Financial topics

[Higgenbotham]

Sound familiar? It should. This happened right before the Dow fell, oh, about 4000 points over the ensuing 2 months.

http://www.federalreserve.gov/newsevent ... 80918a.htm

Press Release
Release Date: September 18, 2008

For release at 3:00 a.m. EDT

Today, the Bank of Canada, the Bank of England, the European Central Bank (ECB), the Federal Reserve, the Bank of Japan, and the Swiss National Bank are announcing coordinated measures designed to address the continued elevated pressures in U.S. dollar short-term funding markets. These measures, together with other actions taken in the last few days by individual central banks, are designed to improve the liquidity conditions in global financial markets. The central banks continue to work together closely and will take appropriate steps to address the ongoing pressures.

Federal Reserve Actions
The Federal Open Market Committee has authorized a $180 billion expansion of its temporary reciprocal currency arrangements (swap lines). This increased capacity will be available to provide dollar funding for both term and overnight liquidity operations by the other central banks.

The FOMC has authorized increases in the existing swap lines with the ECB and the Swiss National Bank. These larger facilities will now support the provision of U.S. dollar liquidity in amounts of up to $110 billion by the ECB, an increase of $55 billion, and up to $27 billion by the Swiss National Bank, an increase of $15 billion.

In addition, new swap facilities have been authorized with the Bank of Japan, the Bank of England, and the Bank of Canada. These facilities will support the provision of U.S. dollar liquidity in amounts of up to $60 billion by the Bank of Japan, $40 billion by the Bank of England, and $10 billion by the Bank of Canada.

All of these reciprocal currency arrangements have been authorized through January 30, 2009.

[Tom Acre]

Sound familiar? It should. This happened right before the Dow fell, oh, about 4000 points over the ensuing 2 months.

http://www.federalreserve.gov/newsevent ... 80918a.htm

Press Release
Release Date: September 18, 2008 ...

Smoking Gun!
That's a modern classic.

[Higgenbotham]

Smoking Gun!
That's a modern classic.

Some more interesting forensics.

After the 2008 press release there was a blistering 2 day rally that took the S&P from about 1140 to 1260, followed by a 2 month collapse to 740.

This week there was a blistering 3 day rally that took the S&P from about 1150 to 1250.

Wow!

[Higgenbotham]

If the sixty years seemed full of brilliance and adventure to a few at the top, to most they were a succession of wayward dangers; of the three galloping evils, pillage, plague, and taxes; of fierce and tragic conflicts, bizarre fates, capricious money, sorcery, betrayals, insurrections, murder, madness, and the downfall of princes; of dwindling labor for the fields, of cleared land reverting to waste; and always the recurring black shadow of pestilence carrying its message of guilt and sin and the hostility of God.

Mankind was not improved by the message. Consciousness of wickedness made behavior worse. Violence threw off restraints. It was a time of default. Rules crumbled, institutions failed in their functions. Knighthood did not protect; the Church, more worldly than spiritual, did not guide the way to God; the towns, once agents of progress and the commonweal, were absorbed in mutual hostilities and divided by class war; the population, depleted by the Black Death, did not recover. The war of England and France and the brigandage it spawned revealed the emptiness of chivalry's military pretensions and the falsity of its moral ones. The schism shook the foundations of the central institution, spreading a deep and pervasive uneasiness. People felt subject to events beyond their control, swept like flotsam at sea, hither and yon in a universe without reason or purpose. They lived through a period which suffered and struggled without visible advance. They longed for remedy, for a revival of faith, for stability and order that never came.

The times were not static. Loss of confidence in the guarantors of order opened the way to demands for change, and miseria gave force to the impulse. The oppressed were no longer enduring but rebelling, although, like the bourgeois who tried to compel reform, they were inadequate, unready, and unequipped for the task. Marcel could not impose good government, neither could the Good Parliament. The Jacques could not overthrow the nobles, the popolo minuto of Florence could not advance their status, the English peasants were betrayed by their King; every working-class insurrection was crushed.

Yet change, as always, was taking place. Wyclif and the protestant movement were the natural consequence of default by the church. Monarchy, centralized government, the national state gained in strength, whether for good or bad. Seaborne enterprise, liberated by the compass, was reaching toward the voyages of discovery that were to burst the confines of Europe and find the New World. Literature from Dante to Chaucer was expressing itself in national languages, ready for the great leap forward in print. In the year Enguerrand de Coucy died, Johan Gutenberg was born, although that in itself marked no turn of the tide. The ills and disorders of the 14th Centruy could not be without consequence. Times were to grow worse over the next fifty-odd years, until at some imperceptible moment, by some mysterious chemistry, energies were refreshed, ideas broke out of the mold of the Middle Ages into new realms, and humanity found itself redirected.

