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It May Be 2008 All Over Again, But There Is One Key Difference
The financial press has been inundated with articles comparing what is happening in global markets now to events in the latter part of 2008. Sure enough, the surge in Treasurys from 100 to 143 in the last two months of 2008 following the Lehman bankruptcy is most comparable to the move in the same security from 122 to 140 in the two months since the beginning of July 2011. What is disturbing is that the bulk of this move has happened after the August 2 debt deal, and after the announcement of QE2.5 or "ZIRP through mid-2013" by the Fed on August 9. Additionally, stocks have also traded in a pattern very reminiscent to what happened during the first round of the Great Financial Crisis, but the lock up in capital market liquidity, especially in Europe, may be the most obvious parallel between the two time periods. That said, there is one key difference between 2008 and 2011. Bill Buckler, in the latest edition of his Privateer, demonstrates what it is...
A Race In Opposite Directions:
How scary is it? The best illustration comes from the $US Gold price. The “price” of longer-term US Treasury debt has risen by 14.75 percent since the beginning of July. Over the same period, the $US price of Gold has risen from $US 1482 to its August 19 spot future close of $US 1852. That’s a rise of $US 370 or 25 percent. Yet US Treasury debt and Gold are polar opposites in any sane evaluation of the financial system. Treasury debt is the foundation of the global monetary system. Gold is the pariah of the global monetary system and has been locked out of it in any official form for four decades.
With all the comparisons to the events of 2008 which have been appearing in the mainstream financial media, this comparison has been all but totally overlooked. Cast your mind back to the carnage of late 2008. During that period, almost everything was sold off. While it is true that Gold did not fall nearly as far as did most of its fellow “commodities”, it is nonetheless a fact that in the two months between mid September and mid November 2008, Gold fell from about $US 920 to $US 700. That’s about 24 percent.
There were two financial assets which boomed in late 2008. One was Treasury debt, the other was the US Dollar. While Gold and everything else was falling out of bed, the trade-weighted US Dollar index - the USDX - soared 21 percent from 73 to 88.2 between early August and late November 2008.
Compare that to what is happening now. Treasuries are soaring but the US Dollar is, at best, flat. And Gold in terms of EVERY major paper currency has gone ballistic. This time, things do look different.
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:-(
Truth in this world is short. CBs style shined through for me and demonstrated confidence/understanding/leadership. It helped me ignore retards. That is why I called him "round hat". Round hats learn you how to live through "hard" times. He touched me like that ...
Not sure why, just is how it is ...
CB influenced some pretty serious reading for me over his posts (tainter being the biggest one) that had a lot to do with where I am am right now. I feel like I owe CB a fishing trip up here in AK.
Take care of your self brother.
Regards,
Cooter
Cheeky B was great.....and is missed.
Hey CrazyCooter - I logged in specifacly to inform you that CheesyBastard is alive and, I hpoe, well.
CheesyBastard was here just the other day
I'm seeing CheesyBastards posts regulary.
Long live CheesyBastard!
CheesyBastard != CheekyBastard.
See my link for the original.
Regards,
Cooter
From page 11 of the issue:
From “Deleveraging” To ...?:
The financial crisis of 2008 was a “deleveraging” crisis. When the large US banks began to mark down
their CDOs (Collateralised Debt Obligations - aka “toxic sludge) to pennies on the Dollar in July 2008,
the cascade had begun. The reason that the Fed stepped into the breach in September and blew out its
“balance sheet” was to prevent the prices for this questionable debt paper on the secondary market from
utterly collapsing and taking the banking system with them. To prevent this, the Fed took them off the
banks’ books at 100 cents on the Dollar. They remain on the Fed’s books to this day.
Even this action by the US central bank was not enough to prevent a freeze up in inter-bank lending.
When this went international, financial markets imploded in a mad scramble to meet margin calls on debts
and to generally get out of debt to the greatest degree possible. Since most international debt paper was
then (and still is) denominated in the reserve currency - the US Dollar - the demand for US Dollars
soared. The Dollars left over from the market carnage had to go somewhere, so they went into Treasuries.
That was then - the six-month financial crisis which took place in late 2008/early 2009. That crisis
marked the end of the huge decade long run up of bank lending. What has happened since is that
governments and central banks have taken over from their banking system as the LAST entity standing
which can still lend new money into the system. That led to the sovereign debt crisis which was, until
recently, confined to Europe as far as the US mainstream financial press was concerned.
The “tipping point” came with the recent debt limit debate and the absurd “resolution” of that debate on
August 2, 2011. This episode rocked public “confidence” in the fiscal and monetary policies pursued by
all governments - but especially by the US government - to very near its breaking point. If S&P’s
downgrade of US Treasuries had happened even two months earlier, it would have shocked the American
people to the core. But by the time it happened on August 5, the American people had already had a good
look at the total inability of their government to come up with anything remotely credible in the way of
spending reduction. The S&P move merely told them what they already knew - or strongly suspected.
As Doug Noland put it in his August 19 Credit Bubble Bulletin on Prudent Bear: “The American people
no longer buy the notion that piling on more debt and “money printing” offers a reasonable solution.
...There will be less tolerance for this ‘experiment’ going forward.”
Indeed there will be less tolerance, not only inside but outside the US. The price of Gold is showing that.
