IceCap Asset Management: Tug Of War
From Keith Decker - IceCap Asset Management
February 2012 – Tug of War
In Berlin June 1922, Alia Schmidt paid 3 German Marks for a really nice loaf of bread. A very quick six months later, the same loaf of bread cost her 700 German Marks. The German decision to print money caused inflation to skyrocket. No one was happy and Mrs. Schmidt had to stop eating bread.
In Tokyo 1994, Makishi Satou paid a whopping 217 Japanese Yen for a delicious McDonalds hamburger. A very long 18 years later, Mr. Satou is still enjoying hamburgers, yet he is only paying 216 Japanese Yen for this very same delicacy.
The Japanese decision to print money resulted in zero inflation. Yet, despite a full belly, Mr. Satou and others are not at all happy with their money printing experience and the subsequent -77% decline in their stock market and the -90% fall in their property market.
Today, future economic historians are lucky enough to both see and experience what will happen as Europe (lead by Germany), Japan, Great Britain and the United States fully engage in the biggest, coordinated, money printing experiment in the history of the Universe. In its simplest form, only three scenarios are possible:
1) Money printing has absolutely no impact on prices rising or falling
2) Money printing results in a return to the 1922 German experience
3) Money printing results in a return to the modern day Japan experience
No worries though - the very competent hands of today’s central bankers, on the surface at least, appear quite confident that their money printing games will successfully engineer a very serene road to prosperity. The mere mention of the probability of scenarios 2 or 3 occurring are casually dismissed as easily as an offering of a third espresso.
However, what should make you a little concerned is that central bankers in both 1922 Germany and 1990 Japan came to the very same conclusion before they commenced their devastating money printing strategies.
...
Tug of War – Inflation vs. Deflation
The 1922 German hyperinflation experience was undoubtedly propelled by printing massive amounts of money. Yet, the Japanese money printing experience has had no impact whatsoever on inflation.
Here we are in 2012, and the World’s four main central banks (USA, Britain, Europe and Japan) continue to print gobs of money. Will the outcome be 1922 Germany or 1990 Japan?
An important point to understand is whether the printed money actually flows through to the economy. In the 1922 German case – yes, it definitely did. The printed money circulated in the economy causing the German Mark to plummet against other currencies which resulted in extreme inflation.
Today, trillions of Dollars, Yen, Euros and Pounds are being printed – yet this new money is certainly not being distributed into the economy. Instead, big banks everywhere are hoarding the newly minted cash for a rainy day. In economic parlance, this is referred to as a “liquidity trap” meaning there is plenty of cash available, however the cash remains trapped and is not being used. This makes today’s situation, perilously closer to the Japanese experience.
Chart 1 ... shows the amount of money not being distributed into the economy by the very big American banks. Once this money is eventually released (via loans) into the economy, the cost of things could rise very quickly – similar to 1922 Germany.
We (and many, many others) have been very critical of the American, European and British central banks. We freely admit that these people all have very good intentions – they truly do want the World’s economy to return to normal.
Yet in our opinion, it is their analysis of the problem that is leading them to make a very big mistake. The central banks fully believe that the World is currently suffering from what they would call – an aggregate demand problem. They believe growth is slow around the World because people and companies are not spending as much money as they normally would.
To many of the big banks, stock brokers and mutual fund sales people, this “aggregate demand problem” sounds no different than any other economic slow down – it’s a part of a normal business cycle. And during a normal business cycle, the solution to encourage people and companies to spend more money has always been 1) lower interest rates and 2) increased government spending. And if the situation becomes untenable as it is today, you can add 3) money printing to the list.
The reason this combination isn’t working today is due to the flawed belief that all of this extra money sloshing around in the economy will naturally entice people and companies to spend their hard earned (and borrowed) money again.
With trillions in freshly printed money, sub 2% growth, widening government deficits and continued bailouts to banks, it has become crystal clear that the central banks’ money printing strategies are not working.
The reason it isn’t working is simply due to the fact that all of this free money being provided to the banks, is not being distributed back into the economy. US and European banks are hoarding this free money and as a result - the transfer mechanism is broken.
For the game of Tug of War - it is this lack of liquidity-flow-through that is hugely supportive of a return to the 1990 Japanese experience. The lack of spending by people and companies in favour of paying down their debt and increasing their savings guarantees sluggish growth at best.
However, it is also critical to know that despite the hoarding of cash by the big banks, the act of money printing by the central banks strongly encourages investors to shun low paying bonds and cash, and instead focus on stocks and commodities.
This by product of money printing has two effects. First, it pushes commodity prices higher, which inevitably causes the prices of some things to also rise higher (when you have a chance, check out the price of gasoline these days).
