Financial topics

[aedens]

We have written extensivley on cause. Policy cannot turn back two generations of purchasing power loss. I could not afford what my parents could
purchase per capita of effective currency nominal value and thus my childrens true ability is effectively less in real terms. As Ludwig von Mises had shown, the Federal Reserve is responsible for the business cycle as we know it today. With credit injections, the Fed lowers interest rates causing businessmen to invest in new capital equipment. They produce goods that consumers can't afford, and they eventually find that their plans don't pan out. This process spreads throughout the entire economy and creates ever-growing waves of booms and busts. Basically it is not the last war but the one even before that they lost since the infection has dissolved the base. I keep reading the so called solution's from the educated opinions and the infection so deep to how they can manage solutions since it is stunning how they cannot see how sealed they truly are.
It is characteristic of current political thinking to welcome every suggestion which aims at enlarging the influence of government. Inflation can be pursued only so long as the public still does not believe it will continue. Once the people generally realize that the inflation will be continued on and on and that the value of the monetary unit will decline more and more, then the fate of the money is sealed. Only the belief, that the inflation will come to a stop, maintains the value of the notes. If the practice persists of covering government deficits with the issue of notes, then the day will come without fail, sooner or later, when the monetary systems of those nations pursuing this course will break down completely. The purchasing power of the monetary unit will decline more and more, until finally it disappears completely. The most serious dangers for American freedom and the American way of life do not come from without. What is needed to prevent any further credit expansion is to place the banking business under the general rules of commercial and civil laws compelling every individual and firm to fulfill all obligations in full compliance with the terms of the contract. If you have to convince a group of people who are not directly dependent on a solution of a problem, you will never succeed. Only to bureaucrats can the idea occur that establishing new offices, promulgating new decrees, and increasing the number of government employees alone can be described as positive and beneficial measures. The issue is always the same: the government or the market. There is no third solution. We have watched this again and they never learn... Even us who have watched from Corporate for decades are stunned and also the social darwinism as they destroy themselves with pragmatic efficencys. They have no idea what is coming and think every one else will save there bent of mind top to bottum.

Observations: Farming Culture -ALG's lucust's Vs. Hunter Culture - DCA seekers
If you do not understand that historical contrast stop investing now since by now your depleted anyway.
As recorded I stepped out in forums given blurred signals to wit. Raise cash as we did last time walking slowly out the door.
A man wiser than me conveyed tiny bubbles four years ago and that takes time I venture to say after the resets
on numbers we already trend. We are getting there so all is not lost other than the curse we have watched transpire.
Kicking the can scenario only last so long as we observe this amplitude increase as we have been warned already
will ignite the effect we wait for. Its is already happening before there eyes but they are to dim to see it.
The gentlemen also observing this aspect have there finger on throat of the patient as the Government
decrees its fitness from the monetary class deemed the best hope of the economy. Sad state of affairs
watching there central planning as the producing class is exterminated from a desease they are blind to
cure as John conveyed a mind averted to ideological damage. Tue Nov 17, 2009

http://www.voxeu.org/index.php?q=node/7128 The Dutch see growth in emerging markets. I will watch
and wonder how insolvent institutions quantify risk models. Nothing is impossible but what is practicle today
since middle firms dependency on risk pools are solvent. Higg made a astute notation we all understand here
on actual conditions of balance sheets. Some may be better but do you trust there current tragectory to
tranparency. Not with my money since debt cannot be resolved with more.

[biffbifford]