Just announced: all those mortgage properties will be auctioned off by the government at pennies on the dollar, but citizens cannot participate unless they can come up with the billion dollar buy in, therefore banks, hedge funds, capital groups, etc will be getting all that property back at a discount and the taxpayer will be left with the FED bill. Talk about "odious debt"...
But your point is still well taken: The clowns talk about treasuries are pricing in this or that when, in fact, they are pricing in total corruption of the bond markets.
Touche (accent grave). Agreed tmos.
By the way any of you more old-timer ZH-ers: what's with the new ZH format and no math questions?
The question of the day is who will save B of A this time around? As the public will not allow another govt funded bailout of a TBTF bank!
"As the public will not allow another govt funded bailout of a TBTF bank!"
/hahahahahahahahahahahahahahahahaha!/
"As the public will not allow another govt funded bailout of a TBTF bank!"
/hahahahahahahahahahahahahahahahaha!/
"As the public will not allow another govt funded bailout of a TBTF bank!"
/hahahahahahahahahahahahahahahahaha!/
/thanks! I needed that!/
You are talking as if the public has a voice! When did that happen?
Yes, last time the public would stand for it either. What was public opinion on TARP, 80% against, something like that? It didn't matter. Threatened with martial law the pols will do what they're told to. The Frank-Dodd anti bailout provisions will just take a couple extra hours to delete before the new bailout is passed. Of course that assumes BAC is not scripted to be the next sacrafice or that TPTB don't lose control of the script. I keep likening what's going on to a tight-rope act with no net. If the ground starts to shake they no longer have any outs. It will happen soon, but 'soon' is a relative term.
Whaddya mean? Buffett already took care of that ;)
The last time the public repudiated the foisting of a paper currency upon them and were able to conceptualize the sly theft of their property was 1775 t0 1783.
The public have been royally fucked so many times and for so long, by bankers and their politician cohorts, that they're able to walk and be fucked at the same time, without the knowledge that they are.
Reminds me of the old joke about the rapist's version of foreplay: "Was that good for you too?"
ZIRP is your answer, and it is very much a bailout. Who would not like to be in on ZIRP? The ultimate cost is payed by all of the world (inflation).
The public did'nt want them before either.
Right or wrong
just sayin'
Really? and what will "the public" do?
Elect more TeaPotDomeExpress III asshats.
but of course! voting for a fave is what the public has been trained to do!
who's yer fave dancer? who did the best imitation of a singer? who get's voted OFF the island? who gets voted OUT of the BBhouse? and on it goes. . .
"voting" gives the illusion of having a say, of influencing the outcome. . . tho' nothing could be further from the truth. . .
And there's another very weird thing that's happening right now: The Euro isn't collapsing, even though capital flight from Europe is intensifying. WTF is going on with the Euro, and why is it magically levitating at these levels? The news out of Brussels really can't be any worse. I understand the plunging dollar. Check. No argument there... But the Euro *not* plunging? Someone help me out here... Europe was toast a week ago. Now? Now they're burned toast. Who are the dumbasses buying Eurozone debt? Or... (shudder).. is that us?
More than anything else, that is what isn't making any sense in this whole business. Money flowing into Treasuries, and the dollar, and gold, AND the Euro???
Its....money from no-where!
Ben take your hands OUT of your pants!
it could be the chinese buying. when shit hits the fan, at least they'll be able to feed all those papers to their people and pass them off as the "new rice."
Yes - that is what is behind Door #1. China propping the EU market still makes economic sense.
That's the point. Something is fishy with this contradictory line-up, and can be expected to break soon.
It's the great alignment which the Mayans forecasted for 2012. Hell, even a twelve year old Mayan Math student could see the writing on the wall on this one.
Galen Slade... You might find this interesting... a funding source for Ts...
http://news.goldseek.com/GoldSeek/1314194400.php
This has been the exact same question i have been asking. Investing in Euros is the equivalent of investing in a husband and wife trapeze act even though one of them is suffering with muscular dystrophy. Or perhaps it is like investing in a set of Siamese twins where one is about to die.
Remember the magician. Keep your eyes on what he doesn't want you to look at.
ALL the major currencies suck. Why should any of the indices like USDX do anything at all of consequence? In 2008, our fiat didn't suck as bad as anyone else's fiat, and so USDX rose. Now, all fiats suck, so if they all gradually default into oblivion at exactly the same rate, how will you see it by looking at a FOREX chart? Answer: YOU WON'T.
You can clearly see the move by looking at Gold. Gold is money, and it is behaving exactly as money is supposed to in a deflation: it's buying power is going up w.r.t. almost everything else. The buying power of fiat is going up w.r.t. some things (houses) and down w.r.t. others (real consumable goods).
Gold is rising in all fiat currencies. It makes perfect sense. The Treasuries thing will work itself out; some suckers are still "fleeing to quality" in Treasures.
Yep, all the horses (fiat) look good racing against one another, but they're all gonna be glue against real money (gold) in the long run
Yeah that's a nice speech, except that's what's not happening. All the currencies for whatever reason don't look good against each other at all. the Euro looks magically fantastic for some unknown reason and the dollar looks like dog shit.
The question isn't gold. That we all understand. The question is the Euro.
What's the difference between the latter two at the moment? 37%? 36%? ;) We shall have to wait to the 5th of October to see. :)
The Euro happens to have not one, but two nurses. The Chinese and the Swiss are both happy to hang another IV drip on the patient.