Secondly, while a higher stock market does help everyone who owns stocks, it just so happens to help the very wealthy a lot more. It is this growing divide which is fueling the bitter tax debate in the US, as well as being the spark for the recent “Occupy Wall Street” movement. Today, you can also include it as the indirect spark which will lead to the eventual social uprising in Greece.
The bottom line is as follows – the combination of the bursting of property prices and the refusal of the big banks to write-off the corresponding bad debt is resulting in a big wave of deflation. We expect this to continue. Yet, we also are mindful enough to know that pockets of inflation will occur in various countries and within various industries.
The real threat of hyper inflation will occur when a major currency collapses. Any country that leaves the Eurozone will undoubtedly see extreme inflation during their transition years. Outside of the Euro-zone, Britain remains at risk due to it being a key center of global finance and at risk should the World’s super-size banks implode once again.
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Looks like the folks at IceCap have been reading Rickards'...
Who in turn has been reading everyone else who has been warning about precisely this... that is, of course, after he was done overseeing and setting the first modern TBTF bailout precedent.
Now now Tyler, he told us the fed was present but never did anything.
Actually, I think he said that they were present but did precisely the wrong thing.
i.e. the Fed did not provide enough liquidity during the great depression when there simply wasn't enough physical cash leading to further bank runs and insovency. Chair Satan then remedied the earlier failure 75 years later... only this time liquidity is/was not the problem -- solvency (and credit) is/was.
+ 1 The Fed..., the greatest failure in history?
Gene Epstein, economist at Barron's asks a very big question: "Is The Fed A Failure?" I review this weekend's issue of Barron's at my blog ("Review of Barron's, Dated 27 February"). What??? A writer at Barron's, perhaps the main rag of Wall St. (at least on the weekends) DARES to question whether the Fed is a failure...!
gmail me at my name (and promise me you will behave), and I will send you the link. Or you can be hairy-chested, and Google it yourself!
While there, see the photos and read all about my visit to an art exhibition! THIS fringe blogger is like a fish in the boat when it comes to contemporary art: all I know how to do is flop around...
It looks like someone at Icecap needs to go an re read their history.
'The 1922 German hyperinflation experience was undoubtedly propelled by printing massive amounts of money. Yet, the Japanese money printing experience has had no impact whatsoever on inflation. '
No it wasn't. The Weimar inflation was set off by foreign holders of German debt selling their assets. Just as today there was not enough cash in the German economy to liquidate these assets at par, which meant that either the German govt could allow the bond market to crater as German bonds were sold for less and less as supplies of actual cash dried up, which would have collapsed the govt due to funding shortages or print sufficient cash to re liquefy the market and enable their sale at par. Does that ring any bells in today's market?
The problem was the hoarding of cash by investors that had it. Perhaps the $500billion on deposit at the ECB and more at the Fed should be making your hair stand on end right now.
It was this printing of money to enable the sale of their bonds that convinced the holders of actual cash (middle classes) to sell it in exchange for goods that were now rapidly rising. The repatriation of foreign bonds forced domestic Germans to sell all cash (including stocks) which only made matters worse causing a blind panic in rising prices and a complete collapse of asset prices which was EXACERBATED by more money printing by a Germany that could no longer sell ANY debt to fund it's deficits.
The real cause was the complete mis pricing of risk by financial markets which resulted in excessive amounts of debt being sold by Germany in the run up to 1920. It was this that resulted in the increased money supply immediately after WWI which caused prices to rise by a multiple of seventeen in the previous five years; it was not the mere printing of money as stated here which at the time was simply not an option for your average German citizen. The damage had already been done 10 years prior. Does this seem familiar today with QE?
Contrast that with Japan that has been printing FIAT money under unofficial agreements with the US and UK to maintain exchange rates within a specified range. This would not be possible under a gold standard and would have already have resulted in Japan's 'Weimar" had it not been for this manipulation. There is no inflation because there is no adverse movement in the fx rates causing holders of cash to offload it. As each Sovereign slowly implodes there will be fewer buyers of debt and reduced ability to manipulate fx rates. When rates and prices rise there will simply be no spare money to intervene, at which point the $1 Trilion on deposit at these two central banks (which will ballon by many multiples anyway) and now flow EITHER into goods causing big time inflation, or into gold and then into goods causing big time inflation. Those holding cash on deposit or under the mattress will be competing with banks to offload it. Deflation, forget it.
That is all you need to know. It isn't like we couldn't see it coming...
Excellent.
Now I need to verify the claims....
I would like to use this, (c/p) and drop it elsewhere. Will give full credit and link. (with your permission)
Be my guest. I didn't think there was any copyright here but thanks for asking anyway...
