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Some Paradoxes Worth Thinking About...
From Peter Tchir of TF Market Advisors
Why does piling on more debt solve a debt crisis? This has been the preferred solution of the global debt crisis, it clearly hasn't worked, but we still rejoice each time it is proposed.
Why would reducing future regulatory capital requirements help solve a current capital deficiency problem? Basel is contemplating easing the capital requirements for big banks in particular, but are bank stocks really trading so poorly because of future capital concerns or because investors don't believe they currently have enough assets to support their massive inventory of unmarked bonds and loans?
Why are the only people smart enough to trick a bank's risk system, so stupid that they lose billions of dollars? The odds that the only rogue traders that exist have phenomenal losses are very small. Some must have small losses, and some must have profits that quickly get converted from "rogue" profits into bonus eligible profits.
Why are so many capitalists and "free-market" champions calling for government support? Many of the same people who rant against government regulations and interference, are happy to demand handouts, subsidies, and "helpful" intervention. Can you really be a commucapitalist? I guess if capitalist is redefined as self-serving, this wouldn't be a paradox.
I don't think it's a paradox that the weather all seems worse on weekends, than weekdays, but in any case enjoy the weekend and whatever news it brings us.
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Ben should just print and print.
why do writers ask stupid questions?
It's easy.
Money is debt.
Debt has a coupon.
That system is represented as P + I. I does not presently exist, only P does. P is the aggregate credit base. I is owed in the future.
Ergo, FUTURE P must be = present P + I. QED, debt must grow. That is why the answer is always more debt.
If you don't understand this, then you need to STFU and do nothing else until you do. Once you understand it, you can start to comprehend why ZIRP is here and what it really means in an aggregate sense and how declining energy supply makes contraction inevitable and debt growth impossible.
We have a special name for commucapitalists. We call them jews.
watch out, first they come for them...
...then they come for you
Hey Tyler... Is the Palestinian bid for statehood at the UN not worth posting and allowing people to comment on?
I think you just did...lol.
There is no such thing as a "Palestinian" as "Israelis" are Palestinians too. Palestine is a region, not a people. And there has never been a "Palestinian nation"...ever.
Its kinda like calling a Georgian a yankee...they're both "North American" are they not?
That should get your little discussion started ;-)
what if it is WE who come for them?
just because you're a fucking goy doesn't mean the facist state doesn't have some shit on you.
cool your fuckin work, the world changes fast, and you might find strange bedfellows my rassiss friend. just cause a motherfucker is a "jew" doesn't mean they are in control, kill some "jew" children and you are off my fucking list, I am anglo/celt as shit, but i'de rather take a black/jew that knows how to work, than some fucking tweaker trailer trash cracka any day.
can you please focus on the fucking motherfuckers in power instead of their inconsequential race/religeoun, if they are fucking lying abusive fucks, then drop them, but why hate cause they jews? plenty of fucked up christians and muslums to go around.
when they get to the top it doesnt matter, they no longer have a religeoun, and thats the point. no morality. atheists have more moral sence than the fuckers in power.
quit hating jews, it's pointless, it's about the hierarchy, power, it has nothing to do with race/religeoun, only timing and willingness to fuck people over.
kristallnacht this you fucking dumb ass literalist. the jewish minority fucked over the germans purposefully during the wienmar era, but that doesnt make all jews fucking satan.
http://www.youtube.com/watch?v=Vb3IMTJjzfo
focus on the issue, quit pushing your jewgenda.
Listen bud. I dont know if your gonna come back to this thread but your goyish understanding of the world needs correcting. Humans are tribal creatures, like ants. My tribe is the European gentile tribe, sounds like yours is too. Our tribe is exploited and enslaved to the Jewish tribe right now. Its not just the bankers, its also the folk singers, the artists, the NPR consultants, the economists, the quack doctors, the media moguls, politicians and the entire state of 'Israel'. They know they are a tribe, they function as a tribe, they should be admired for this. And you should be ashamed for not understanding.
what if it is WE who come for them?
Ahhh! The fantasy of inferiors for thousands of years.