Maybe the euro, instead of declining gradually, will walk off a cliff one day.
If you add gold to the USDX you would have a clear vision of what currencies are really "worth".
The Fed swapping Treasuries for Euros?
thought the fed
was trading turtles
for
the long end of the bond...
... The “price” of longer-term US Treasury debt has risen by 14.75 percent since the beginning of July. Over the same period, the $US price of Gold has risen from $US 1482 to its August 19 spot future close of $US 1852. That’s a rise of $US 370 or 25 percent. Yet US Treasury debt and Gold are polar opposites in any sane evaluation of the financial system...
Exter's Pyramid in action. It's a scramble for liquidity. To me, what this unusual correlation is saying is that the price of L-T Treasury debt is not rising enough to keep up with the evolving perception in the value of gold. U.S. Treasuries are perceived as solid (for now) but not as solid as gold.
As for the Euro, couldn't the Chinese be buying?
Thing's do make sense when considered in terms of Exter's Pyramid.
Occams razor......
.....Bitchez
Good question. Fx swap lines from the Fed and PBOC, maybe?
Bingo Popo --- We have seen the enemy and it is us.
The Euro is Like a Rubber Band
It's fiat that stretches and stretches and stretches...
But one of these days it's going to snap...
Then, some one's fingers will be a stinging...
The Bernank is winning the devaluation race to the bottom... An ugly sister contest...
Good point Popo and totally agree. My son is starting a 2-year graduate skool program in Europe and I need to ease into the Euro to pay for living expesnes and tuition or at least hedge it against FXE. But the FXE will not pullback.
It won't pullback against the dollar. They're both trash. The Fed buys euros and the ECB buys dollars. They've decided between themselves what the exchange rate will be.
PoPo,
Or... (shudder).. is that us?
In answer to your query, in a word "YES".
The euro is to europe as the suck market is to the u.s. They both plunge soon enough.
The answer is China
ZeroHedge told us 7-10 days ago China is buying Eurobonds.
Who knows what the Chairsatan is doing.
The FED is doing what it has done since the 1920's under Strong- we are supporting the euro(it was the pound then) through swap lines and other credit facilities. This debt is just added to the American bill. We have always subsidized Europe. Makes one wonder why the ownership of the FED is not questioned more thoroughly...
But... but... gold is not money, it's merely tradition... You can't eat it! And it doesn't create anything, it just lies there in the hole. So how can it be the price is going up and up? Must be the speculators. Surely the bubble is about to pop any time now, as Nouriel Houdini and Becky Quick were saying last time I checked...
and it only costs a handjob to dig out of the ground.
Shit. I have gold laying all over my yard. I simply bend over and pick up a few nuggets. I don't understnd what all the fuss is about.
you know them things cost $5 to dig out of the ground for us regular folks, right? you lucky SOB...
Nice sub-thread above guys, best laugh of the day, thanks!
So Bernanke the buffon Keynesian who in his little mind decided the Great Depression was caused by not enough paper money. He then failed miserably in his defined responsibly to prevent the 07-08 housing bubble crash. He next decided he could fix the real economy with more paper money & that has failed miserably, also. Why is this asshole Princeton phd Keynesian economist still in charge?
Because the Global Bank Cartel controls both the CB's and Governments.
Their only current problem is Germans aren't acting that way.
Germany is the lynch-pin of the whole fraud's fate; Will make for some great books eventually.
Holy Sheite! Don't tell me we are going to war with GERMANY again! Wasn't twice in last century enought to teach those krauts a lesson?
I bet Iran and Korea will be relieved when they find out.
bernank's mama.
The academic always did look out of place. Surprised the banks couldn't have done better with their Chair. He wasted the past 3 years effectively doing nothing. Now the task is too big for him.
I am 50 years old. Been waiting for this a while now. Wondering how many tricks they got. Well, it looks like the magic is finally gone. The little shop of Horrors is about to open for business.
Good! I love the little shop of Whores...
the market rallied without any aid from the bernak
they still have lots of trix
55 here. I am wondering the same. Seems like they have used up almost every trick.
Keep up the preparations everyone!
Disclosure: I have been worried since JIMMY CARTER, so my words mean little.
Politicians, Bankers, Wall Streeters and the Fed (THE BIG FOUR a/k/a THE STATUS QUO....includes Grandpa Warren Buffett and the likes of Elder Spokesman holding all the Chips), will do anything and EVERYTHING to hold on to power. That includes taxing Gold out of it's shorts if need be, confiscating Retirement Accounts, Stretching out Social Security Age, cutting Medicaid & Medicaire when the time is right (most likely when that becomes patriotic to accept...like during the next conjured War they create) etc.... There is no way out. Do not attempt to adjust your dial.......
Douglasnew,@ 17:21
BINGO, while I/we still have good health insurance, my wife and I both, have had COMPLETE physicals, X-Rays,Colonoscopys, and all dental work that POSSIBLY needs to be done.
Want to make sure ALL bases are covered and if any pre-existing conditions are there, in the past 3 weeks. We will be covered before the loss of insurance.
I would STRONGLY suggest everyone here over 40 do the exact same things.
Knowing your health,condition completely could save your life, and keep you from having to divest yourselves of BIG $$ if the system takes a major dump, or you lose your jobs.(ins goes w/it).
