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The "Muddle Through" Has Failed: BCG Says "There May Be Only Painful Ways Out Of The Crisis"

Tyler Durden's picture




 

Denial. Denial is safe. Comforting. Religiously and relentlessly abused by politicians who don't want nor can face reality. A word synonymous with "muddle through." Ah yes, that "muddle through" which so many C-grade economists and pundits believe is the long-term status quo for the US and the world just because it worked for Japan for the past three decades, or, said otherwise, "just because." Well, too bad. As the following absolutely must read report, which comes not from some trader of dubious credibility interviewed by BBC, nor even from an impassioned executive from a doomed Italian bank, but from consultancy powerhouse Boston Consulting Group confirms, the "muddle through" is dead. And now it is time to face the facts. What facts? The facts which state that between household, corporate and government debt, the developed world has $20 trillion in debt over and above the  sustainable threshold by the definition of "stable" debt to GDP of 180%. The facts according to which all attempts to eliminate the excess debt have failed, and for now even the Fed's relentless pursuit of inflating our way out this insurmountable debt load have been for nothing. The facts which state that the only way to resolve the massive debt load is through a global coordinated debt restructuring (which would, among other things, push all global banks into bankruptcy) which, when all is said and done, will have to be funded by the world's financial asset holders: the middle-and upper-class, which, if BCS is right, have a ~30% one-time tax on all their assets to look forward to as the great mean reversion finally arrives and the world is set back on a viable path. But not before the biggest episode of "transitory" pain, misery and suffering in the history of mankind. Good luck, politicians and holders of financial assets, you will need it because after Denial comes Anger, and only long after does Acceptance finally arrive.

First, let's recap why BCG thinks all the alternatives have been exhausted

We believe that some politicians and central banks - in spite of protestations to the contrary - have been trying to solve the crisis by creating sizable inflation, largely because the alternatives are either not attractive or not feasible:

  • Austerity - essentially saving and paying back - is probably a recipe for a long, deep recession and social unrest
  • Higher growth is unachievable because of unfavorable demographic change and an inherent lack of competitiveness in some countries
  • Debt restructuring is out of reach because the banking sectors are not strong enough to absorb losses
  • Financial repression (holding interest rates below nominal GDP growth for many years) would be difficult to implement in a low-growth and low-inflation environment

Inflation will be the preferred option - in spite of the potential for social unrest and the difficult consequences for middle-class savers should it really take hold. However, boosting inflation has not worked so far because of the pressure to deleverage and because of the low demand for new credit. Moreover the inflation "solution" while becoming more tempting, may come to be seen as having economic and social implications that are too unpalatable. So what might the politicians and central banks do?

 

Since the publication of Stop Kicking The Can Down The Road, a number of readers have asked us what would happen if governments persisted in playing for time. To what measures might they have to resort? In this paper, we describe what might need to happen if the politicians muddle through for too much longer.

 

It is likely that wiping out the debt overhang will be at the heart of any solution. Such a course of action would not be new. In ancient Mesopotamia, debt was commonplace; individual debts were recorded on clay tablets. Periodically, upon the ascendancy of a new monarch, debts would be forgiven: in other news, the slate would be wiped clean. The challenge facing today's politicians is how clean to wipe the slates. In considering some of the potential measures likely to be required, the reader may be struck by the essential problem facing politicians: there may be only painful ways out of the crisis.

At this point BCG goes into the details of why it is long overdue for reality to be finally acknowledged. We will skip this part as any regular readers of Zero Hedge are all too aware of reality, and how it is masked constantly by the mainstream media and its agents in all walks of life. The truth is far, far uglier than anything anyone in a position of power will tell you because acknowledgment would imply the need to come up with solutions that involve more than merely extending the event horizon for a little longer. Alas, even politicians now realize there is only so far that the can can be kicked.

There is one thing we would like to bring to our readers' attention because we are confident, that one way or another, sooner or later, it will be implemented. Namely a one-time wealth tax: in other words, instead of stealth inflation, the government will be forced to proceed with over transfer of wealth. According to BCG, the amount of developed world debt between household, corporate and government that needs to be eliminated is just over $21 trillion. Which unfortunately means that there is an equity shortfall that will have to be funded with incremental cash which will have to come from somewhere. That somewhere is tax of the middle and upper classes, which are in possession of $74 trillion in financial assets, which in turn will have to be taxed at a blended rate of 28.7%.

And if the prospect that very soon a government near you will force you to hand over a third of your wealth, here is the rest of the terrifying analysis of what will happen to the world in order to get it back in order:

A Program for the United States

The situation in the U.S. is different from that of the euro zone and, in a way, would be less complicated  to resolve.  The U.S. has all the levers with which to address the crisis and would not need to coordinate 17 countries with divergent interest. But some facts would need to be acknowledged before decisive action could be taken:

  • In spite of massive intervention by the Fed and the US government, growth remains anemic
  • The deleveraging of private households will have to go on for many years
  • The real estate market has not yet stabilized. About 11 million US households suffer from negative equity (their mortgage outstanding is higher than the value of their home). And the supply of homes is still in excess by 1.2 to 3.5 million (depending on the data used to estimate this number).
  • The US government deficit is not sustainable and will need to be brought to acceptable levels, which will slow growth and amplify the problems of the private sector.
  • In spite of a significant weakening in the dollar, the U.S. is still running a trade deficit that cannot be blamed on China alone. It reflects a lack of competitiveness in some key markets and the low proportion of manufacturing in the U.S. economy compared with countries such as Germany and Japan.
  • There is a striking similarity between the US and Japan in the development of stock and real estate prices (See chart below). A correlation does not mean causality, but it is a sobering picture should Ben Bernanke and his team fail to reflate the economy.
  • The interventions of the Fed, notably the programs designed to buy financial assets, have created a monetary overhang that could be the basis for sizable inflation in the future.

Addressing the debt overhang.

The US would also  need to reduce the debt overhang of the government, of consumer loans besides mortgages, and of non-financial corporate sector in the same way as in Europe. As exhibit 2 shows, the total debt overhang in the US equals $11.5 trillion or 77% of GDP. In the somewhat unlikely event of the US following the same path that Europe might pursue, a one-time wealth tax of 25% of financial assets would be required. As in Europe, this would also require the following initiatives.

  • Cleaning up the banking sector by calculating the losses and recapitalizing as needed – even if it means wiping out existing shareholders.
  • Additional taxes on real estate, including an increased capital-gains tax to offset the support for the real-estate market.
  • Creating an incentive for corporations to invest in R&D and new machinery by taxing profits not reinvested.
  • A commitment by the government to restrict its debt level and to prepare for the increasing costs of an aging population by either limiting benefits or raising the retirement age.