They made a simple claim (in a handful of words); you made an elaboration on that claim (in many handfuls of words). I don't see the conflict at all. In fact, you restated their claim:
"which would have collapsed the govt due to funding shortages or print sufficient cash to re liquefy the market and enable their sale at par."
There's that word "print"
ok Thomas, let's have a look at another bit. 'With trillions in freshly printed money, sub 2% growth, widening government deficits and continued bailouts to banks, it has become crystal clear that the central banks’ money printing strategies are not working.
This is bullshit. The money printing worked just fine. It did exactly what it was supposed to in that it prevented a collapse in bond prices by enabling sellers to raise cash without incurring a loss on liquidation of their bonds, just like Weimar.
The reason it isn’t working (oops there's that error again) is simply due to the fact that all of this free money being provided to the banks, is not being distributed back into the economy.
again pure bullshit. The Fed doesn't want this money to flow into the economy because that will increase prices. It's quite happy thank you very much to have this held at near zero cost at the CB. The only difference between this and Weimar is that we have a number of countries partaking at the same time, and they are relying heavily on their ability to influence prices through derivatives markets using fractional reserve moneyThis system's end will be no different in any way other than it will be orders of magnitude worse.
US and European banks are hoarding this free money and as a result - the transfer mechanism is broken.' The transfer mechanism is just fine. If the Fed wanted this money to flow into the economy they would simply close the deposit facility and force the banks to invest their reserves elsewhere. Like it or not this article is wrong. It was written by some ill informed oik who has done no research whatsoever, and to be blunt, is typical of what we have come to expect from this company. How you think I restate it is beyond me, the money printing was a consequence of Weimar, not it's cause, Japan should have taught you that. All I can say is 'when it comes to money printing, you ain't seen nothing yet'...
I disagree with your claim that the transfer mechanism is "just fine". The problem with the transfer mechanism is that we have a money supply based on debt. Once there is too much debt in the system, demand for it drops to zero as consumers pay it down. It doesn't matter where the debt is held ... if it weren't held at the FED then banks would hold it with zero consumer demand (except for short-term CDs). Banks are not interested in lending (except to those with pristine balance sheets) because they have to write down the gigantic pile of bad loans on their books. The only taker of debt (and thus open transfer mechanism) is the Federal government, which is also reaching its saturation point. So, on the one hand we have week demand for loans from (qualified) consumers and on the other hand we have an insolvent banking system that has been given a free pass by FASB, the government and the FED to repair its balance sheets at the expense of everyone else. This is highly deflationary and why savers are willing to hold at negative real rates as asset bubbles pop up all around them. So I would hypothsise that the only mechanism that is working is Federal deficit spending. Once that stops or even flat-lines, bubbles will pop again. The FED knows it is walking a tight-rope in its printing game so it will not over-play its hand. They know that the very solvency or the Federal government (and by extension itself) depends on access to very low cost credit.
The Weimer Repulic operated in a world where international trade was conducted on the gold standard. Therefore, it was a calcuated bet on the part of the government to use money printing to default on WWI reparations (which were destroying its economy). They severely under-estimated the resultant social and political chaos, but economically it worked. Hitler stepped into power right when Germany had a clean balance sheet and was mistakenly credited with the economic rivival. In the USA, FDR was mistakenly credited with the revival because the debt market had crashed prior to his arrival on the scene. In both cases, destruction of credit sowed the seeds for rivival not a political leader, philosophy or government program. The same will happen this go around. The debt will have to be destroyed before the seeds for a sustainable recovery will be sown.
Argentina operated in a similar world because it had tied its currency to the dollar...
Much of what you say is true, so I must focus on the bits we disagree on, which is not much. Hitler didn't step onto the scene until ten years after Weimar. He wasn't credited with any of that recovery. Hitler rose to power as a consequence of the end of the boom which followed Weimar and destroyed what was left of the middle classes (the Great depression).
'They severely under-estimated the resultant social and political chaos, but economically it worked.' There is no way that anyone could estimate the rate of an economic failure because it is entirely subjective, an emotional repudiation of paper. It is a switch which once thrown can only result in a snow ball effect of failure which cannot be measured beforehand. Weimar was not the first hyperinflation or currency collapse, but they still got it wrong. 'it was a calcuated bet on the part of the government to use money printing to default on WWI reparations...'. Not so, Germany just like everyone else was expecting to win the war and have the losing team pay the bill. It didn't raise money through taxes to pay its military bill. When it had to pay it it simply printed bonds without any regard for the quantity of cash in the economy needed to service them. It was the need for cash to liquidate once stock markets stopped rising, tax revenues began falling and a rising general unease amongst foreigners with Germany's ability to service its debts that led to the need for more cash to liquidate. Had Germany not printed it the bonds would have been sold at a loss effectively closing the govts access to new money and causing the run anyway. just like today. The damage at Weimar was already done long before the money printing started, so I disagree with your claim that 'it worked'. It didn't.