IOW, make sure you have all known health bases covered. Ask you Dr/Dr's to double up on your scrips (explain why, and most will do so),unless it's a controlled substance.
Look at every base,need, and likely need NOW.
Poor comparison. Late 2008 was a much more severe sell off. Late 2007 and early 2008 might be a better comparison. Gold might do fine if we have a huge sell off like we did in Sept, Oct. Nov. 08 but this has by no means been proven yet. Nonetheless it is definitely good to see gold trading the like the safe haven that it is.
Oops, I took something out of context... I agree with the courser and finer ponts, here.
..and it IS different this time.
Gold is higher because the stakes are higher. In 2008 we hadn't already tried every monetary stimulus in existence including things that had never been tried in the US before. There was a big amount of denial: most WS pundits and analysts still believed this was just a routine banking crisis and real estate bust (remember, we've had that after every Republican administration since Nixon). Nobody understood that the collapse could spread beyond the inland empire, Phoenix suburbs, and BSC which deserved to die since hey had enemies on the street.
Gold has become the safe haven PREcisely because it has been "pariah of the global monetary system" . It hasn't been doctored up like Frankenstein's Monster. Even Treasuries today, although liquid, have not been subjected to true price discovery due to ongoing Fed buying programs on a large scale. As many paid lip service to traditional paper, they spoke with their wallets and bought gold.
And, "The Brick' wan't the prez. I still say his presidency ended with that speech about a month ago during the Debt Ceiling "debate" when he said ABSOLUTELY nothing and the market was down 6 Hundo by the time he shut his piehole.
+ $1850
oil feels like march '07
the stock market feels like march '08
the bond market feels like march '09
gold feels like Argentina 1999
So true! Plus 2.25 10'S / and 14.3 Trillion in the drink...
God damn I hate fiat under the current "leadership".
The dollar will soar, gold will collapse this fall. Sad but true. And I am a gold bug.
To what? 500/ounce?
For how long? 1 week?
We'll see. I'm looking forward to Chrismas time, snowfall, walking in the woods. But first a fall with a banking/stock market/currency crisis? No, they always fix it. Boring world we live in.
Wish I had your crystal ball. Define "collapse."
Gold to 250$.
so that means you must be loaded to the gills with gll shares and gld puts. please be sure to report back periodically and tell us how those trades are working out.
I rather watch the spectacle.
all talk and no action. is that you, robo? lol
Looking@ 17:32,
How do you explain your position?.
Remember we are GLOBAL market in Pm's now, and the majority of the rest of the planet do not buy and sell, they hold.
Also, the ONLY scenario I can see for that to happen, is if the Central Banks dumped ALL their Gold onto the market at once...........
That's a possibility, but............we /THEY still have a wild card, they never had before and it's the FACTS in my second sentence.............
Their are nations that will Suck up all they dump at loser/bargain basement prices.......................so, how do they END around that?.
When the US was the ONLY real player, along w/GB, in this, it was doable, and was DONE.
This time I do not see it being possible.
Sounds good. But the USA will experience an enormous inflation as the excess reserves are gonna be used, that is: fractionally loaned out. See
http://mises.org/daily/5574/On-the-Brink-of-Inflationary-Disaster
This would turn gold lower, as people start running for credit, consume again (and forget about gold) or loose their money by the higher prices.
Inflationary disaster does not lead to increased consumption, though it does lead to decreased savings. In high to hyper inflation, incomes do not keep pace with price levels and people lose total faith in the currency. People do not save within the currency but they are unable to consume anything outside of necessities. Gold becomes invaluable, it does not drop to zero.
I am not sure why I bother with responding to obvious trolls...
That article doesn't reach your conclusions. It merely points out a possible use of those assets- one could argue they will be used in an operation twist where banks use it to buy treasuries and control a large part of the curve through interest rates. This would allow for up to 30 trillion in new debt, while controlling inflation at about 2%.
Further, the chart on leakage is less than satisfying. The numbers are pretty flat.
Worse, you are assuming traditional responses to monetary phenomenon. The price of gold may become immaterial- as it is the prices themselves that are immaterial. Currencies without value are incapable of pricing an asset- you could not buy gold or silver in Zimbabwe, regardless of the offer.
LookingWAmazement... The scenario you describe is similar to the Weimar hyperinflation...
PMs were king during Weimar... the only other safe haven was strong foreign currencies...and, we know that there are no 'strong foreign currencies' now.
Think it through and take a look at the Wiki description of the Weimar hyperinflation event.
Why, if you're right, wouldn't some of the consumers that already have enough cars, houses, TVs and electric can openers and no debt to repay consume gold and silver with all their extra cash? That's what I would tend to do. Isn't there anyone else that would do that too?
Barron's this weekend had a bearish article (short term) on gold.
Do not lose faith in gold. Of course it will go up and down. Bettiing against gold is betting that we have competent and honest leadership. I'll take the gold over the lies. Gold has a GREAT future, do not let jarring markets dissuade you. It is all part of the game.
The difference is we are few more trillion dollars in debt and even white people are learning to hate the Man.
We are not Japan. We are the new Rome. 30% of the population hates the other 60%.
Govt. has written its own epitaph with its oh so clever divide and conquer shit.
Reap what you sowed, Uncle Sam.
"30% of the population hates the other 60%"
I'm afraid you just made a big part of our problem clear.