Yep, this is even true when said "money" is backed by gold. At some point someone is going to have to go find more gold ore to process and that takes energy as well as a source of gold ore, both of which are finite (yeah sure, lots out there in the universre, well go get it then fuckers).
But I digress, most can't get past trav's anger to see his intellect.
That's already happening. The Amazon jungle is being turned into desert by self-employed miners and rivers into pools of mercury.
That is not 100% true. When the debt behind debt money gets repaid, the money is destroyed. New debt must be issued to cover the interest so the system must grow.
When a gold debt is repaid, the gold still exists. The gold can continue to flow around within the system and repay its own interest while probably increasing the monetary velocity.
In both systems, defaults can also be used to come up with money to pay the interest.
Regarding energy, you are full of shit, take a chemistry class and thermodynamics class.
Regarding the "man-made" idea of currency (which Nature really doesn't give a shit about) you only strengthen the point because we don't allow defaults anymore now do we, that is the whole problem with TBTF.
Commonly believed fallacy.
Debt money DOES NOT get destroyed when the debt gets paid off, only when the debt defaults.
This is based on double entry bookkeeping as applied to banks. A debt repayment retires the debt which reduces assets, and the complimentary bookkeeping entry is to the banks reserves account (its own money), which maintains the balance. The bank is now free to spend this money anyway it likes, like building a Greek temple to money. I've veryfied this with some prominent economists.
Its not about a math formula, you miss the bigger picture that the plan was not to create a perpetual motion debt machine at all, but to make people think thats whats happening while they just bankrupt everyone for their 1 world government.
Perhaps, but then everyone would have to agree at some point and it seems that the IMF and other "one-world" conglomerates can't even force Greece on board.
Just to be clear my response was to travs 'the whole point is to keep printing' post.
horseshit.
Nobody knew about peak oil at Jeckyl Island. There is and was no plan.
Their plan was to get rich by extracting seingiorage from the issuance of money. That's it.
There was no 120 year goddamned plan hatched by men who would be dead 100 years before its fruitition.
The problem with debtmoney is it only works so long as it can grow; this is a matter of basic math. But I digress; I gave you specific instructions to STFU until you understood this.
Agreed, except not all debt has a coupon, eg FRNs. The monetary base must grow, but a lack of real growth means you either nail borrowing rates to the floor, or you print money via QE (which is swapping an interest bearing debt instrument for a zero coupon perpetual). The Fed is keeping rates low by printing money, and telling us it is a temporary measure. The reality is, absent a significant technological change, it is here to stay.
Which brings me to the great paradox that I see - we have an insolvent nation, running 10% annual deficits, a 3% trade deficit and led by a bunch of lunatics, and the market is willing to lend for 30 years at 2.8%.
So, something has got to give?
The ongoing crisis stems from the fact that the banking system has totally different needs from the productive economy.
au contraire...effectively every FRN in existence has a coupon.
The FRN on paper is merely the manifestation of some debt somewhere else. Most of those debts are in eDollar form. It makes no difference as they were ALL borrowed into existence by somebody at some point in the past.
Without MORE borrowing in the future the interest owed on the debt that created today's money can never be paid. Or, it can, but then there is inadequate remaining money to repay the principal.
As I said, this is very simple math.
Printing money is the only way to solve this math...literally, it is. Ben has to print the coupon because there is no credit growth that can pay it!
Do you get that? If P is outstanding now, and P+I is owed one year from now, SOMEONE *must* borrow that extra I in order for it to EXIST in a debtmoney system. If nobody does, the entire system is in default. So Ben has printed up I.
It is either that or FRNs snuff themselves out of existence and cease becoming money. Deflationists understand this "blackhole vortex" principle of deflation but they don't understand that a scarce FRN will lose its ability to serve as money due to its scarcity. Excessively scarce things aren't currencies.
...effectively every FRN in existence has a coupon
Exactly. And the defacto coupon rate on any denomination FRN is inflation. So P + I(nterest) = P - I(inflation). The rate of printing to meet I(interest) will be proportionate to the rate of I(inflation). And both accelerate asymptotically because that's how the math works.
Net result - asset deflation and then hyperinflation of staples. On the field of the debtmoney system, we're on the 2 yard line...