The reason for all the money printing is to prevent deflation. Don't forget the Federal government confiscated gold in the 1930s, and entered into the Bretton Woods act in the early 1940s. Without access to easy credit, people would not spend, effectively causing deflation. Inflation is money chasing the same goods and services, driving up prices. We are witnessing the greatest transfer of wealth in all of human history. Bernake is printing money, creating stimulus, and bailing out banks. Businesses are getting richer. People are getting poorer, and taking on more debt. For the last two years, my credit cards have nearly doubled their credit lines in October and November. No need to ask why: To stimulate spending, and drive me deeper in debt. The real question we should be asking ourselves is: why would anyone want to hold US dollars? Well, the only currency O.P.E.C will take is US dollars. If you are a foreign nation and want to purchase oil from O.P.E.C. nations, you need to go to the World Bank and exchange that currency into dollars. This is why more than 70% of all the world’s financial transactions occur in dollars. This is why the US supports such a large military budget. Anyone who has threatened the US hegemony over the world's currency has suffered greatly. Suddam Hussein attempted to push Arab oil producers to change to Euros in 2000. The US made war with him in 2003 claiming WMDs and state sponsors of terrorism. So we fight about this war, and call George Bush stupid for going to war on bad intelligence. However, the reality is, this war was fought to preserve hegemony of US currency and prevent Saddam Hussein's rhetoric of attempting to change from selling oil into Euros. Dominic Strauss-Khan spoke harshly against the US hegemony as the world's currency, and asked for another world currency. He was accused of raping some nobody maid in a New York hotel. War is being waged to control the world's resources. China is defending itself against that threat with its recent military buildup. I would do the same if I was a country facing down the Barrels of US foreign policy, and wars of "faulty intelligence."

Now for all you gold bugs out there - I will make a prediction that will get many people very angry. Gold will fall in price to less than half its current value in the coming years. Why? Gold is a fear trade. The rich protect their assets when they purchase gold. However, remember what happened in the early 1980s. Gold ran up to new highs and everyone wanted the precious yellow metal. Heck, even the Saudis' invested billions into the little yellow metal - well you can look up on the internet and find out what happened those that jumped on the gold train. These are difficult times, no doubt, but we are under the influence of the most corrupt politicians our country has ever known, a Fed chairman that is making deals with countries, bailing out banks and businesses, and is accountable to no one. The day you can buy food at Vons in gold is when I will believe gold will soar through the roof (5k+). We have a long way to go before we can count on gold as a standard form of monetary transactions.

[aedens]

Here is the list. It was solvency. The rest is semantics to public opinion campain. Marginal Utility is another topic of consumer deflation
to preference bundles.
http://www.cumber.com/content/misc/fed.pdf

As forwarded from the Florida study "Higg made a astute notation we all understand here on actual conditions of balance sheets.
Some may be better, but do you trust there current tragectory to tranparency."

As always people assume deflation was a threat. The threat was years of misery was enabled by the excess credit by design. The balance of payment was a issue between counterparty's of gold on a governmental basis not consumer. They inflate "debased" for the fabian sociopaths running rampant also today.
The distinction between market and natural interest rates, and the key role played by credit, was already commonplace when John Stuart Mill (1871) was
writing, and was the main preoccupation of thinkers such as Wicksell (1898) and those that followed him. "I dissected Alfred Marshall since he doctrinated Keynes" The importance of understanding global financial intermediation and its tenuous link to current accounts was a key theme in Kindleberger (1965). It has motivated the collection and analysis of statistics on international banking by the policy community, a task entrusted to the BIS in the 1970s. More recently, several observers have again highlighted the need to focus on the whole balance sheet of national economies, albeit from a purely residence (balance-of-payments) perspective.

MF Global did business, including, in the U.S., the USA PATRIOT Act, which requires the Company to know certain information about its clients and to monitor their transactions for suspicious activities, as well as the laws of the various states in which the Company does business or where the accounts with which the Company does business reside. This dovetails into the observation they knew for month the scope. On the farm we call it canners and cutters grade 4.
My opinion does not matter. What does in any age is you cannot trust any bank with your money. Case No. 11-15059 (MG)
Going forward if you answer this I know who you are.
What instrument do we have at our disposal to fight successfully against private capital under these conditions? Is there such an instrument? There is a consciously planned approach to the market and to economic tasks in general.

Here’s Corzine from an earnings conference call just last week. This should be his epitaph.
“The spread between interest earned and the financing cost of the underlying repurchase agreement has often been attractive even as the structure of the transaction themselves essentially eliminates market and financing risk.”

[Tom Acre]

Here are some nice places to live in the middle of the ocean:

The rest of the earth may be destroyed by nuclear war, but your family
will be snug in your Flip Ship.

John

Looks like it should be called a 'Flip Off Ship' instead.

[richard5za]

Now for all you gold bugs out there - I will make a prediction that will get many people very angry. Gold will fall in price to less than half its current value in the coming years.