Addressing the fundamental issues of the US Economy.

We have argued for a long time that the US economy needs to address some fundamental issues in order to become globally competitive again. In putting an end to muddling through, the government might also embark on a major restructuring of the economy:

  • Reindustrialize and grow the share of the manufacturing sector from the current low of 12% of GDP to 20% of GDP . This might then allow a rebalancing of trade flows.
  • Revisit income distribution.  Most U.S. families cannot make up for their income shortfall with increased credit – and 41 million Americans are officially considered to be below the poverty line.
  • Take action to reduce dependency on imported oil by investing in new technologies and modernizing existing infrastructure.
  • As in Europe, an administration that truly bit the bullet would take a long-term view and invest more in education.

All this is still speculation. But history shows that the US economy, like no other, is capable of adjusting and implementing quite radical changes. And in our view, some of the actions described above might be pursued by the US government if things do not improve soon.

BCG's conclusion:

The programs we have described would be drastic. The would not be popular, and they would require broad political coordinate and leadership – something that politicians have replaced up til now with playing for time, in spite of a deteriorating outlook. Acknowledgment of the facts may be the biggest hurdle. Politicians and central bankers still do not agree on the full scale of the crisis and are therefore placing too much hope on easy solutions. We need to understand that balance sheet recessions are very different from normal recessions.  The longer the politicians and bankers wait, the more necessary will be the response outlined in this paper.  Unfortunately, reaching consensus on
such tough action might requiring an environment last seen in the 1930s.

Full report:

BCG_Back_to_Mesopotamia_Sep_11[2]

 

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Thu, 09/29/2011 - 18:17 | 1724030 Dick Fitz
Dick Fitz's picture

+1000 KevinEarick!

More debt is not, cannot, solve the "debt (spending) crisis" and will only make the Misean "crack up boom" that much bigger.

I fear for the future of this country.

Thu, 09/29/2011 - 19:52 | 1724259 Bicycle Repairman
Bicycle Repairman's picture

What was the previous paper from BCG?  "The Dangers of Climate Change and Taxing Our Way to a Solution"?

Thu, 09/29/2011 - 16:27 | 1723587 hedgeless_horseman
hedgeless_horseman's picture

 

 

...after Denial comes Anger, and only long after does Acceptance finally arrive.

Alternatively, after The Consummation of Empire comes Destruction, and only long after that is Desolation.

There is the moral of all human tales;
'Tis but the same rehearsal of the past.
First freedom and then Glory - when that fails,
Wealth, vice, corruption - barbarism at last.
And History, with all her volumes vast,
Hath but one page...

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

Thu, 09/29/2011 - 16:40 | 1723667 fyrebird
fyrebird's picture

Too true. History breathes in, and History breathes out, and that single breath was the whole of a way of life, of a people, and of a nation.

Out from the flood and into the fury and all of Heaven will tremble, because beyond here there be monsters.

Thu, 09/29/2011 - 22:57 | 1724681 Imminent Crucible
Imminent Crucible's picture

" beyond here there be monsters."

You said that yesterday.  Give us something fresh today, slacker.

Fri, 09/30/2011 - 03:58 | 1725008 Shirley Wilfahrt
Shirley Wilfahrt's picture

Someone stole my battery!

Thu, 09/29/2011 - 17:22 | 1723863 Ricky Bobby
Thu, 09/29/2011 - 19:48 | 1724247 Phil Free
Phil Free's picture

With solar panels and satellite dish.

 

Yeah.  Yeah, that's it ...

 

Thu, 09/29/2011 - 16:24 | 1723588 HedgeAccordingly
HedgeAccordingly's picture

the ES still looks ugly despite this last hour ramp.. thanks HF .. http://www.hedgeaccording.ly/2011/09/post-close-15min-s-chart.html

 

bring it on

Thu, 09/29/2011 - 16:25 | 1723591 tuco13
tuco13's picture

So, are you saying we should own assets the government can't track?  Assets which will appreciate along the lines of inflation or currency rebalancing?  Assets that are not taxed by state or local governments? 

What are my options?

Thu, 09/29/2011 - 16:33 | 1723633 r101958
r101958's picture

Silver, gold and more silver?

Thu, 09/29/2011 - 16:36 | 1723643 LongSoupLine
LongSoupLine's picture

Silver, gold and MRE's

Thu, 09/29/2011 - 17:31 | 1723908 agent default
agent default's picture

And lead don't forget lead.  Your assets are worthless if you can't defend them.

Thu, 09/29/2011 - 19:34 | 1724204 DoChenRollingBearing
DoChenRollingBearing's picture

Yes, to all of the above

Thu, 09/29/2011 - 19:51 | 1724256 Phil Free
Phil Free's picture

Mmmm.  Lots of lead.

 

Thu, 09/29/2011 - 16:26 | 1723593 chubbar
chubbar's picture

Let's see, the plan is to take 28% of my middle class savings in order to pay bankers and the debts of borrowers? Yeah, pack a lunch and a tactical vest when you come to collect it.

Thu, 09/29/2011 - 17:16 | 1723832 americanspirit
americanspirit's picture

I sure hope you don't have a 401-k, brokerage account, pension fund, or any money in a bank account or in a safe deposit box or in electronic form anywhere in the world because they can come take it all without you ever getting them in your sights. Also you can probably forget Tax refunds. And that Social security direct deposit.

Now, let's see. What if you own a car or truck or boat worth more than, say, $5000. Wait till you see what it's gonna cost you to register it. And if you're counting on keeping that 'over 65' property tax break, I wouldn't. Oh, and what you win in Vegas or at the track - 100% of gambling winnings will go directly to the Man.

And I sure hope you haven't told ANYONE about your stash of gold and silver because the Man is going to be paying BIG rewards and whoever you've told will rat you out in the blink of an eye because they WILL be able to keep that reward money.

Got money 'hidden' on offshore accounts? Want to bet on that? And don't you dare try to slip out of the country with cash, gold, or diamonds sewn into the lining of your clothing - or in your gastrointestinal tract. Like to smoke? Feel free - you'll just be paying $20 a pack. And that nice little bottle of California Zinfandel - you'ld happily pay $100 for it, right? And don't even get me started on what gasoline is going to cost.

So guns and ammo are all good against mobs, but against the gummint, useless I'm afraid.

Thu, 09/29/2011 - 17:26 | 1723884 Chicago bear
Chicago bear's picture

Nice of the IRS to have a rule tha tthe most you can get as a loan against your 401k is $50,000. Smells fishy that cap. "For the benefit of the borrower," is how they phrase it. Right- they don't want an end around the deposits. However, if all of us take the max loan out, that is a run on the mutual fund industry/shadow banking system. Would be great to see!