The first part is all correct. The only reason the Fed can still sell debt is because they printed sufficient to allow bonds to be liquidated at par, else they would have been in the same boat as 1922 Germany. To effectively restart the economy they simply need close the deposit facility but with a trillion dollars flowing into the market you can see what comes next, and it's not deflation. But the mechanism itself is still in place and will function just as well as it always did, IF that was what the fed really wanted to achieve.
Banks are not interested in lending (except to those with pristine balance sheets) because they have to write down the gigantic pile of bad loans on their books... This is because they know of the extent to which credit assets are overvalued, but this will have no impact on rising prices of general products which will occur when Bernanke's attempts to levitate stock markets fails and investors go looking in search of real returns, which is inevitable.
and finally, 'The debt will have to be destroyed before the seeds for a sustainable recovery will be sown.' There is no recovery, not for as long as I can identify a business opportunity, invest to exploit it based on genuine market research and have some china man magic up some fantasy money with which to set up beside me and undermine my prices. There is no recovery, just falling wages and poverty. That's what globalisation really means...
The point is that Hitler and FDR came into power near the bottom of an economic collapse brought about by an unsustainable build up of debt and sold themselves as saviours with their solution being a strong central government led by them. The obvious difference being that one was a murderous psychopath. So we are both right that it took an economic collapse for Hitler to come to power, I stand corrected about the exact timing with respect to the Weimar collapse. However, Hitler's original rise to power in the early 20s was brought about during the inflation so I would list it as a contributing factor.
I missed your point about the Chinese and globalism. It seems clear as day to me that this is just another 70 year debt cycle that is playing out. Market price signals have been distorted by forward demand created through government sponsored debt for a few generations now. The reason there is no pricing power is because the debt buildup has created too much production to support current demand. Additionally, current demand is saturated by debt servicing costs. There will be plenty of exploitable investments once the debt (and by consequence mal-investment) is destroyed. At that time pricing power will return. Low wages do not indicate poverty in a market based economy where episodes of deflation follow inflations because in a deflation your purchasing power increases. The only time it becomes a tragedy is when central planners foster a debt cycle to grow as big as this one has then do everything in their power to preserve the status quo.
Hitler also murdered a shitload of Bankers. He wasn't all bad
Lucius, ' It seems clear as day to me that this is just another 70 year debt cycle that is playing out.' This is a bit more than that. This is the end of multi 70 year debt cycles.
My point about China is this. Wealth is not created through printing but by saving surpluses as they occur. Let's go back to an inability to print endless money. Any community therefore has only finite wealth which is built up over time and is not wasted. Business earn profits, workers earn wages which are recycled back into the local economy allowing some to spend more and others to spend less thereby transferring wealth in and around an economy. My point is that it is sustainable locally. Though some go bust and others prosper the whole community prospers from the recycling of money within the economy. Should one community decide that a railway is beneficial to the community then it may be able to raise sufficient capital from within the community to build it. If it can't the railway does not get built until sufficient capital has been earned within the economy. Maybe the owners would raise it from both communities so that both can benefit. The point is that the capital is only deployed if genuine investors think it is worthwhile and then only if the investment can generate enough profits to sustain it, all of which is then re cycled back into the local economy(s). That capital is used and cannot be redeployed elsewhere.
Contrast that with now, when any 'entrepreneur' can simply go raise capital in the form of magic money created from thin air and build a second railway supposedly to 'create jobs' right next to the first. There is no constraint on capital. Now we have no pricing power as supply overwhelms demand, prices plunge as do profits resulting in no security or stability and now less money going into the local economy. You'll note that this has nothing to do with debt overhang or limit, merely the place where the income or profits are earned, which in this case is no longer within the local community but in China, or some other place. Wages fall as does local demand and thus wealth whilst someone in China sucks out wealth from the local economy in the form of interest on capital that was never earned, does not exist and was simply created from nothing. There is no stability in the investment world, simply a transfer of real wealth to anyone who can create the most new money, even if it is given as a gift. Sure, everyone can claim to be employed for as long as it takes for one unprofitable railway to close but by then there is no longer sufficient wealth to support even the one railway and our communities end up destitute on welfare and foodstamps.This is what our governments have done to us.
This is globalisation and it needs to end so that we can get back to proper jobs, equitable wages and some semblance of job security. We agree on much. You are correct when you say that the debt needs to be defaulted and written off but that in itself will not make us wealthy. What we need is a cap on the supply of capital so that we can build sustainable businesses with real wages that create wealth in a community, and that takes time. All we have now is ' money pumpers' and the proverbial 'collapsing railways'...
Chinese railways? Hell, you could just as well be talking about American real estate!