A Distant Mirror: The Calamitous 14th Century
1978

[at99sy]

Smoking Gun!
That's a modern classic.

Some more interesting forensics.

After the 2008 press release there was a blistering 2 day rally that took the S&P from about 1140 to 1260, followed by a 2 month collapse to 740.

This week there was a blistering 3 day rally that took the S&P from about 1150 to 1250.

Wow!

Now we are at 1258. Only difference between now and then is that there will be no crash any time soon. This wave will go for a while I think.
Like John has been saying. Not til the xmas holiday is done then we might see a major hit. They need to get as many dollars out of our pockets and
back into the retailers and banks as possible. Even todays unemployment rate drop is a fantasy. Far down in the article I read it mentioned in passing
that many had dropped off the books and were no longer being counted. It's like saying a persons debt has been reduced by not counting the bills they don't pay.
Brilliant!

Cheers
sy

[Higgenbotham]

Now we are at 1258. Only difference between now and then is that there will be no crash any time soon. This wave will go for a while I think.
Cheers
sy

I didn't say it outright, but I do expect a crash. I stopped doing the trading updates because I felt they were a waste of space and might attract people to the forum who are more interested in real time trading than GD.

Everyone is saying stocks have to go up in December. Exactly 9 years ago, on December 2, 2002, the stock market made a multi month high, so it doesn't have to happen, just nobody talks about it.

[jcsok]

I rarely discuss my positions, however, I came into today 35% short, now at 65% short S&P, also short Euro, silver, crude, dumped long corn, and have 100% of cattle hedged.

I primarily raise cattle. The cattle market has been on a tear for the last 12 months. My hedging has given up substantial "windfall" profits, because in 45 years of following cattle prices, I've never seen such a grind upwards. I am, and have been, paranoidly fearful of a cattle market crash; I've lived and traded through several, but now my risk is enormously higher. When the financial markets implode, and transfer payments to unemployed cease, I can't envision cattle prices staying this high. People worldwide will have to exist on cheaper forms of protein. Look back to the 30's; cattle prices were low, the gooberment slaughtered substantial numbers of livestock, even while people were barely existing. Such is not the case today. Beef prices are high because of demand and low numbers of cattle. If people can't afford the high price of beef, they will substitute lower priced protein from chicken, turkey, and pork, even though it is not as palatable. This will force beef down, therefore, I have to stay 100% hedged at these stratosheric prices. Other operators continue to buy cattle, because the sky's the limit; inflation is just days away because of the Fed's printing, etc.... I have explained generation theory to several people, but I sit back in amazement that very few people comprehend the real risk. We all see the light at the end of the tunnel. Unfortunately, we are in the middle of the tunnel, no place to go, and the light is the freight train about to run us over.

[Higgenbotham]

I'm going to make a novice attempt to define the difference between the beginning of a Dark Age and a typical fourth turning crisis era.

First attempt: A Dark Age is defined as the social and political breakdown of a regional or world hegemonic power which creates a power vacuum for which there is no clear and immediate successor.

Now I'll use Tuchman's words to further attempt to define a Dark Age.

"Mankind was not improved by the message. Consciousness of wickedness made behavior worse."

This is a clear distinction in my view and we are seeing Dark Age behaviors today, behaviors that have not been seen to this extent in seven centuries. As the financial crimes go unprosecuted, the consciousness of that knowledge has apparently increased the willingness to commit even bigger financial crimes.

"Rules crumbled, institutions failed in their functions. Knighthood did not protect; the Church, more worldly than spiritual, did not guide the way to God."

Another clear distinction. Today's dominant institution, the nation-state, which displaced the decrepit 14th century institutions, is failing in its functions, is not protecting, and is morally bankrupt.

"The towns, once agents of progress and the commonweal, were absorbed in mutual hostilities and divided by class war."

This hasn't happened yet, but the flash mobs, Anonymous and Occupy Wall Street movements are probably the beginning of the mutual hostilities and class war.

"The population, depleted by the Black Death, did not recover."

This hasn't happened yet, but if 14th Century timelines continue to hold, permanent population depletion will happen within 5 years and maybe 10 at the outside. It's already happened in the former Soviet Union.

"The war of England and France and the brigandage it spawned revealed the emptiness of chivalry's military pretensions and the falsity of its moral ones. The schism shook the foundations of the central institution, spreading a deep and pervasive uneasiness."

Already discussed somewhat above, and there does seem to be a deep and pervasive uneasiness.

"The oppressed were no longer enduring but rebelling, although, like the bourgeois who tried to compel reform, they were inadequate, unready, and unequipped for the task."