Aren't we arguing the same point? QE is swapping an interest bearing debt instrument for a zero coupon perpetual, which is necessary as there is not the growth to support the I. The problem for the Fed (and all other central banks) is to get the rate of printing right. Too little, and you head straight back to debt deflation, too much and it results in excessive inflation. Add to that, the effect of the printing depends on what the banks who get the money do with it. They deposit back at the Fed, lend or speculate in risk assets, all of which have different consequences.
The only thing that is certain is that at some point, it will go wrong.
"Excessively scarce things aren't currencies"
You nailed it right there Trav- I posted earlier today:
The leverage built into the present system (about 800T) exceeds the total existant dollar supply (8T) by 900%.
How, pray tell, will 8 Trillion dollars be used to clear 800 Trillion in leveraged derivative and unfunded gov't liabilities if it is not moving around (a lot)...?
Bernanke is trying to prove to the world that illiquidity and insolvency are indeed, the same phenomenon.
I'm with you- we will see ZIRP forever, and falling real incomes, and general price declines (on all but food and energy essentials which will probably rise 100's of percent)
http://www.rickackerman.com/2010/08/it-doesn%E2%80%99t-have-to-be-%E2%80%98inflation-vs-deflation%E2%80%99/
Stocks and flows, buddy.
P+I can't exist in a static world, but a dynamic world, where the money circulates like haemoglobin, you can repay the debt. The music just can't ever stop.
no...you can only roll until I > P
Sure you can. You just need to increase the flow.
Let I = 10 and P = 9.
In the course of a year, you must earn at least 11 to satisfy I and pay some of P. 9 years on, you've paid P and I.
Want to pay it all off in a year? Earn 19.
Money flows. How much of the money that you earn do you spend?
Based on the savings rate, the average is in the high 90%. Let's say 98%. The rest of it gets passed on within days of you recieving it usually.
Unfortunately for your magic math, we can measure the velocity of money after graduating kindegarden with the formula V = GDP / MoneySupply and immediately see that 98% of it isn't turning over every few days.
Money velocity is the Orwellian term for slave productivity.
HUH?
Just EARN more? That is growth, dipshit. The thing we are lacking now.
To "earn" this money, someone ELSE has to borrow...do you get that? Look; I gave SPECIFIC instructions on STFUing until you understood debtmoney mechanics.
Are you going to bark all day, little doggie? Or are you going to bite?
"Are you going to bark all day, little doggie? Or are you going to bite?"
That is quite possibly the gayest comment I have ever read on Zerohedge.
It's certainly in the top 5
How about contributing something productive to the discussion, Ass? If you have no valid, rational challenges that would strengthen the intellect of the debate, then you, my friend, should be at the very forefront of those heeding Trav's free STFU advice...
Thank you. I respect gay people, so I take that as a complement.
Well, exactly - that's the point. Telling someone to "shut the fuck up" is not very productive, right? I mean, the guy was trying to get the other one to stop contributing to the conversation, right? I see this as brutish, mean, uncivilized. So I quoted the movie "Reservoir Dogs."
NO, what Trav said was:
"STFU unless/until you know what you are talking about regarding debt based money"
You do not know what you are talking about, therefore, you should STFU. Modus Ponens- google it.
This has nothing to do with right to free speech, or the right to respect complete and utter gayness (in all its forms). You have those rights, but they have no bearing on a discussion about credit founded money. This discussion is about credit founded money. Trav invited you to contibute something rational and relevant about credit founded money, or else to leave this discussion alone (STFU).
You have contributed nothing to the discussion about credit money. Go do your sock-puppet "are you gonna bark or bite doggie" thing somewhere else.
No further exchange is necesary, and any effort to continue this diatribe of yours is a complete waste of time for everyone else here-
I am trying to educate you- to make you understand that tangential commentary does not help advance a central discussion. The choice to learn this lesson (or not) is yours.
You have been pwned. Go do what you should, and get in some reading and studying on the real topic being discussed here.
ZIRP only makes sense during this bumpy plateau... We're going to need NIRP once we start the real decline.
...
I can't wait to see peter schiff on the tee vee extolling the rise of the stock market priced in GOLD...