I am. It affects everything. We need gold backing once again...
My point is that simply defaulting will not solve the problem, it only sets us up for the next round of same...
No real "claims" to verefy- Harlequin has it exactly right.
our central aurophobic overlords didn't seem to get the memo.
Indeed...
nihil novi sub sole
Very good Tyler! The rampant money printing is catching up to the excessive debt that has been generated over the last few decades with most in the last few years. The economy will be trashed when all of the malinvested money returns nothing and defaults start rolling in.
This leaves the question. When debt-deflation kicks in overdrive, will the CBs print like no tomorrow? That would be your hyperinflation event.
Wyoming House Advances Doomsday Bill
University of Wyoming political science professor Jim King said the potential for a complete unraveling of the U.S. government and economy is “astronomically remote” in the foreseeable future.
But King noted that the federal government set up a Continuity of Government Commission in 2002, of which former U.S. Sen. Al Simpson, R-Wyo., was co-chairman. However, King said he didn’t know of any states that had established a similar board.
http://trib.com/news/state-and-regional/govt-and-politics/wyoming-house-advances-doomsday-bill/article_af6e1b2b-0ca4-553f-85e9-92c0f58c00bd.html
I thought this was supposed to be top secret;
Continuity of the US government.. TOP SECRET!
http://www.youtube.com/watch?v=QdfjsS9Wqk8NWO Concentration Camp
http://www.youtube.com/watch?v=l9jlMD2HphI&feature=related
"And House members approved an amendment Friday by state Rep. Kermit Brown, R-Laramie, to have the task force also examine conditions under which Wyoming would need to implement its own military draft, raise a standing army, and acquire strike aircraft and an aircraft carrier."
Yeah, because a land-locked state totally needs an aircraft carrier...
Duh!
Is that why you rip Rickards every chance you get? He's just a cog in their wheel. If he didn't do it someone else would have.
We rip on Rickards? Maybe a check up for that object-subject dyslexia is overdue: we wish Mr. Rickards all the best on his book sales tour and recent employment by Tangent Capital Partners.
And furthermore, what is "that"?
alex: ok, tyler, here's your "Casino Action" for $600 answer: MARTINDALE
YES! and furthermore (L0L) the judges also would have accepted wtf? or wtf, BiCheZ?
Rickards is good with macro gaming and some outside the box thinking but ZH numbers don't lie. Running some hard numbers on Rickards suppositions is fair game and very enlightening. Many hands make light work. Thanks mucho.
I still think the Tylers could write a helluva book and it would sell like hotcakes. I was at a little beach bar in Bumfuck Costa Rica last week and a guy had ZH on his laptop. He couldn't stop talking about it. TD could call it "Economics for PhD Dummies." But who'd do the tour?
I actually think Rickards is both extremely bright and intellectually honest.
However, I think his analysis of Twist in terms of outright nominal purchasing power was incomplete (unless there were some specifics he outlined that I missed). He at least implied that the Fed woudn't have to initiate further outright programs of QE, and certainly not in larger doses, in order to achieve an ongoing monetization of deficit spending.
Good punch, Tyler
Though I also have the impression of his intellectual honesty
And he shows a good grasp of *foreign* politics and monetary policy.
While you *disclaim* yourself of doing anything else than talking your book!
Delicious, like "all Tylers are liars", signed: Tyler. ;-)
I assume he meant "provide counsel on the LTCM bailout". Maybe you feel that you truly don't harbor any hostilities towards Rickards, but if that is the case, you being the resident mnemonist and all, you should be able to summon another positive mention of Rickards from the comment archives, because all I seem to recall are snipes, swipes and mutterings. What with Tangent Capital Partner Whalen on board, maybe ZH has elected to bury the hatchet, but the comment above would indicate otherwise. An almost Pavlovian response to that impudent mention of he who shall not be mentioned (favorably).
... and LTCM was run by Nobel Prize winning PhDs who thought they knew everything and had a fool proof derivative plan they could leverage to Corzine levels. Alas, Glass-Seagall was getting repealed about the same time and the madness has spread.... they learned not.
One reason I like Rickards is that he has been in the trenches and now is a gold advocate, which really rankles the noses of TPTB and CNBC pundits.
"that is, of course, after he was done overseeing and setting the first modern TBTF bailout precedent."
When Genius Failed by Lowenstein is an excellent book on the topic...
Tyler hit it on the head.
Inventing Money by Nicholas Dunbar is my favorite book, on that same topic...
Currencies rise and fall due to yields in the Bond markets and accessibility to Loans and Credit
If Inflation rises, due to higher Fuel and Energy Costs, this will eat into the GDP and in turn will hike up Bond Yields. In the extreme, this can cause Bond markets world-wide to fail, freeze or even blow up !