Thu, 09/29/2011 - 19:58 | 1724279 Phil Free
Phil Free's picture

Guns, ammo, against the gummint?

 

I am reminded of an old friend-of-mine's saying...  " There is no problem that a suitable application of plastic explosives cannot solve. "

 

Fri, 09/30/2011 - 01:19 | 1724894 Tompooz
Tompooz's picture

Fight or flight...  Fight is suicidal, flight the sensible survival option.

Thu, 09/29/2011 - 21:27 | 1724517 mkkby
mkkby's picture

All true.  But the people would take revenge.  As long as gas can be obtained, do you think a bank branch would be left standing?

Thu, 09/29/2011 - 23:25 | 1724732 Syrin
Syrin's picture

You are right from the perspective of an individual, but a group of armed citizens storming DC can remove gov't over night.   I doubt our boys in uniform feel much loyalty for the Teleprompter Tyrant.

Thu, 09/29/2011 - 17:20 | 1723854 Waffen
Waffen's picture

There is no way a government would get away with it.   This is why we will have Hyperinflation.

 

This article is ridiculous.

Thu, 09/29/2011 - 17:41 | 1723943 Commander Cody
Commander Cody's picture

Agreed, but only after deflation rears up its head.  Governments will not do anything but close their eyes to the inevitable hoping somehow it won't happen while continuing to fleece the middle class.

And what about all the derivatives floating around?  Unleash the Kraken and 28% won't cover the tip much less pay the bill.  The only result will be hyperinflation, which the oligarchs will chose since they make out while everyone else goes bust, or the Grand Reset.

Thu, 09/29/2011 - 18:09 | 1724008 Panafrican Funk...
Panafrican Funktron Robot's picture

I actually see "mild/in range" headline inflation and the continued competitive currency devaluation.  This is the script from here on out.  This is the least bad option for those that run the game.

Thu, 09/29/2011 - 16:26 | 1723594 adr
adr's picture

To deny something you must first actually acknowledge there is something to deny. These people don't even have a vocabulary to describe the real situation. They actually think we are the ones in denial and that the world's stock markets belong at the levels they reached in the past bubbles. That is the correct position.

Why does the market keep shooting for a level that has been proven to be unsustainable? They truly believe this time is different and the forces that brought the market down were in fact based on faulty data. If you try to say that DOW 14k is impossible based on macro economics they call you insane.

The only answer is that they are true narcissists putting out nothing but bold faced lies to cover up the fact the market and global economy is nothing but a scheme to rob the common people of their money.  How can anyone in their right mind believe Salesforce is worth nearly 700 times forward earnings?

Here's a nice question. If everyone invested every penny they had in stocks, how high would the market go? If you asked that question to anyone on CNBC they would probably say that the sky is the limit and every single person would make a killing, that is how you get rich.

I would say, hey dumbass, if everyone invested every penny in the stock market there would be no money left to buy anything so there would be no economy. Then they would call me an idiot and deny my point of fact actually exists.

Thu, 09/29/2011 - 16:30 | 1723618 jdelano
jdelano's picture

It's like I cloned myself and the clone decided to post under the alias ADR. +1 bravo, bizzaro me.

Thu, 09/29/2011 - 17:15 | 1723822 narnia
narnia's picture

the last thing a sausage salesman wants to explain to you is how the product he is trying to get you to purchase was made.

this whole analysis (in the article, not yours) is a dart throwing contest against an invisible dartboard.  the problems of central economic planning cannot be solved by central economic planning.

Thu, 09/29/2011 - 17:46 | 1723954 Piranhanoia
Piranhanoia's picture

You get it, now turn off the tv forever, if not that, take CNBS or any other news out of the channels you can watch, and if you can't do that, turn the sound down. 

Thu, 09/29/2011 - 17:54 | 1723975 disabledvet
disabledvet's picture

Did someone call "language management issue"? Here let me help you help all those people who still see buying opportunities--and yet another element that stands in the way of even that:
http://www.youtube.com/watch?v=0EoHogKyfGM&feature=player_detailpage
sure--you think you've got it made--you DO have it made...you DO!
But then..."enter the succubus"...

Thu, 09/29/2011 - 20:24 | 1724340 Phil Free
Phil Free's picture

In the 19th century, opium dens became prevalent .. the den being a convienent place to purchase and then partake of, the opiate.

 

Here in the 21st century, in our super-information-age, the citizenry doesn't have to travel to a 'den'. Modern tech. brings our 'hopium' right to us.  TV, computer, phone, radio, internet -- the masses can bathe in their 'hopium'.  And so they do.

 

Thu, 09/29/2011 - 16:31 | 1723605 fyrebird
fyrebird's picture

OIC how it is. Random Trader Guy is random. Check. Impassioned insider is impassioned. Check. This is not important, these guys are losers because they are not selling a report.

But wait, there comes Another Consulting Group! Finally someone with a fucking agenda we can know in advance will talk their book!

Ah the familiar shores of Lethe. I can now relax in the warm, suffocating embrace of the mainstream meme generator machine!

Let not a single human know or speak the truth for only the machine can set you free. Though of course, not for free.

I've been thinking for myself lately, and I really do think that beyond here there be monsters.

Thu, 09/29/2011 - 16:40 | 1723669 XitSam
XitSam's picture

If by "here" you mean East of the Hudson, then yes.

Fri, 09/30/2011 - 02:10 | 1724951 Ponzi Unit
Ponzi Unit's picture

Well said, fyrebird.

Thu, 09/29/2011 - 16:28 | 1723608 nobusiness
nobusiness's picture

Why try to collect a wealth tax when the same thing is accomplished by defaulting on the debt?  Who holds the debt?  The wealthy and middle class and foreigners.  you even get the added benefit of foreigners taking part of the hit.

If Greece defaults on its debt only 1/3 of the loss hurts the Greek citizens the rest is held by foreigners.  If they try to pay it back 100% comes from the Greeks.

Thu, 09/29/2011 - 16:29 | 1723613 hedgeless_horseman
hedgeless_horseman's picture

He who defaults first defaults best.

Thu, 09/29/2011 - 19:40 | 1724222 DoChenRollingBearing
DoChenRollingBearing's picture

Yes, green

But, if you are not in a position to DEFAULT on someone (or some bank) and are in the position of being at risk that they will default on YOU, then you must prepare:

Get money out of the banks, cash is your friend!  Buy gold!  And guns & ammo.

Looks like Jubilee or hyperinflation is coming.  We all know it.

Thu, 09/29/2011 - 16:36 | 1723642 jdelano
jdelano's picture

No matter how you cut it, it's the same. I'd pay the 30%tax, because if every body else, including the jamie dimons took e hit, I'd be in exactly the same relative position I am now. I'd try to hide as much physical as I could, and at least I wouldn't have to subsist on spam in a bunker somewhere because the dollar collapsed..