Choose your definition of 'free' carefully.
Also, choose your definition of 'we' carefully.
Didn't see 'we' mentioned in the article.
Well he's talking as if 'we're all' in on it.
profitable rogue traders all get hired by goldman
It isn't really gambling if someone is paying your tab.
Let 'em fail.
One way or another we get back to sound money and free markets, we always do. Thanks to ZH and other preparations, at least we won't be serfs when we do. We are past the point where constructive capital can overcome the debt and the debt destruction of producive capital is excellerating. Just lok at the difference in price between paper gold and what your local bullion or coin dealer is charging. The fluctionation may not be that big, but bigger than the last dip and gold. A few more whipsaws and it is game over.
Excellent point. Personally as a small business owner, I dont understand it. I always thought myself as a capitalist, and that i will succeed or fail based on my own efforts and talent or lack of.
Maybe i am naive but i dont get these comucapitalists (great name), leaving aside their obvious greed and keeping the gravy train going at any cost (but to themselves), they have such little self-worth if they dont realise just what a personal failure they have become, and the catastrophe they have caused for much of the global economy.
I guess they view it as winning at any cost, so it's inbred harvard-type thinking that the end (which boils down to their self enrichment) justifies the means.
So maybe i am more of a socialist than i thought because that attitude makes me feel sick to my stomach.
don't worry, they are all labels. At the end, it's a matter of degree. Answer this:
In a country with a flat tax rate (every dollar earned is taxed the same way):
1. how much would be the "right" tax rate?
2. how much would be the "right" redistribution per head?
nr. 1 gives you how much a socialist you are, nr. 2 how much a communist. Simple.
ehmm: I forgot
3. how much should you borrow?
I haven't been this intrigued since I attended the 8 and 9 year old cage fights last weekend
"Why does piling on more debt solve a debt crisis? This has been the preferred solution of the global debt crisis, it clearly hasn't worked, but we still rejoice each time it is proposed."
Because for the day/week/months that illegal QE's are pumped into markets there are bull(shit)ish rallies and everyone can further ignore funduhmentals and structural failures.
"Why would reducing future regulatory capital requirements help solve a current capital deficiency problem? Basel is contemplating easing the capital requirements for big banks in particular, but are bank stocks really trading so poorly because of future capital concerns or because investors don't believe they currently have enough assets to support their massive inventory of unmarked bonds and loans?"
Because there is even more wiggle room to cook books and hide toxic assets; and no one cares about the future as the present is collapsing all around them. Them is the dangerous human variables that ultimately undo all.
"Why are the only people smart enough to trick a bank's risk system, so stupid that they lose billions of dollars? The odds that the only rogue traders that exist have phenomenal losses are very small. Some must have small losses, and some must have profits that quickly get converted from "rogue" profits into bonus eligible profits."
Myopia and hubris are the above human variables. Offsetting and concealing and taking that "one last" risk are clearly more seductive than sanity and sober aversions.
"Why are so many capitalists and "free-market" champions calling for government support? Many of the same people who rant against government regulations and interference, are happy to demand handouts, subsidies, and "helpful" intervention. Can you really be a commucapitalist? I guess if capitalist is redefined as self-serving, this wouldn't be a paradox. "
Because the nature of CDS's derivatives and other insane market products beget insanity; because when the system is perverted by the very financial products and tools that were initially rationazlied as being good for markets and ultimately destroyed them, then handouts become the last ditch efforts to justify untenable positions and products of sociopathic banksters and policy-makers.
"I don't think it's a paradox that the weather all seems worse on weekends, than weekdays, but in any case enjoy the weekend and whatever news it brings us."
Unemployment numbers are much improved over the weekend too. Perception is a bitch, biyatchez!
Why would keynesian types, who are also typically left leaning in social policies (for others, if not themselves), want to limit future population, when said future population is required to service the debts of the current population?
Just a thought: some folks might believe it's more moral to limit your own population growth than it is to murder your neighbors in wars for resources.
Although I suspect your definitions for "keynesian" and "left leaning" are probably pretty fluid. Easier just to call people assholes.
asshole
Sure. I admit that I am not very sophisticated. But is not increasing the money supply, and ensuant inflation, also a way to steal resources from others? It may seem less violent, but didn't the Tunisian incident have an element of inflation with burocracy intented to suck it back in, but turned into corruption. that sparked violence?