10% are govt. employees.
the 30% and the 60% BOTH hate that 10%
as long as we have zirp, you don't have to wonder where gold is headed. Or more accurately, where the dollar and other fiats are headed versus the barbaric metal. Remember this: MAKE MONEY CHEAP, AND YOU HAVE CHEAP MONEY.
Quite a setup Rodent!
Rock on! Yen
0.1% of the population hates all the rest of us...
The Ruling Elite Parasite Class
Criminally and psychotically amassing wealth and culling the heard of "useless eaters"...
That is the only percentile you need to keep in mind...
I'm in that 30% of haters......but I hate 90% of this population!
Which 30% hates which 60%. Personal experience doesn't help me here.
Me either. I'll just keep my gold closer... And my guns to protect it.
I believe the racist is implying that the 30% of people who are minorities in the US hate the 70% that are caucasians; like most barbarians, he believes that his Tejas is representative of the entire US and is quite mistaken.
Gold was at all time highs when the S&P was at 666. It won't be all that different.
I've moved my money from the stock market racket into TIPS am I about to become a bagholder?
I sold all my TIPS after holding them for years. Made a great profit on them. I got out for one reason....who compiles the CPI that determines the indexing of TIPS? Do you have confidence that they will always always always be fair and honest in compiling those stats, especially when inflation really kicks in? I couldn't convince myself that they would so the TIPS went out for the bid, they are long gone with no regrets.
That being said, if the yields on them get back into the mid to high threes where I bought them the first time, I would probably be a buyer again.
I'd own TIPS over UST but with negative yields out past 5 years and a cooked CPI number I recently sold all mine.
Beyond a PM and dividend paying stock allocation I am short on alternatives. Good luck.
(I used to worry about making money; now I worry about keeping it!)
TIPs have had a great run. imo you bought at a short term top. So to answer your question, yes.
http://finance.yahoo.com/echarts?s=VIPSX+Interactive#symbol=vipsx;range=...
the cpi has come in hot ytd but the stock market and oil are down in august which may lead to a much cooler august cpi when reported in mid-september.
This current spat of instability walks like a duck, talks like an duck, and once roasted will only be purchasable with PM's. Still like silver better. The historical ratio is 16:1 and we are no where near that. However, that is splitting hairs as both will go parabolic together.
Hey ZH, something interesting just came to mind...you should run a survey of readers and gage education levels, demographics, geography, pm holdings and ideology. If I am right the new powerbase may not be as wealthy as the elites (if the herb kohls of the world are smart enough to see this coming) but does have a significantly different plan for America.
"you should run a survey of readers and gage education levels, demographics, geography, pm holdings and ideology."
hehehe...yeah, wrap us up and hand us over with a ribbon to the goon squads...
What a great idea...
money built on debt is the most perverse cancer ridden form of money conceivable and come straight from mammon's asshole....it is a device which enriches banksters of fabled riches while impovershing and enslaving those who do not have access to its managment....only the bankster money changers benefit from such a corrupt system....gold (and its cousins) is the great liberator by which man may regain his freedom....unfortunately there is a re-run episode of dancing with the stars i have to watch so i will worry about this later.
I agree with the debt based system part of your comment. But, I disagree with the way out being gold. The biggest problem this country has right now is that it rewards Capital as opposed to productive potential. If the masses catch on to this.......gold will become less desirable. Not to mention, when enough corrupt jackos control 80% of the gold, the game will change again.
Rewards Capital???
Not my view. Maybe if you are Warren Buffett, but I see NO good business opportunities here.
The ONLY business I have a stake in is in PERU. And now with their Chavez-clone, well...
Risk is everywhere. I see so little decent income opportunities or worthwhile investments to make thge USA a better place. Regulatory transparency and lower tax burdens would help, but I do not see that happening.
THAT is why I hold gold. My country no longer rewards capital, it is DRIVING IT AWAY! Except for the connected like Warren Buffett. He sure got a cozy deal... But, did HIS capital build anything?
The biggest move into bonds happened well after the Lehman bankruptcy and subsequent crash. So how is this bearish? The crash already happened.
The crash has yet to begin in earnest. We've only been given a warning so far.
OK Ben, show all these skeptics what you got. Show'em how strong the pillars of this economy are. You are a student of the depression. Pull out all the stops and sho'em Ben......Ben? .....BEN?
"We all have two choices now - try deflation with the strong dollar, riots on the street and total collapse within few shot years or we will see the coordinated QE3.0 unlished to keep the insolvent financial system running. We have seen the beginning already: Oil release from SPR, SNB and BOJ interventions to prop up the dollar and Run to Treasuries last week. Mother Bear in Treasuries will be continued. After initial panic the dollar will go down - now it will be important to manage its gradual debasement. This is the only way to inflate out Debt, increase Tax revenues without real growth in real Inflation adjusted GDP and make export of US goods and services viable again. We will not be surprised to see the general markets up by the end of the year...in nominal terms. If you would like to know the real picture just check the value of DOW divided by price of Gold. Do not do it with your house price - you will be really depressed. Once the panic settles we will see flight to the Real assets, China will not be able to diversify all 1.2 Trillion holdings in US Treasuries, but the gradual transition will be in place - new world currency will be the Hard one based on Gold, Silver, Copper and access to strategic commodities like Oil, Lithium and REE. We are expecting that first the gold Majors will properly reflect the Gold valuation in their market caps and after that liquidity will go downstream into the Gold and Silver Juniors. Copper juniors will be at the mercy of the M&A consolidation game again and Lithium will show its truly strategic status with every uptick in the Oil price again. James Dines can be right on the money again with his calls this time. And we will be honest with you - we just do not know what to do if political circus will bring US to the abrupt end without the proper glory of the Rome Empire in its final days. More" http://sufiy.blogspot.com/2011/08/gold-vix-panic-and-ppt-in-action-will....