Thu, 09/29/2011 - 17:46 | 1723955 Boner Jamz 03
Boner Jamz 03's picture

Yeah, but as much physical as you can hide, they can hide more. If you're willing to take a 30% haircut to pay for other people's fuckups, you're not considering that the main purpose of wealth is to qualify inequality. If it were as easy to just say "Mkay lets all minus 30% and all commodities can cost 30% less and its just like yesterday but with no debt", what exactly would debt be? Debt isn't simply a financial product, it's an expression of inequality. Nobody sells something with the aim of being in a worse position afterwards. Someone is *getting* that 30%, and the Jamie Dimons of the world are charging fees to process it.

Thu, 09/29/2011 - 20:00 | 1724285 Bicycle Repairman
Bicycle Repairman's picture

"Why try to collect a wealth tax when the same thing is accomplished by defaulting on the debt? "

Well, debt default is so terribly arbitrary.  The wealth tax would be administered fairly by wise men.

/sarc

Thu, 09/29/2011 - 16:29 | 1723610 Zola
Zola's picture

I have the solution for the crisis ! A new reserve currency !! Apple products !!! Yes , so says CNBC !!!

http://www.cnbc.com/id/44718875?_source=yahoo|related|story|text|&par=yahoo

 

Who said you could not eat IPADs ?

Thu, 09/29/2011 - 16:31 | 1723623 NotApplicable
NotApplicable's picture

Now, wait a minute! Whoever said that muddling-through wouldn't be painful?

Thu, 09/29/2011 - 16:32 | 1723626 SMC
SMC's picture

"...world is set back on a viable path"...  since when has any tax been "one time".  

Insane.

 

Thu, 09/29/2011 - 16:41 | 1723672 SheepDog-One
SheepDog-One's picture

Yea see we're the Gubment, we're here to help you! In order to do that and save you, we will now need to confiscate anything you have of value, for your own good, betterment and benefit.

Thu, 09/29/2011 - 20:27 | 1724362 Phil Free
Phil Free's picture

Badgez?  Badgez???  We ..

 

Fri, 09/30/2011 - 07:51 | 1725214 swiss chick
swiss chick's picture

you are so right, no one time tax, do it thru inflation, that way everyone gets to pay cause I'm sure that the 1% wealthy won't have to pay otherwise and this is all their fault anyway...

Thu, 09/29/2011 - 16:33 | 1723635 sabra1
sabra1's picture

hey perry! fire the bernank now, and i promise robottrader will vote for you!

Thu, 09/29/2011 - 16:35 | 1723641 Segestan
Segestan's picture

The ..World... back on path? It isn't the World that will be taxed to death, but the west. Why should I care about the world? Really what is economics ... capital or religion?

Thu, 09/29/2011 - 20:29 | 1724365 Phil Free
Phil Free's picture

Yes it is.

 

(re: Economics, not the World path.)

 

Thu, 09/29/2011 - 16:37 | 1723645 XitSam
XitSam's picture

the developed world has $20 trillion in debt over and above the  sustainable threshold

Wait. That means there is still the future labor of generations of the undeveloped world left to plunder!

Thu, 09/29/2011 - 16:37 | 1723647 Börjesson
Börjesson's picture

Bloody hell! Time to take out a huge housing loan and buy a mansion or two, to ensure that there's no money left for them to take from me.

Thu, 09/29/2011 - 17:36 | 1723925 WonderDawg
WonderDawg's picture

Property taxes, brother. They'll tax you blind and when you can't pay, they'll take your shit.

When you get right down to it, when you buy property, you're still renting it from the gubmint.

Thu, 09/29/2011 - 21:01 | 1724452 BigJim
BigJim's picture

You get green from me.

Fri, 09/30/2011 - 01:02 | 1724872 Conax
Conax's picture

Property taxes ARE wealth taxes. All they need to do is raise them.

A green from me too, WonderD.

Thu, 09/29/2011 - 20:34 | 1724376 Phil Free
Phil Free's picture

Hey, when you find an entity that'll lend you some shit-tons of money, let me know who -- in my part of the country, nobody'd lend me a bucket of water if I was on fire!

 

(And it ain't 'cuz of my "credit".)

 

Thu, 09/29/2011 - 16:36 | 1723648 Fips_OnTheSpot
Fips_OnTheSpot's picture

Ok - so reduce the debts by "one time" tax. Net effect: the monieees go back to the debt-holder -- after all that's just aggregating liquidity in lesser hands once again. Looks like a plan..

And it wont solve ANY underlying problem of debt-based fiat currency systems and in, say, 10 years the whole shit starts again. No?

Thu, 09/29/2011 - 16:37 | 1723650 Lmo Mutton
Lmo Mutton's picture

I got your 30% tax right here.

Thu, 09/29/2011 - 16:37 | 1723652 grid-b-gone
grid-b-gone's picture

Rip the band-aid off. Have none of these guys ever watched an Americal western? Chug a little whisky, chomp down on a piece of wood, run that bowie knife blade over a flame, and dig the bullet out before infection sets in.

Greece is infected. Amputation is now necessary due to the delay.

Thu, 09/29/2011 - 16:39 | 1723657 dick cheneys ghost
dick cheneys ghost's picture

Call me when they redefine the "corporation", close the empire, put the bankers in jail and come up with a new monetary system..........

Thu, 09/29/2011 - 16:46 | 1723699 fyrebird
fyrebird's picture

It would take 50 years of brutal societal turmoil to attain even ONE of the things you have in your list. And attaining even one would probably place all the others out of discussion for 100 years

I hope that was your point.

Thu, 09/29/2011 - 16:42 | 1723676 Peak Everything
Peak Everything's picture

the developed world has $20 trillion in debt over and above the  sustainable threshold by the definition of "stable" debt to GDP of 180%

 

The situation is much worse than stated. 180% assumes a historically "normal" growth rate. But growth is now constrained by the production cost of oil. We can therefore expect a much larger haricut than 30%.

Thu, 09/29/2011 - 16:46 | 1723697 SheepDog-One
SheepDog-One's picture

Money is not the answer, more money is definitely not the answer...even this article is somewhat a trick as it doesnt really address whats really going on the PURPOSEFUL transfer of wealth to the top .01%. 

Thu, 09/29/2011 - 17:44 | 1723951 fishface
fishface's picture

yep just a trick to keep the system going.

whats 30% if you own billions, shitload of money but hey, you still get away with 70%

If it comes to looting, revolution, ...you could lose everything, plus maybe the head.