"...is not increasing the money supply, and ensuant inflation, also a way to steal resources from others?"
You could make such a claim, but "Keynesianism" isn't inherently inflationary. Keynes' theory was that the central bank was supposed to build up a cash surplus during boomtimes (which is "deflationary") and then use that surplus as stimulus to boost demand during recessionary periods.
The "build up a surplus" part of the theory has been removed in order to turn "Keynesian" into an epithet.
I can't guess how one conflates "left leaning" with "Keynesian." I'm not even sure what "left leaning" is supposed to mean, these days. In the USA, we've stripped left and right labels down to code-words for Dem and 'Pub, which is pathetic, given that neither party has anything to do with the traditional "left vs. right" definitions.
But what can we expect in a country that had to swap the red vs. blue labels just to be different? I mean, really. Aren't reds supposed to be the COMMIES?
Why would keynesian types, who are also typically left leaning in social policies (for others, if not themselves), want to limit future population, when said future population is required to service the debts of the current population?
Left-leaners are laggards and want to be recipients in their re-distribution schemes. More population to them means more hands taking out of the so-called social contract, not more hands paying into it.
maybe this is all linked to the new possible discovery, effect before cause? e=mc2 may be false
"Commu-capitalist" LOL
I might be old fashioned, I remember when there was a commonly understood term for a capitalist in bed with the state: Fascist.
for some reason people are afraid to use this word, it's never used by the tv talking heads but it is the most accurate word to describe what we have
Silver in euros below 24.
Major paradox.
Risk free investment:10 euro face value(valid in Germany).
Less than 12 euros commodity value.
http://en.numista.com/catalogue/allemagne-17.html
These are the pair of docks I'm worried about
http://www.logisticsmgmt.com/article/ocean_shipping_ports_of_los_angeles_and_long_beach_august_2011_volumes_show/
+ 1 relevant punnage, -1 for not doing it in a piii-rat voice, yarrrr...
The hockey-helmeted markets dont move for anything now except rumors of phone calls. Actual news makes no difference at all. Only rumors will be priced in, even better is rumors of rumors...totaly broken.
Self help becomes help yourself real easy don't it! Seriously though this is a good piece...and yes government indeed does have an unlimited balance sheet PROVIDED it's acting in an inflationary manner. IF however "government has decided to be the Phucker instead of the Phuckee"...well...much comedy and commentary suddenly ensues!
Solve the debt crisis? LOL! What makes you think the people who put everybody into a debt crisis have any interest in solving it?
The befuddlement lies in what people perceive as the ideology of the billionaire class. Sure, Barton Biggs looks like a hypocrite when he calls for more government intervention in European banks as well as more "stimulus" domestically while at the same time calling for cuts in social secutity. If you understand that his only ideology and that of his class is in the redistribution of income upwards, it's not hypocritical at all. He understands which dollars trickle upwards (stimulus and bailouts) and which (social security) finds its way to the poor, middle classes without the plutocrats making a dime on. It's easy to know which ones he's for expanding and which he's for cutting.
Got to keep the game going to keep fleecing the specs.
Never confuse principles with rationalizations for self-interest, and things will be clearer.
Capitalits are self serving. No paradox there. But these capitalists, the only capitalist types the world has known are also scammers and schemers. They convince the lowly man that there is something called "free market" which they KNOW to be untrue.
All the while even before their company gets into financial trouble they beg for subsidies and would leave this earth as one giant unlivable turd if no one resisted. These are the capitalists we have.
BUT, the worst of the bunch are the financial capitalists: banking and finance sectors. Now these dens of iniquity aren't little more than ruses to rob their clients of their wealth. And when they run their game into the ground, they always run to the government with cap in hand begging because they don't want to lose their lifestyle but the rest of us should graciously take it on the chin.
Read history. I'm reading books from the 1800s and this game they run is as old as the sun.
...There's an oxymoron for our age if there ever was...
Moral Hazard?
It's so easy... privatize the profits, nationalize the losses.