Deflation and a strong dollar causing riots? In your dreams. Deflation/Strong dollar = Lower gold prices, food, energy, and housing. If you think the JPMorgan, GS, WFC, BAC HFTer is going to riot, your wrong. We are due for a massive correction, one that will drive prices through the floor just as it did in 1920-1921 !!!!! But THIS TIME, instead of 31% wholesale DOWN, try 50-70% wholesale down. Them will be the days. I for one will be SO GLAD that THIS TIME, the 'home loaners' will not be able to ATM their house and buy a lot of things at discount (like during the bubble years). Nor will the gold hoarders (if the price collapses). A forced return to an economy more like 1969 will do us MUCH GOOD.
What is your problem with "the gold hoarders?" What did they do to you to make you dislike them so? Also, please explain how you see the oncoming deflation playing out.
The Fed Gov will be FORCED TO CUT SPENDING because they will not be allowed to borrow anymore and the people will not stand for higher taxes. Therefore, the government WILL BE CUT. (Deflationary). The Stock Market WILL COLLAPSE in the absense of US FED GOV spending and it becomes a race to get ALL the money out.(Deflationary) The dollar will go higher, not lower. Commodities will fall. (Deflationary). House prices will continue to fall without the ability to make LIAR LOANS. (Deflationary). Unemployment will double digit. (Deflationary). Benefits will be slashed. (Deflationary). and finally, ALOT OF DEBT WILL FINALLY BE PURGED FROM THE SYSTEM (Deflationary). Wages will be cut, (Deflationary). The us gov could possible finally impose price limits on medicine and care (deflationary), and will have to or see people die. The troops will be let go. (Deflationary).
If no one will buy bread at $X then the price of bread will be cut until people buy it. Same goes for everything. You'll see.
We already hyperinflated. Gas from $.30 t $4.00, bread $.21 to $2.99, houses from $15,000 to $150,000 (or 30K to 300K)(or 50K to 500K). Without WAGE INFLATION (OR!) and this is the MOST IMPORTANT POINT - WITHOUT THE ABILITY TO BORROW AGAINST THE FUTURE prices will DECLINE. The us 'consumer' and home 'loaner' is MAXED OUT. There is no place to go but down.
Thanks for the explanation. Can anyone actually force the Fed Gov to cut spending? Can they not just print what they need? Does not your scenario of deflation require the Fed Gov to generally play by the rules and use good sense and judgment? I'm uncertain what will happen; however, I appreciate your confidence in your opinion.
@ bill1102,
Hyperinflation (or even just moderate inflation) is the usual historical response. Buying and holding gold will probably be a great bet. Keep 6 months of fiats on hand for a bout of deflation if that is a worry. Holding the CASH is not so bad with interest rates so low. "Paper is worth more than electrons" if they give us a Bank Holiday.
Fiat forced hyperinflation huh??? If our gov is stupid enough to print us into oblivion, YES YOU ARE RIGHT, -- GOLD WILL GO THROUGH THE ROOF. As will everything else,, INCLUDING WAGES and BORROWING CAPACITY. Until wages, borrwing capacity AND REAL federal PRINTING take off, there will be no hyperinflation.
But lets just say it does happen. Fine. Gold to 10,000 or 20,000 or whatever. Your rich right??? NOPE. Because what happens AFTER this type of Weimer Germany inflation? A new currency is issued, thats what, and GOLD will NOT be valued highly with a new US CURRENCY.
The fed has already stated they will fight deflation with every ounce of their soul-less soul...
Solid points. I agree with you; however, look what gold did during this whole "inflationary" boom. It collapsed. Gold trades roughly in line with the monetary base not total credit outstanding. The monetary has been exploding since 2008. I do not think the monetary base is going to be shrinking any time soon. Not at least with Bernanke at the helm. I think the inflation that you refer to is more of a credit bubble than actual real inflation. "Inflation is always and everywhere a monetary phenomenon," Milton Friedman. Keynesians have confused what inflation actually is. Rising prices due to increased demand is not inflation. Inflation has everything to do with prices rising irrespective of demand. Gold is rising in anticipation of eventual broad based price increases. Gold may have certain pullbacks as the credit bubble continues to deflate but the long term trend is still up.
Your explanation implies a breakdown of the social contract and revolution. The sum of the monetary destruction is complete. This leads to a short term barter economy- where silver, gold, food, alcohol, etc would be king.
Thus, you have to continue and describe the result of the deflationary action. What form of government would result? History is not kind in retrospect. However, history does show that the Elites are remarkably capable of managing these types of conflicts for their own benefit.
As they now control the levers of power on a global basis, there is" nowhere to run " for the average joe. More likely, they will recognize legitimate forms of capital and honor its' value. Gold is money- just ask JP Morgan.
The system can only ruin you if you are dependent on it. If you operate outside the services it sells, then the only dangers that present themselves are coordinated military action(surrender or die trying) or roving gangs- easily dispersed by community action groups.