Thu, 09/29/2011 - 18:43 | 1724087 perchprism
perchprism's picture

 

They did mention the socialist "distribution" of wealth (should be re-distribution) to the lower rung poor of the country.   Then I see they're a commie think tank from Taxachusetts.

Thu, 09/29/2011 - 18:13 | 1724018 anyways
anyways's picture

@Peak Everything: if a comment starts in italic format, nobody can rate it. This is a bug in the comment system.

So, here we go: +1

 

Thu, 09/29/2011 - 21:04 | 1724462 BigJim
BigJim's picture

Well spotted.

Thu, 09/29/2011 - 16:42 | 1723678 Random_Robert
Random_Robert's picture

“LE SORT DE L’HOMME SE JOUE SUR LA MONNAIE”

 

http://www.plata.com.mx/Mplata/articulos/articlesFilt.asp?fiidarticulo=173

Fri, 09/30/2011 - 08:33 | 1725332 WmMcK
WmMcK's picture

“Give Collapse a Chance", indeed.

Thu, 09/29/2011 - 16:44 | 1723684 SheepDog-One
SheepDog-One's picture

Another perfectly normal +200 open, back to double digits a few times before plunging well red, with the usual +150 last minute market save.

One of these days it wont be this 'training drill' it will be real and S&P will plunge under 1,000 for a real long time. 

Someones got to pay here, and it wont be the banksters taking their haircut I guarantee that.

Thu, 09/29/2011 - 16:52 | 1723734 Belarus
Belarus's picture

Yup, it's unreal. I can't believe anyone buys that this is a funcitonal market anymore. You'd have to have your head so far buried under the sand that you'd be peaking through the axl. No one will complain though, not until the computers freak out and they make the May 6th flash crash look like peanuts. 

Thu, 09/29/2011 - 16:44 | 1723688 Corn1945
Corn1945's picture

Odds of a 30% wealth tax for middle-America are absolutely fucking zero without 223 Remington flying around. 

Interns must have wrote this nonsense.

Thu, 09/29/2011 - 16:47 | 1723703 SheepDog-One
SheepDog-One's picture

I like Lake City ammo better myself although more expensive accuracy and range are way better. Stockpiled.

Thu, 09/29/2011 - 17:23 | 1723867 DosZap
DosZap's picture

Sheep Dog-One,@1647

Dittos................ For when your only care to send the very best.

Thu, 09/29/2011 - 19:13 | 1724128 I only kill chi...
I only kill chickens and wheat's picture

That'd be black hills, if you truly want to send the best.

5.56 Nato Black Hills Barnes TSX 50gr. Hollow Point Ammo

Thu, 09/29/2011 - 19:45 | 1724236 DoChenRollingBearing
DoChenRollingBearing's picture

Green, green, green and green to above 4!  Right attitude.

I just stick with 7.62 x 39.  Easy to use, clean, fire and cheap.

Fri, 09/30/2011 - 00:19 | 1724810 mjk0259
mjk0259's picture

Hasn't happened in a significant way since the 1800's. Since then taxes and government as percent of GNP up more than times ten. People get more aggravated about social issues then money. If you required every family to have at least one gay/interracial/interreligious marriage, then you might have guns.

Thu, 09/29/2011 - 16:45 | 1723692 BlackSea
BlackSea's picture

I call BS on this tax idea. One, because to get the"cash" necessary to pay this would be impossible. Think of the forced liquidatios.

Second, think of the uprisings such an overt grab would trigger. Politicians would hang for this, and that's just not their style...

No, much easier to do this through hyperinflation and then pretend no one could see it coming.

Thu, 09/29/2011 - 16:48 | 1723706 SheepDog-One
SheepDog-One's picture

Now that theyve bankrupted the people into the gutter, time to tax the peasants? Thats their answer?

We're no more evolved at all than the Dark Ages, same old shit.

Thu, 09/29/2011 - 20:44 | 1724412 Phil Free
Phil Free's picture

At this rate, we'll be back there sooner than later.  Let tensions double or triple over where they are now, let someone (Iran?)(Israel?) toss a couple of nukes around, we will have the 21st century version of the fall of the Roman Empire .....

 

which will for better or worse, simplify things.  No markets to consternate the masses -- it'll be back to the mud fields.

Thu, 09/29/2011 - 19:49 | 1724246 DoChenRollingBearing
DoChenRollingBearing's picture

@ BlackSea

Green, I think you nailed it.  VERY hard for me to part with that much...  Only to see them coming for more and more.  And then more...  Hyperinflation is easier to do.

FOFOA's "Hungry Collective" comes to mind here...

Thu, 09/29/2011 - 16:47 | 1723702 slackrabbit
slackrabbit's picture

"which comes not from some trader of dubious credibility interviewed by BBC"

 

Tyler would you really prefer Liesman credibility?

;-)

Thu, 09/29/2011 - 16:50 | 1723718 koaj
koaj's picture

this worked very well in Argentina

 

dear BCG - go fuck yourself

Thu, 09/29/2011 - 16:51 | 1723728 gwar5
gwar5's picture

I say we have a one time nationalization of all international banks.

 

The bankers played and lost and they have to pay. Their Keynesianism boosted government spending without limits. And where's Robert Rubin and Bill Clinton? Haul all of them out of the CFR and into court and see what they have to say now about repealing Glass-Steagall.

The solution presented in the article above is eerily similar to the 40% citizen robbery from the 1933 gold confiscation and price reset. But as I recall, the depression still continued to drag on another 8 years. 

 

Thu, 09/29/2011 - 21:08 | 1724478 BigJim
BigJim's picture

$20.67/oz -> $35/oz is 69% change, not 40%. Why do people keep repeating this?

Fri, 09/30/2011 - 00:23 | 1724818 mjk0259
mjk0259's picture

Rubin should be in a Siberian salt mine under KGB supervision.

The  ruling class of international banks, like the ruling class of most banks, has by now figured out how to siphon off all profits, be they real or imaginary, into their own net worth almost as soon as they are created. Nationalizing the banks might stop this assuming you could get someone to run them that was as smart and not so much of a thief but they have zero (probably hugely negative) value since the ruling clas has stolen all actual profits and the book value that is supposed to be there is almost entirely imaginary.

Thu, 09/29/2011 - 16:56 | 1723755 SILVERGEDDON
SILVERGEDDON's picture

You're fucked, I'm fucked, we're all fucked. This is fucked up. I almost don't give a fuck. Because, we're all getting fucked. This is a fucked up situation. Fuck me, I am fucking pissed off. Fuck 'em if they can't take a joke, motherfuckers. 

Thu, 09/29/2011 - 17:44 | 1723949 s2man
s2man's picture

Tell us how you really feel...

Thu, 09/29/2011 - 17:53 | 1723974 toady
toady's picture

Fuck me?