WSJ currency war
LONDON—So much for the global battle to hold currencies down to keep a competitive edge. Now authorities around the world are intervening to prop them up in the wake of a mad scramble for dollars, especially in export-orientated Asia.
On Friday, the National Bank of Poland intervened to prop up the flagging zloty, after the Bank of Korea, Reserve Bank of India and Central Bank of Russia were all suspected of stepping in to support the won, rupee and ruble, respectively.
Yea what happened to 'the race to the bottom' for currencies we read for months about....did all the nations suddenly get cold feet? Maybe they saw their people starting to throw molotov cocktails and punch bankers and politicians in the face and decided its not such an easy plan after all?
OT:
another dead banker!
http://news.ph.msn.com/business/article.aspx?cp-documentid=5304845
Did he break the deadbolt from the outside first?
6th floor of their company headquarters?!!!?
That's not classy at all. Fly to Dubai if you want to jump from a building. Or hell, go parachuting and ditch the chute.
"An artist is a bloke who can hold two fundamentally opposing views and still function" - Tinker, Tailor, Soldier...Spy
Why are so many capitalists and "free-market" champions calling for government support?
Because:
There are no rogue traders.
There are losses, legitimate losses due to bad markets, and the bosses need to find a fall guy so their regular geniuses can go forward with their slates all cleaned up and the company simply another victim of those 3vil haxxorz
I'm not buying it. Didn't buy it at the time (and said so) and not buying it now. It's all just a bunch of "our company doesn't make $2B mistakes" PR clusterfucking.
"Why are the only people smart enough to trick a bank's risk system, so stupid that they lose billions of dollars? ... some must have profits that quickly get converted from "rogue" profits into bonus eligible profits."
No conversion necessary. These guys are trying to make money for the bank, for which they get a share, and taking unallowed risks. The ones that succeed don't get reprimanded, they get promoted and given more money to play with.
exactly. furthermore, while they are making money, their trades are most likely not beyond authorised limits. i would think the 'rogue' part of it - ie beyond limts, and trade concealment - only come into play when the losses start to accrue. there is no paradox here at all, IMHO.
The answer is: our leaders
a) are crooked and serve only themselves and the multinational corps
b) don't really understand the full consequences of their own actions
c) believe laws, morals, ethics apply only to the masses not the elites
d)desire only power and wealth
e) all of the above
Does PM stand for post mortem?
really? you think the guy taking the free money that the government is trying to give away is the bad part?
not the part where the government sticks a gun in the face of all us "non-state actors" -- taxation -- so that it can keep happening?
what, because it's "equal" or "fair"?
commucapitalist...
Ther is already such a term...supercommunist . First heard it abt 15 years ago...from Asia.
They are privatizing profits and socializing risk. --- Communism and Capitalism are the two sides of the same coin. That coin is Modernism, as in the Modern Period of History, which began in 1815.
" Can you really be a commucapitalist? I guess if capitalist is redefined as self-serving, this wouldn't be a paradox. "
It's called fascism, Peter. Your ignorance is showing. This is the Fight Club. You can use the F word here.
One definition of Communism is that it is the system under which the State uses its police power to control labor, whereas, Mussalini's definition of Fascism is, "a close cooperation between government and industry." Thus, there is no fundamental conflict between those two systems. For example, one of the large New York banks funded and controlled Trotsky; throughout the Soviet era that bank continued to own and operate several large mines in the Soviet Caucasus Region; and most if not all of the individuals who, became Neocons and were part of the Bush Administration, had previously openly self-identified as Trotskyites. They continued to represent those same interests as Neocons. One might call any of them "commucapitalists," "commufascists," or simply "Commi-pigs" --- Of course, one might question whether a Trotskyite is a true Communist. They are clearly not strict Marxist-Leninists and Stalin prosecuted several of them in well publicized show-trials for not being good Communists. --- The issue hinges largely on how you define the terms, "Communist," "Fascist," and "Capitalist,"
I should have known one of the "Tylers" didn't write this. It's amazing that the TPTB at ZH even allowed it to go up.
I can't wait to go back up and see what the "land of the blind" otherwise known as the comments area have to say about this.