Credit will be harder to get and it will be more expensive to get Loans. Interest Rates will go higher and this in turn will fuel Inflation even more. Keeping Interest Rates at zero by manipulating the reserve currency will further exacerbate the problem, devalue the US Dollar and increase prices of Commodities further. And so the seeds of hyperinflation are sown.
Bond yields rise and Credit markets freeze or become more expensive which in turn effects the exchange rate and makes it less competitive for export. Bond yield manipulation by Central banks will only increase the danger of hyperinflation.
A good example is the Argentine Economic Crisis (1999-2002)
The crisis intensified when, on 5 December 2001, the IMF refused to release a US$1.3 billion tranche of its loan, citing the failure of the Argentinean government to reach previously agreed-upon budget deficit targets, and demanded further budget cuts, amounting 10% of the federal budget. On 4 December 2001, Argentinean bond yields stood at 34% over U.S. treasury bonds, and, by 11 December, the spread jumped to 42%.
By the end of November 2001, people fearing the worst began withdrawing large sums of money from their bank accounts turning pesos into dollars and sending them abroad, causing a run on the banks . On 2 December 2001 the government enacted a set of measures, informally known as the corralito, that effectively froze all bank accounts for twelve months, allowing for only minor sums of cash to be withdrawn, initially announced to be of just 250 a week.
http://en.wikipedia.org/wiki/Argentine_economic_crisis_(1999-2002)we don't have to go back as far as the Weimar Republic, Argentina is a much better, much more recent example of how hyperinflation can flare up due to Bond Market manipulation by Central Banks.
Don't forget that Mr. Bond is nothing more than a Blackjack dealer, pimping the biggest market on this planet via a hedge-fund: Eventually the Bond-market will blow up in his face, due to the Fed's Bond-Yield manipulation.
Hyperinflation is happening as we speek, just look at cost of Fuel and Energy, Food and Commodity Prices world-wide.
Bond-Yields and Inflation are already creeping higher, and Bernanke won't be able to stop the world-wide Inflation of the cost of living (the "real" CPI including Food and Energy).
just look at Libor, the 3 month rate Banks charge each other to borrow money.Has anyone got the real figures?
The "normal" Libor Rate (according to Greenspan) would be 0.25% but as we know it is far higher than that
and Banks are nervous regardless of Bernanke's Zirp. ( zero Interest Rate manipulation) Zirp.
wr;)
this site has some kind of congenital problem in tha all the "tylers" refuse to label a graph or actually say what you are pointing out. Please see above. WTF is wrong with you people, isn't the point to actually make the product better.
yeah I know what the names on the lines are, I've no 8idea what the left axis is, or what you are pointing out. PLEASE
I like that chart.
"HOLY CRAP!" said the captain of the Titanic.
polar bear friendly graphics..
This is my favourite chart.
That looks like............................EVERY CHART WE HAVE !!!
Everyone refers to that chart as if their gold is going to be worth $1,000,000 an ounce in two weeks. That is based on the assumption that the Fed prints ad infinum. But the Fed has made no indication that it intends to do so and there has already been considerable backlash about the printing it's conducted thus far. In other words, the Fed needs more than a nudge to turn the printing presses back on. It's going to need a visible train wreck in the economy before it starts printing again. Namely, a stock market crash. The Fed isn't making money by printing money anways, so what incentive does it have to print gobs of cash? It has none - therefore, I am going to assume that the Fed does not flood the market with more cash, but rather sits out until the last moment. In between now and then, there are going to be some serious shocks to the market, and I think those will be the optortunities to make money, not sitting around with your fingers crossed hoping gold goes to $10,000,000 an ounce
Actually the Fed is making gobs of money. It receives dividend payments from the Government on all the USTs it buys using QE.
Then at the end of the year, the profit from all the dividends received is returned back to the US Treasury minus the Fed's 'fees'.
Wasn't that suspended, or the Fed hs the option to suspend?
You miss the point about why the Fed was created. To be the ultimate liquidity backstop for banks during a financial crisis. So the Fed will do whatever it has to do to save the banking system. It is not about making money or prevening a stock market crash. Only if a stock market crash threatens the banking system will the Fed care about the stock market. The recent claims that the Fed has mandates for full employment and controlling prices is a fig leaf and distraction from the Fed's one and only true mission - being the ultimate liquidity backstop for the banking system. All the recent Fed actions including ZIRP and providing unlimited dollars to the ECB are focused on keeping the global - and therefore US -- banking system from collapsing. Don't get distracted. Pay attention to what the Fed actually does - not what they say.
The ultimate goal of the Fed is to stay in control. That means to keep others from their stash, which of course, they can and do by expanding or contracting the money supply. With that they can buy/short and manipulate anything they want, and they do. If they can't buy it they destroy it/him/her/them, or threaten to destroy it/him/her/them. The Fed of course is also only a tool.