Fuck me?

Fuck you fuck me FUCK YOU!

Thu, 09/29/2011 - 22:40 | 1724651 High Plains Drifter
High Plains Drifter's picture

sounds like that movie   deer hunter....

Thu, 09/29/2011 - 19:29 | 1724188 kill switch
kill switch's picture
You need to come out of your shell

 

Thu, 09/29/2011 - 20:36 | 1724383 SwingForce
SwingForce's picture

You better watch your fucking mouth.

Thu, 09/29/2011 - 20:39 | 1724399 PulauHantu29
PulauHantu29's picture

Try more KY, it won't be so painful maybe....

Fri, 09/30/2011 - 11:58 | 1726046 Fuckin Floyd
Fuckin Floyd's picture

My sentiments exactly! (Better late than never)

Fri, 09/30/2011 - 20:09 | 1727887 bid the soldier...
bid the soldiers shoot's picture

He needs a couple of Valium. Anybody have his street address?

Thu, 09/29/2011 - 17:01 | 1723772 Fips_OnTheSpot
Fips_OnTheSpot's picture

Just in case "docstoc" is as slow as hell again, here the full PDF directly from BCG:

http://www.bcg.com/expertise_impact/Capabilities/Management_in_a_Two_Spe...

Thu, 09/29/2011 - 17:01 | 1723779 Mr. White
Mr. White's picture

Isn't Denial an African river that flows past the Chinese city of Tipping?

Thu, 09/29/2011 - 17:03 | 1723782 Waterfallsparkles
Waterfallsparkles's picture

12-21-2012.

 

Thu, 09/29/2011 - 17:05 | 1723786 falak pema
falak pema's picture

Here we are finally,  a voice of corporate USA is addressing the real issues; rebringing industry back, debt reduction, taxing the rich, redistributing wealth, going towards better quality education, changing the energy paradigm away from ME oil. One aspect missing : breaking down the financial system as it is. No more casino capitalism. More regulation of financial sector world wide by eliminating naked derivative trades and separating deposit and investment banks. The US oligarchs have to align themselves to this program and discipline themselves over the long haul. 

THIS CAN BE SUMMARISED IN ONE PHRASE: END THE PHILOSOPHY OF PAX AMERICANA built  OVER FIFTY YEARS OF OIL/MIC/MULTINATIONAL OUTSOURCED labour arbitrage world model. 

Bring back localised models to each continent in a energy expensive environment. Does not mean go protectionist whole hog, but selectively based on strategic considerations. Deglobalisation should be decided on multilateral basis and should avoid situations of armed regional conflicts. No return to Armageddon.

Thu, 09/29/2011 - 20:20 | 1724334 Bicycle Repairman
Bicycle Repairman's picture

Who's going to oversee your plan?  Obama? Bush? Boehner? Pelosi?

Fri, 09/30/2011 - 04:38 | 1725015 falak pema
falak pema's picture

Finding honest governance is the first step. And it has to be co-ordinated multilaterally, as financialized capitalism, root cause of world-wide malaise, is global and transnational.

"Where have all the Jeffersons, Lincolns, FDRs gone? Long time passing... where have all the flowers gone?...Long time ago".

If the USA doesn't find them then US democracy is dead AND bankrupt. Its the end of the USD age.

Fri, 09/30/2011 - 20:01 | 1727867 bid the soldier...
bid the soldiers shoot's picture

.
"No more casino capitalism.". =. NOW

"No more Adam Smith capitalism. =. SOON

Thu, 09/29/2011 - 17:05 | 1723795 gaoptimize
gaoptimize's picture

Is anyone worried the the sales records of the PM dealers will be subpoenaed when it comes to this?

Thu, 09/29/2011 - 17:48 | 1723963 s2man
s2man's picture

I was. I sold my gold back to Kitco, duly noted and recorded.  All subsequent PM purchases have been currency exchanges.

Thu, 09/29/2011 - 18:16 | 1724029 Montgomery Burns
Montgomery Burns's picture

Most of my physical was stolen, except for what I sold for a loss.

 

Thu, 09/29/2011 - 19:50 | 1724252 DoChenRollingBearing
DoChenRollingBearing's picture

Damn boating accidents.  I promise NOT to take my gold out fishing with me ever again!

Thu, 09/29/2011 - 21:43 | 1724538 hedgeless_horseman
hedgeless_horseman's picture

Everyone should hold at least one yardsale.  Keep a copy of the classified advertising guns, gold, etc.  Everything must go!  Cash only.

Thu, 09/29/2011 - 22:35 | 1724641 DoChenRollingBearing
DoChenRollingBearing's picture

THAT is a great idea (mind starts churning...).

Thu, 09/29/2011 - 19:19 | 1724158 DosZap
DosZap's picture

gaoptimize,@17:05

So what?,you sold them,you gave them away, they were stolen,they were lost.

When you sell them, you declare loss or gain,(or you should be), your dealer sends a 1099R to the IRS,showing total purchases from you end of year.( usually I never get a copy of it, that's why I keep records,of sales, P & L).

Unless you just buy one or two at a time,most small dealers will not require records,SS/DL,etc.

Just the one's you bought lots from over the years.

 

Thu, 09/29/2011 - 19:28 | 1724185 I only kill chi...
I only kill chickens and wheat's picture

If they did you'd get a copy.

The following are reportable items as listed by the Internal Revenue Service. Also shown is the threshold number of ounces that triggers the need to file a Form 1099 with the IRS. Remember, the reporting requirement occurs when you as a client sell, NOT when you purchase.

Gold bars (any size bars totaling 1 kilo -- 32.15 troy ounces -- or more) Gold Maple Leafs (25 ounces or more) Gold Krugerrands (25 ounces or more) Gold Mexican Onzas (25 ounces or more) Silver bars (1,000 ounces or more) U.S. 90 percent silver coins, pre-1965 ($1,000 face value or more) Platinum bars (25 ounces or more) Palladium bars (100 ounces or more)

Also, more than one transaction engaged in for the purpose of circumventing the reporting laws is to be treated as a single transaction. This includes transactions by more than one member of the same family. The 1099s also require the seller's Social Security number. The ICTA warns:

Thu, 09/29/2011 - 19:53 | 1724262 DosZap
DosZap's picture

I only kill chi...@19:28

If they did you'd get a copy.

So, your saying, if I do not get a copy, then I do not file?.Unless the guidlines you posted are breached?.