Already discussed somewhat above, and the Occupy Wall Street crowd, for example, clearly does seem inadequate, unready, and unequipped for the task of governance. If we are entering a Dark Age, it will be found that nobody can govern and part of the reason, I believe, is simply that the US as it exists is ungovernable. As mentioned before, I don't think any dictator in his right mind will want to take over the US and try to restore order because it can't be done. Also, see my definition above.

"They lived through a period which suffered and struggled without visible advance. They longed for remedy, for a revival of faith, for stability and order that never came."

I believe this in a nutshell is the future for the next several decades at least.

[John]

Dear Higgie,

> I'm going to make a novice attempt to define the difference
> between the beginning of a Dark Age and a typical fourth turning
> crisis era.

I read Tuchman's book a couple of years ago, and it's certainly
both fascinating and depressing.

But I would have to question whether the 20th century was any less of
a "Dark Age" than the 14th century, especially if you're focused on
Europe. The two world wars were focused on Europe. These wars were
incredibly bloody and destructive, and if you extend to the end of the
century, you have the the bloody wars in eastern Europe (the old
Yugoslavia). And the Holocaust might (arguably) be considered worse
than the Hundred Years War.

There was even something comparable to the Black Death - namely, the
worldwide Spanish Flu epidemic in 1918.

So what can we conclude about the next decade? There will certainly
be an extremely bloody war, and I've estimated that it will kill some
2 billion people. But I have no reason to conclude that this war will
be any worse than WW I+II.

However, there is one thing: There may well be a new flu pandemic that
will cause as much death as the Spanish Flu or the Black Death.

As you know, I've analyzed what's going on today through the
interactions between the Boomer Generation and Generation-X. I'm
going to be writing more on this subject in the "Generation-X culture
vs Boomer culture" thread.

I believe what happened in Germany in the 1930s-40s, including the
Holocaust, was similarly caused by the interaction between the
Missionary and Lost generations. If anything, the people in the Lost
generation hated the Missionaries even more than Xers hate Boomers
today. And I have little doubt that much of what happened in the 14th
century can similarly be analyzed by the relationships between the
Prophet and Nomad generations of the time.

"All that is necessary for evil to triumph is for good men to do
nothing." -- This is attributed to Edmund Burke, and I currently
believe that applies particularly to generational crisis eras, and to
the interactions between Prophets and Nomads.

> First attempt: A Dark Age is defined as the social and political
> breakdown of a regional or world hegemonic power which creates a
> power vacuum for which there is no clear and immediate successor.

I actually expect the 2020s to be vibrant decade, thanks to new
intelligent computer technology.

Perhaps the new Dark Age will begin with the Singularity.

John

[Higgenbotham]

Dear Higgie,

But I would have to question whether the 20th century was any less of
a "Dark Age" than the 14th century, especially if you're focused on
Europe. The two world wars were focused on Europe. These wars were
incredibly bloody and destructive, and if you extend to the end of the
century, you have the the bloody wars in eastern Europe (the old
Yugoslavia). And the Holocaust might (arguably) be considered worse
than the Hundred Years War.

There was even something comparable to the Black Death - namely, the
worldwide Spanish Flu epidemic in 1918.

So what can we conclude about the next decade? There will certainly
be an extremely bloody war, and I've estimated that it will kill some
2 billion people. But I have no reason to conclude that this war will
be any worse than WW I+II.

Looking at the scale of the raw numbers, the 1918 pandemic killed roughly 3% of the world population and WWII killed roughly 3% also. The bloody dictators in Europe and Asia killed a similar sized percentage of world population. This all happened over about a 50 year period. Despite this, world population continued to increase - there was no permanent reduction in population as occurred during the 14th Century.

The raw figures bring up an interesting observation, though. The more permanent population reduction in 14th Century Europe (defining 14th Century Europe as a region relatively or completely unconnected from Asia and the Americas) was approximately 10 times the temporary world population reductions in the 20th Century.

A permanent reduction in population over some time scale longer than, say, a saeculum seems to be characteristic of a Dark Age as opposed to a normal crisis period. Naturally, this is a case of arbitrarily defining something as opposed to something else and giving it a name.

So how could a scale of population reduction that is 10 times that of the prior saeculum occur? My thesis is that a Dark Age scale population reduction can only come about through large scale individual moral and institutional failure. This is harder to quantify, but my previous post describes what that looks like as opposed to typical crisis period failure.

I actually expect the 2020s to be vibrant decade, thanks to new
intelligent computer technology.

Perhaps the new Dark Age will begin with the Singularity.

John

If intelligent computers can eventually take over the governance of human affairs from the inept humans described in my previous post then, whenever that begins to happen, that can be the beginning of the end of the Dark Age. If it does happen as early as the 2020s then this has the potential to be a normal crisis period. Technology doesn't develop in a vacuum, though. There must be adequate support systems and those support systems are in serious danger of rapidly eroding.