The FED's first responsibility is to protect the assets of it's shareholders', i.e. Wall st. ...the ONLY tool the FED has is the Supply of Dollars (and by extension, Swaps w/ other currencies). pls. notice that the supply of 'fiat' has been the ONLY response ...rant...(and cavalier disregard for, of course, the small people's law -come, let us make the world, England) from the super highly educated, visionary, fabulously well-heeled, utterly blind destroyers of hope and beneficiaries of Sovereign 'credit'...etc,.
Chart 1: kids, this is what a tsunami of inflation looks like.
Old news, who reads and stays informed, does not have to be some economics guru, understands the situation, I believe ZHers DO!
Tell us something we don't know...yet?!:))
Agreed, i usually like icecaps reports a lot, but this one is a bit weak and softballing.
ZH attracts a million new readers every month some of whom are not apriori financial experts.
Kudos, Zero Hedge.
You're a big part of the reason people are wakening to the basics as to how they're being tossed overboard in a game that's rigged by the central thieving banks of fractional reserve Ponzinomics, and how their so-called 'elected representatives' no matter their affiliations or professed beliefs are all in on the scam.
What I've realized lately is that even if those realizing how they're being used as grist for the fractional reserve mill remains a small percentage of the population at large, there's a profound multiplier effect that brings significant pushback (by way of conversation, action and unwillingness to participate in destructive behavior, that rubs off on neighbors, family & friends) with each incremental growth in that subset of the enlightened.
It may truly only take an awareness by III percent in order to thwart the best laid plains of the con artists and The Money Masters.
A million a month new? Awesome news. Congrats.
And you call yourself a "fringe blogger".....
And Zero Hedge obtains its page views and comments by actual meaty & substantive headlines and analysis, sans clickbait pictures, unlike some other websites that have alleged journalists whose first names start with Joe and whose last names end with Wiesenthal.
*Zero Hedge occassionally flashes the deer in the headlights (i.e. Obama, Pelosi, Romney or The Bernank), but it doesn't stoop so low as to regulary insert photos of half naked women or collapsing buildings with the headline "Gold Plunges!" on days where the precious falls by $3 an ounce or "Stock Explode!" on 0.03% uptick days (w.i.e.s.e.l.t.h.a.l).
I thank Jebus ZH doesn't try to push slideshows on everyone. Any website that uses that clickity click bullshit is pathetic.
A million new readers? Seriously?
tyler's being to conservative - those of whom have been greatly humbled by life, are by far the greatest truth sayers
thankyou, tyler
A million new readers every month? If that's true, then there's no fuckin' way lying Obama gets re-elected!
I'm guessing not all are eligible to vote in the US, but what the hell....
We don't need no steenkin' eligibility to vote! -- the American Left.
Wee-weed who counts? Long Diebold.
Agreed, the Left is gonna cheat to the max. But I think Obama is just so awful... all the cheating in the world will not save him. He's gone over the edge. He's done!
Get off the Heglian merry-go-round. The "Left" is gonna cheat and the "Right" is gonna save us???
I think a better demarcation then the now empty terms Left v. Right, is Opposed to War v. War Monger.
There is only one candidate opposed to war and he's a Libertarian.
There is not even one textbook in one single school or university in this country that tells the truth about how economics actually work, no wonder about 99.99% of the population are completely brainwashed.
Our malevolent government is the biggest criminal organization in the world. They have numerous scams running, most of which are done right in front of peoples eyes.
For example, Ben prints and lends $$$ to all his investor friends, who in turn run pyramid schemes, bid up the price of everything on the market and commit various other offenses.
Then Ben tells US that WE OWE HIM for all the $$$ that he just printed and spent, and that WE must be taxed to pay him back for it.
Tyler, that would be like if your next door neighbor counterfeited several million $$$, went to home depot with all his friends and bought everything in the store, then came over to your house and demanded that you pay him back for all those millions that he had just spent.
So in one fell swoop, people are taxed twice for the single criminal act of another. They're taxed by inflation AND their income is taxed. Somebody is double dipping.
You don't have to ba a financial expert to witness a crime, a child can see it clearly.
No wonder why I got a "D for Done" in Econ101.
Common sense doesn't make the grade in college.
I just found out the Chairsatan wrote a book on Macroeconomics. I'm half tempted to read it.
Yes...I'm a doctor. So, please try to use less financial jargon for this invaluable job you do.