Thu, 09/29/2011 - 22:31 | 1724637 blindman
blindman's picture

the federal reserve notes are fiat currency, backed by
bonds, not precious metal at all. confiscation today
would be stealing. if they would like to make good
on their debts they can either print more notes or confiscate
the land that they sold to the Chinese and sell it back to them.
or something like that. precious metals have nothing to do
with it. or, they , the fed, can offer the investors in the
u.s. debt. the plastic garbage heap in the pacific gyre. they
are all free to confiscate their products / collateral. imo

Thu, 09/29/2011 - 17:07 | 1723798 Mr.Really.Fed.Up
Mr.Really.Fed.Up's picture

Article appears stupid to me and here's why.

If Uncle Sam taxed all financial assets at 30% , wouldn't you be forced to sell stocks and bonds to make up the difference to meet your living expenses?

 

and btw, holding gold wouldn't do any good, they would tax that as well

Thu, 09/29/2011 - 17:18 | 1723846 SheepDog-One
SheepDog-One's picture

Assuming everyones sitting on a pie of stocks? Who? Besides the 401K Bathrobe Brigades and pensioners?

Thu, 09/29/2011 - 17:24 | 1723876 dalkrin
dalkrin's picture

Who has gold?  Nobody here but us down-on-our-luck debt serfs, living hand to mouth.  Go hassle my governor, senator, and representative.  Better yet, some CEO's might have the gold you are looking for.  Who among us would dream of purchasing such a barbaric relic, and declare it to our friendly government bean-counters?  Have some FRN's instead, plenty more where that came from.

Thu, 09/29/2011 - 17:23 | 1723805 hooligan2009
hooligan2009's picture

its no big deal...nothing to be afraid of..its close to the truth and bcg has no monpoly on that. the haircut is one half..lets just deal with it..watch the suncome up tomorrow..realise we arent starving, cold or dead and move on... of course the fuckers who got us into this mess will receive absolution but then it was as much our fault for letting them as it was theirs for playing the game... what is the big deal? NO FEAR..just no more bullshit please please please!

Thu, 09/29/2011 - 20:23 | 1724346 Bicycle Repairman
Bicycle Repairman's picture

You are naive.

Thu, 09/29/2011 - 17:14 | 1723823 ivars
ivars's picture

Bancor starting de facto in H2 2012?

 

http://saposjoint.net/Forum/viewtopic.php?f=14&t=2860#p34267

Thu, 09/29/2011 - 17:17 | 1723840 Miss Expectations
Miss Expectations's picture

I read somewhere that gold bugs are optimists.  I'm starting to believe it.

Thu, 09/29/2011 - 22:32 | 1724638 Hulk
Hulk's picture

Absolutely! 

Thu, 09/29/2011 - 17:20 | 1723851 Tyrion_Lannister
Tyrion_Lannister's picture

The first decade of the 21st century was The Decade of Debt.

The second decade of the 21st century will be The Decade of Default

 

Thu, 09/29/2011 - 20:56 | 1724443 Phil Free
Phil Free's picture

This second decade may become The Decade of Flames.  Or do you think TPTB can push, kick, and forestall this 'till next decade?

 

Thu, 09/29/2011 - 17:25 | 1723880 Backspin
Backspin's picture

So, BCG is a "consultancy powerhouse" ?  Their ideas sound like a bunch of the same lame old socialism and big govermnent centrally planned "solutions".  Trust me on this: If their ideas were implemented, the problems would get far worse.

Thu, 09/29/2011 - 18:08 | 1723962 anynonmous
anynonmous's picture

These dudes are top drawer globalists and have their tentacles into everything from NGOs and .gov to Wall Street and Fortune 500.  In no small way BCG and their ilk have played an important role in helping to shape today's corporatist culture.  From outsourcing to sustainability the watchwords of today's economy and culture are propagated by organizations such as BCG. 

They are among the high priests of the 21st century. Electirc cars, carbon offsets, big banks, big pharma, big ag etc

a sampling from these wonderful folks

"The real economy needs large banks and efficient markets a plea for avoiding overregulation"

http://www.bcg.com/documents/file41768.pdf

Thu, 09/29/2011 - 20:24 | 1724352 Bicycle Repairman
Bicycle Repairman's picture

These guys are errand boys sent by grocery clerks.

Thu, 09/29/2011 - 21:51 | 1724551 anynonmous
anynonmous's picture

I can understand how you think that. When was the last time you worked on a made in USA bike in your American operation? Alternatively how is business in your Shanghai operation comapred to 10 years ago?

Thu, 09/29/2011 - 21:04 | 1724463 Phil Free
Phil Free's picture

Pschaw.  There's always Ripley's plan.

 

" ..nuke the site from orbit. It's the only way to be sure. "

Fri, 09/30/2011 - 12:06 | 1726080 Fuckin Floyd
Fuckin Floyd's picture

You are correct, Sir!

Thu, 09/29/2011 - 17:25 | 1723882 CapitalistRock
CapitalistRock's picture

In practice a 30% wealth confiscation would not work for many reasons, but mostly because most wealth is not liquid. Are we going to try and break off a 30% chunk of a small business without destroying it? Or break off 30% of a house? The disruptions would torpedo the economy. It can't be done like that.

Not to mention, in America this would come after lots of debate and people would liquidate and hide assets. Just some serious talk of such a thing would be extremely destructive and deflationary.

In any event, I'd prepare now. Gold... bitchez.

Thu, 09/29/2011 - 17:32 | 1723911 sasebo
sasebo's picture

Did I see where BAC has over $1 trillion in deposits?

There's your problem. Too many stupid assholes.

Thu, 09/29/2011 - 17:32 | 1723912 anynonmous
Thu, 09/29/2011 - 17:35 | 1723921 gwar5
gwar5's picture

Ok, I just looked again at why BCG thinks we can't implement 4 other solutions such as austerity or make the banks take the hits. Bullshit. That pissed me off.

 

-no austerity because of social unrest   =   bloated welfare state government shall be off limits, steal it from the middle class because they won't fight back 

-no bank restructuring becuase they're to "weak" to absorb it   =   rich bankers who caused the problems shall be off limits

-no financial repression because it will take many years =  takes too many years and TPTB must have your money now

-no higher growth immediately possible due to demographic changes  =  too many uneducated illegal aliens brought onboard to expand the welfare state

 

Start by cutting the Federal Government 10% across the board (to start), eliminate automatic spending increases, nationalize the banks and end the Fed, disincentivize and encourage illegal aliens to go home but encourage all foreign educated and skilled and all recent USA foreign graduates to stay and work, drop corporate tax rates  and personal rates, and use all our coal gas and oil resources pronto, insist that all states become right to work states.



 

 

 

 

Thu, 09/29/2011 - 20:27 | 1724359 Bicycle Repairman
Bicycle Repairman's picture

A counter-proposal:  reduce the size of all governments by 50%, starting with war machines.