Plan for the worse and hope for the best.
But, USA debt will not deflate. You say we already hyperinflated, and we have only serviced the debt. Says it will probably only grow bigger.
Will the dollar survive or gold?
You bet it's different this time.....this time, thanks to folks like Zerohedge, people know what the hell is going on.
why don't we ever talk about WALL ST. paying ?! hand them back their ticking time bombs & let them blow up ! i'm sick of these people ruining average peoples lives . TPTB sure have done a great job brainwashing the public that WE are the ones who have to pay these gambling debts back ! Why the hell isn't ROBERT RUBIN IN JAIL YET ! I will not rest until I see that s.o.b. in cuffs.
Occasionally you make a { good remark}, Thank you.
I really share your sentiments and agree with you almost every post lynnybee.
But, we all know what is going to happen. No one among TPTB will likely suffer, maybe one or two just to throw us a bone. Wall Street, Banksters and .gov won't pay anything.
There is LOTS of blame to go around. Robert Rubin would be a great place to start though.
Gave you green! Now go get some more gold for your grandkids. They will need it.
+1, angry Lady.
Need more angry ladies...
So many in the rogue's gallery and still you single out Rubin...you crack me up, Lynny.
I too have noticed the correlation between bonds and gold. Eventually one of them will break, right? What, are we going to see gold at $3,000.00 and the 10 yr at 1.5%? I guess its possible if we go full retard Japan but at some point something will have to give and the biggest bubble of all will break, the US Gov bond and USD bubble.
The appropriate consequences are a replay of the USSR. It was the last "evil empire", and it killed itself, and everyone on earth is better off for it.
The appropriate consequences of the actions taken by the predators-that-be and predator-class in the USSA is the same. This new "evil empire" is killing itself off, and everyone on earth will be better off for it.
Normal people are soooo stupid, it is amazing how completely and overwhelmingly they are under the control of "normalcy bias". Even when what is normal is horrific, they cannot imagine any change would be better. Just insane, completely insane.
Honesty is good. Liberty is good. Ethics and justice are good. Individualism is good. And we won't have any of that ever again unless the current predators-that-be go the way of the dinosaurs and the USSR. And good riddins.
And don't think China is not smart enough to step into the breach -- unlike the failure of the U.S. to do so when the USSR failed.
honestann & Rocky,
I share your sentiments, but I do not fear China. They have LOTS of problems, as of course we do. But theirs are WORSE. I would rather be HERE than THERE.
For sure.
@ some point, PO or not, the fiat cost of oil alone will kill 'globalism' if only to spark a WW3.
goD help us all if PO is for real, then I fear it will be a nuke the others to secure what oil is left . . .
Subprime JD...
This is interesting... a funding mechanism for Ts that is obscure...
http://news.goldseek.com/GoldSeek/1314194400.php
Now that's interesting! Thanks!
Morgan Stanley Lays An Egg: the Footprint of the ESF
When one considers that Morgan Stanley “strapped on” 9 Trillion [according to the OCC in Q1/2011] in notional of products that require 2-WAY–CREDIT-CHECK – we should all now be scratching your head as to “WHO” or perhaps “WHAT” would be an agreeing counterparty to such STAGGERING 9 trillion of two-way-risk trade with Stanley in 3 months????? Remember folks, a couple of years ago – no institution would consider buying / acquiring Stanley for any amount.
The ONLY answer – is that the EXCHANGE STABILIZATION FUND is acting in the int. rate swap market [through the N.Y. Fed] “RECEIVEING” 5 – 10 year swaps at “FIXED RATES” [meaning Stanley is paying the ESF fixed rate and the ESF is in turn paying them ‘floating’ 3 month libor, but does not exchange bonds with Stanley]. Morgan Stanley “IS” a spread player and the ESF is NOT. [the custom in int. rate swaps of 3 – 10 year duration is for the “receiver” of fixed to sell the “payer” of fixed a duration weighted amount of government bonds of the tenure of the swap, ie 25 million notional of 5 year swap would entail a physical bond trade of roughly 25 million 5 yr. gov’t bonds.]
This FORCES Stanley into the bond market to purchase the required amount of bonds to hedge their trades. [this has the added benefit of being quite profitable if you are the Exchange Stabilization Fund – especially when you KNOW [and no one else does] that short term rates are NEVER going to go up.
This serves to make US bonds “SCARCE” for settlement purposes [fails to deliver data available open source confirms this] over the past few years – and has served to give the U.S. Treasury / Fed control of the long end of the int. rate curve. This is why interest rates are so PERVERSELY LOW today. It really has NOTHING to do with “flight to quality” or “liquidity”.
This has all been perpetrated on humanity by a group of elite, narcissist, globalist Central Bankers to obscure the reality that “their” FIAT MONEY is FAILING – in spades.
I would like to posit that this is total economic warfare.
In history, this happened with a number of tools and forces, military and otherwise. Most of those tools are not simply either not available or the ramifications of their use result in a zero sum gain - at best.
The western powers are using debt to enslave their own countries as well as to usurp power from other countries "not playing ball". This is a travesty and going on right before our eyes and we're letting it happen. Its not too fantastic to make a comparison to the round up of Jews and others in Germany in the 30's. This is happening although with a different dynamic. Physical people aren't being enslaved, their duty to service debt is and their true wealth - freedom and justice - are being rounded up.