Keep going Tylers
Yes....I'm a farmer. So, please keep using your financial jargon so as to expand my understanding of economics and finance for this invaluable job you do....
boouood: this might help........ http://www.investopedia.com/terms/t/tips.asp#axzz1nUV7uC7S
We in the medical field use alot of jargon as well. I'm often challenged reading Molecular Biology manuals,documents and research papers and I'm in the field. This site has been invaluable to me expanding my knowledge in the financial arena (albeit still fairly weak but improving day to day!) one year ago one hr here could translate to 2 hrs Googling terms.I know being a doctor means you have no time...I thought I didn't either so I used MSM for my education. I miss those idiotic ignorant days sometimes.....nah.
Miffed :-)
thanks Tyler(s) ! :)
Well, some of us might, just might, have posted links to articles and graphics from Zero Hedge to reinforce our arguments in posts in forums at the biggest mainstream news sites in a certain country that still has a queen.
Something like the pie chart showing where the Greek bailout money goes to can be really good at hammering the point that it's not the Greeks that are being bailed-out. Even the most financially-illiterate people got the message on that one.
That said ZeroHedge has a steep learning curve for those without any background in finance. Even if you did work in finance, if you're not from a Fixed Income background some things are a bit hard to crack at first. That said it's great schooling and well worth the learning!
"This will result in a long period with people and countries paying off their debt and saving more money."
I'm no rocket scientist, but one can't payoff debt and increase savings with the same money ... debt repayment and saving are both uses of cash ... they can't both be done at the same time
@ a boy!
debt repayment and saving are both uses of cash ... they can't both be done at the same time
You can if you reduce spending at the same time.
I'm no rocket scientist, but one can't payoff debt and increase savings with the same money ... debt repayment and saving are both uses of cash ... they can't both be done at the same time
**********
Debt repayment "is" savings-your balance sheet is moving towards positive as debt is reduced-
"while a higher stock market does help everyone who owns stocks, it just so happens to help the very wealthy a lot more."
Good thinking Mr. Galt. Now I get it. Polo later, John?
"Would you have any Grey Poupon?"
http://www.youtube.com/watch?v=itHhhYxqSSE&feature=related
GREENSPANISH! Mas Agua por favor?
No hay agua para usted !!!
Usted es comico.
Usted es Maricon !!!
Hulk I"m tired, but as usual Tyler caught me off guard. " La puerta esta' cerrada. Hasta manana.
Here's a hint:
What does it mean, to give megabanks megapiles of POTENTIAL wealth?
1. If you give them such large sums, even if they only invest a low percentage into things like commodities, it will drive prices up.... thus causing the strong true inflation we see.
2. But more importantly... what about that cash which is currently "trapped"? What does it mean, if someone gives you trillions of wealth, which you currently do not spend? Quick sidestory: Why is inflation so often called "stealth-taxation"? Because, when the printed cash is brought into circulation, everyones cash will be worth less, but for those who received the printed cash, they now have an edge: Wealth redistribution! Got that? Fine.... now back to that "trapped" cash, given to megabanks... they can now basically at any time decide to make this "wealth-redistribution" happen! They can transfer wealth of entire populations, at the push of a keyboard-key. Metaphorically, entire populations now OWE them money (ON TOP of the nominal debt)... and they just haven't sent out the bill yet.
However you look at that entire debt as well as moneyprinting thing.... what it does is give a global elite insane amounts of "claims".... actually, such ridiculous amounts of claims, that it could insta-crash entire economic blocks. It is a bit like that nuclear arms race, where superpowers can destroy each other 100times.... just here, global elites can now on paper own the planet 100times.
Of course, they don't expect to own the world 100times.... they'd settle for an implicit or explicit global dictatorship.
That's what they are betting on, yet it'll never happen!!! Greece may be some "test" for them but "the world" is simply too big and too complex...! They will loot as much as they can or are allowed and that's IT!!!
The welfare state, increasing energy costs,greatly increasing medical costs due to lack of activity and a government recommended diet , coupled with a permanent state of war push this thing inflationary in the US...
A major currency collapse awakens the sheeple and all bets are off...
"greatly increasing medical costs due to lack of activity and a government recommended diet"
Really? Medical costs aren't up because medical science can keep unconscious ninety five year olds alive for a few mill a year and big pharma can charge the equivalent of a small house for a vial of chemo drugs? And the government recommends the pink slime that uber capitalist Mickey D's serves up all day to the masses? The government may be responsible for a lot of evils, but for God's sake think man.
You need to check out the costs associated with type two diabetes. They are rising exponentially and are capable on bankrupting medicare all by their lonesome...
The rise of type two diabetes is largely the result of high fructose corn syrup, which is a favorite product of some of the most successful capitalists in existence. So do you blame capitalism for the health care crisis?
While sugars no doubt play an outsized role, your singling out of HFCS as largely responsible should have included a link beside "I said so". Is that a proven assertion? I say that all sorts of simple carbohydrate overload are built into the system.