Thu, 09/29/2011 - 17:38 | 1723935 PulauHantu29
PulauHantu29's picture

WSJ: "Developer Set Up Vehicle to Invest in Banks but Couldn't 'Make the Numbers Work' Real-estate developer Stephen Ross and his partners spent more than a year digging into U.S. banks, including more than 100 with loans to local bakeries, gas stations and amusement parks. They hoped to spend about $1.1 billion buying or investing in lenders. But the deeper they went, the worse things looked. As a result, Related Cos., the New York firm in which Mr. Ross is chief executive, gave back the money it raised from roughly 150 investors, including hedge-fund manager David Einhorn. The firm did find several investments it was interested in but was outbid. Just 18 months ago, Mr. Ross thought the U.S. banking industry was a lucrative investment opportunity that could yield big profits as the economy recovered. At the time, private-equity firms, hedge funds and other investors were pouring capital into banks. Since then, signs of economic improvement have faded, leaving many of the nation's 7,500 banks and savings institutions besieged with troubled assets, weak loan demand, rising regulatory costs and few growth prospects."

Thu, 09/29/2011 - 17:40 | 1723940 pcrs
pcrs's picture

a 30% tax will really boost the willingness to save and invest. But the default has in fact already happened, it just has not been acknowledged yet

Thu, 09/29/2011 - 17:53 | 1723968 ricocyb13
ricocyb13's picture

Goldman Sachs Government will just start another war - it is much faster, cleaner and more profitable than digging that oil out of the ground by yourself.

there are too many people on this planet anyway...

Thu, 09/29/2011 - 17:54 | 1723979 Tyrion_Lannister
Tyrion_Lannister's picture

They will have to start a war, and then use the war as a mask for the tax.

There's no way that the politicians could ever be able to pass a straight tax of 30%. 

 

Thu, 09/29/2011 - 21:49 | 1724554 hedgeless_horseman
hedgeless_horseman's picture

Was not the highest income tax bracket in WW2 90% or better?  Nobody complained...or at least nobody listened.

Wed, 07/04/2012 - 17:52 | 2587595 HamFistedIdiot
HamFistedIdiot's picture

Given that Oklahoma City and 9/11 are still not widely recognized as self-induced wounds, the "global war on terror" continues to expand as a cover for the economic centralization of the world. Even our humanitarian interventions in Africa are a fraud. Another false flag event  of sufficient magnitude would have the sheeple of the USA peeing their pants and gladly giving away half their assets. It's a tough call what to do right now. I support Infowars.com, Solari.com, Mercola.com, NaturalNews.com, and ZeroHedge for real news. I've put a fair amount of my assets into precious metals, but this past year has been hard for me. How low can something real go, priced in fiat dollars, even as trillions more of those dollars are printed? I guess there won't be inflation if the dollars don't leave bank balance sheets and enter the real economy. Would things be better being a subject of the Queen of England in one of her 70+ commonwealths like Australia, New Zealand, and Canada? Or a latin American country plagued by corruption and drug wars? Maybe as Alex Jones and Catherine Austin Fitts say, there is basically no where to run to nowadays. Time to make a final stand human liberty and independence.

Thu, 09/29/2011 - 17:55 | 1723982 kahunabear
kahunabear's picture

Consensus here seems to be that we don't need no stinkin' write down. A bit ironic considering that is exactly what most think the Greeks need. Pretty obviuos why these things never fly.

Thu, 09/29/2011 - 18:15 | 1723983 kahunabear
kahunabear's picture

Oops!

Thu, 09/29/2011 - 18:14 | 1723989 Big Ben
Big Ben's picture

The US may have too much debt, but judging by interest rates on Treasuries, you would never know it. The current plan seems to be just to keep on borrowing. After all, Japan has a 200% debt/GDP ratio and they aren't having any problems, so why don't we just do that?

If markets were rational, they would charge an interest rate premium which would increase as the borrower's debt/income ratio went up. Instead, as US government debt goes up, interest rates go down! At this rate, when our debt/GDP reaches 500%, interest rates will be down to 0.1% (or even negative) and everything will be fine!

The problem is that the difference between a good debt and a bad debt is really only a matter of perception. If a debt is perceived as "good", it gets a low interest rate. So even debt/GDP ratios of 200% become feasible if the interest rate is 1%. But if that same debt is suddenly percieved as "bad", the interest rate might suddenly shoot up to 10%, and it becomes a crippling burden which is impossible to service.

Markets are only looking ahead a few days, or a few weeks at most. So when the end comes, it will come suddenly with almost no warning.

 

Thu, 09/29/2011 - 18:22 | 1724042 anyways
anyways's picture

+10

smart.

Thu, 09/29/2011 - 18:00 | 1723990 drawswell
drawswell's picture

But don't ja know acknowleging you have a problem is the first step on the road to recovery!!

Or as Lucy said to Charlie Brown, the fact that you can realize you have a problem indicates you are not too far gone...

Thu, 09/29/2011 - 18:06 | 1723999 Downtoolong
Downtoolong's picture

A 30% Haircut sounds about right. In fact, I’d say it’s happened already on that scale in some schemes. For example, when you take away COLA adjustments from someone’s pension, or lie about the real rate of inflation and understate is by 2-3%, or do something to cause inflation that exceeds safe investment yields by 2-3%. All of these things effectively amount to a 20-40% reduction in the purchasing power of annuities and long term cash flows.

Politicians and people in power like these gradual approaches best because they are more subtle and easier to get away with. If you tell a pensioner they’re not going to ever get a COLA again, they probably relate that to the 2-3% increase they got last year. Most recipients aren’t mathematically gifted enough to calculate that they just lost 30% of the entire NPV of their future income stream. If they were, a fist in the face becomes a more likely response.

Thu, 09/29/2011 - 19:34 | 1724203 Sophist Economicus
Sophist Economicus's picture

Exactly!    They ruled out Financial Repression - but that is what these jokers have done in the past, what they are doing now and what they'll continue to do

Thu, 09/29/2011 - 18:12 | 1724019 s2man
s2man's picture

Had to return when I re-read the title of this piece.

There May Be Only Painful Ways Out Of The Crisis?  Duh.  You actually thought there was a painless way out of this?

Thu, 09/29/2011 - 18:18 | 1724033 Old Poor Richard
Old Poor Richard's picture

that between household, corporate and government debt, the developed world has $20 trillion in debt over and above the  sustainable threshold by the definition of "stable" debt to GDP of 180%.

 

Forgive me if this is a little dense, but how in the world can the entirety of the earth have a net debt, let alone "excess and unsustainable" levels?  Who the hell do "we" owe it to?  God?  Space aliens? 

 

Thu, 09/29/2011 - 20:30 | 1724367 Bicycle Repairman
Bicycle Repairman's picture

Exactly.  Just default already.

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