I believe that we are buying Euro debt in tonnage. Europe is too big to fail and the power struggle is on.
This is the only way consolidation of power can happen in todays world. The information age has sealed that deal. If a finance minister in Belgium farts, a blogger in Rancho Cucamonga knows about it 10 minutes later. Large scale war? Where's that going, even if Krugman's big idea were to unfold?
Economic enslavement and the concomitant "new age" are what we are staring down the barrel at. So what if you own physical gold? 1933.
Large scale war can always break out as it has throughout human history. Just look at Libya and how quickly it disintegrated into a hellhole. Syria is next. And then the bigger boys start going at it. The battle lines arent set yet but as currency wars turn into trade wars the next step is real war.
Bottom line: never discount the possibility of armed conflict taking place on a large scale. It would, in effect, be the worst case scenario. Fuck a dollar crash, fuck peak oil, because in the end a full blown armed conflict with China will kill BILLIONS this time. Just a week long barrage of nukes being sent out in each and every direction will literally be judgment day ala T2 style.
I hope that doesnt happen but conflict does follow economic hardship, always has.
Subprime / over 50? Or > CAL. FLY. NY?
Gold speaks volumes without saying anything. It's a total embarrassment for the establishment to have gold this strong. I'll never sell a single oz of it and when it's my turn to kick the bucket it's staying in the family. I Never cared about having big numbers in a bank account anyway. Looks like gold is going to reclaim it's currency of 1st resort when everything shakes out. Not really a big surprise. It does it every time. The dumb money was always in the USD. The smart and aware people bought gold and silver and put up with dumb asses ridiculing us for being "fringe." They look like complete fucking morons now and I almost feel sorry for them but not really. If you're that stupid, corrupted, or unaware of shit staring you right in the face you don't really deserve to own gold. It's not for fools and certainly not for cry babies who refused to buy at $500, $1000, or $1500 because it was" too high." If you don't own any gold then please do yourself a favor and don't be one of these shmucks. Step up and buy an oz of it at $1830 so you can at least get 1. It's not going to be cheaper than this next year or the year after or the year after that. Gold has already passed by so many of our lower income people and now (middle income people) forever.Soon it will only be for the wealthy. If it's still in your orbit grab an oz!
this is a serious question......what is one oz. of gold going to do for anyone........even if you buy today and it goes to $5000, does it really help ?
for this reason i have bought many ounces of silver......i could be way off, but i would rather have 1000 shiney bars than just 1 in my possesion
Seasmoke @ 19:51,
Simple..........................if silver goes to $50.00 an oz,and you/they have a 1000oz, and Gold goes to $5k an ounce, and you have a 100oz of Gold,you have same value in Gold, with not so much weight you cannot carry on your person.
Try that with even 500oz of silver.
Your comparison makes no logical sense.Since if one can only afford a single ounce of gold, they should buy Silver.(IMHO)
IOW, your scenario is artificially limiting the Gold owner, but not the Silver owner.Apples n Apples pls.
ok let me phrase my question better, as i wasnt clear
..we are buying in case the whole thing collapses and will hold until then......at that point, isnt having 1000 shiney silver bars better than having 100 shiney gold bars in your possesion for ease of barter or purchase goods/services........ also i wouldnt want to lose or have 1-2 gold bars or have them robbed where losing the 2 silvers (while hiding the others) wouldnt be as devastating......or is just a scenario you see in mad max and has no relevance to us today........
DosZap, Seasmoke,
The answer of course is to buy BOTH. Silver for everyday spending after TSHTF. Gold to preserve your wealth for your children / grandchildren.
Also consider fractional 1/10 oz gold Eagles. Kind of an intermediate point between 1 oz of Ag and 1 oz of Au. Yeah they have a higher premium, but when I leave on a trip, some of my gold comes with me...
It's amazing to see the lack of imagination out there.
Here's some for ya:
A copperhead BB is ~5 grains. A troy ounce is 480 grains.
10B toz above ground and $1 quadrillion in assets worldwide -> $100k/toz ($208.33 / grain or ~1041.65 / gold BB).
16:1 ratio of Ag to Au -> $6,250/toz ($13.02 / grain or $65.10 / silver BB).
Current minimum hourly wage (and the typical fast-food meal) would be: ~1/10th of a silver BB (or ~4 silver BBs per week).
My family monthly wages (not counting cap gains): 2 silver eagles (or 192 silver BBs or 12 gold BBs).
My current rent: 48 silver BBs or 3 gold BBs;
A full tank of gas: 2/3 of a silver BB.
A nice bottle of wine (or 1/8th of high-end weed): 1 silver BB.
A new high-end PC: 2 gold BBs.
A new crotch rocket: 2 silver eagles (192 silver BBs or 12 gold BBs)
A decent new car: 5-8 silver eagles (480 silver BBs or 30 gold BBs).
An emergency surgery: 12-16 silver eages (1152-1536 silver BBs or 72-96 gold BBs or 1 gold eagle).
An average 3bd house: 2-3 gold eagles.
A ridonculous mansion: 100 gold eagles.
The average hollywood blockbuster: 2,000 gold eagles.
The national debt: 147.3M gold eagles.
Current treasury holdings (in theory, stop laughing): 147.3M gold eagles.
You could have even more if they were nickels.