I totally agree with you. The question is not whether but when? And how much higher will it go before the now ten year bull trend reverses. The answer could be anything from 0 days through to 15 or more years with a top price from the recent circa $ 1950 top through to $ 50 000 per ounce.

I have done very nicely out of gold and miners over the years, and also this year, but at present am 100% in cash watching and waiting for either a decisive break up or a break down. Currently both gold and miners seem to be churning sideways.

If you have any more specific views to throw upon the subject they will be read with interest.
Richard

[Higgenbotham]

I wouldn't be totally surprised to see a very quick and severe deflation that ends in late 2012 and then if the politics don't change for there to be serious inflation by the end of 2013.

I don't think there ever has been or ever will be a severe deflation of a pure fiat currency.

As an example of deflation leading to hyperinflation, consider the case of the Weimar Republic. In 1920, Germany experienced a deflationary collapse, with the average citizen finding it harder and harder to get enough money for necessities. Banks, short of money, could not honor checks, and businesses were strapped for cash to buy materials and meet payroll. Fearing a collapse that would throw millions of workers out on the street, the German government desperately printed money in an attempt to re-inflate the economy. During this period, despite the government's money printing, the mark actually gained in value against foreign currencies, so that prices of imported goods fell by some 50%.

I believe the steps to get hyperinflation as quick as you are expecting would be similar to the Weimar scenario described:

1. Quick and severe deflationary collapse but not really as deflationary as it appears on the surface.
2. No change in politics.
3. Bernanke, etc., at the ready, overreaches and throws tens of trillions, even hundreds of trillions wantonly into the system as Obama, Congress, Citizens, China, Russia, etc., sit with their thumbs up their asses and do nothing to stop him.
4. Hyperinflation within 12 months.

[OLD1953]

And again, I must object to the idea that there is no feedback in the system. There is a great deal of feedback in the system, perhaps even too much. The government is indeed attempting to hold together the old financial regime, but this is already ending, even a jobs bill is meeting with great resistance. There is feedback in the system.

If Bernake tried to release hundreds of trillions into the world, he'd be fired. It's that simple. The resistance to such a thing would be incredible.

And let us look back at the 30's. When did the fraudulent bankers and financiers go to jail? Well, most of them simply didn't. But of the ones that did, when did they go to jail?

Richard Whitney - jailed in 1938.
Howard Hopson - jailed in 1941
Arthur Cutten - market manipulation - indicted in 36 but died before coming to trial
Jesse Livermore - never indicted but killed himself in 1940
Samuel Insull - acquitted

I could go on, but this is a fair illustration of my point, you are committing the semantic error of compressing time as you look into the past. This is very easy to do, and we've all done it. But the fact of the matter is this, any successful trial of a very large fraud in the markets either requires absolute proof, as in the case of a Ponzi scheme, or it takes many years to come to trial. There are always the obvious frauds who are detected early on (usually by confession), like Maddow, but the subtle frauds or the ones who dip into the money as their own money is lost, will take years to be brought to trial.

Have patience my friends. Their time will come. But it will come after the true crash, which is looming over us even now. The real crash of the 30's began with the collapse of the soverign debt market, and I suspect this time will be no different. After that crash, the public will thirst for blood, and the books will be examined, but not before. We all see the criminal activity that is occuring now, and it offends us. But was Al Capone making 120 millions in a single year any more attractive? Was Capone owning Chicago any easier on the public morality of the time? That Bonnie and Clyde were considered as romantic semi heroes by a good many people who had come to hate bankers was indeed unfortunate, but the example shows how far we have yet to go before the financial world is roundly hated in this fashion. When the people fight the cops who come to take the unfortunate from their homes, when the call is for JOBS, not some gaudy glitzed up "support business" program, when the people as a whole have had enough, and get up from the table to take back their own, then we will have change. But not before.

[richard5za]

I believe the steps to get hyperinflation as quick as you are expecting would be similar to the Weimar scenario described:

1. Quick and severe deflationary collapse but not really as deflationary as it appears on the surface.
2. No change in politics.
3. Bernanke, etc., at the ready, overreaches and throws tens of trillions, even hundreds of trillions wantonly into the system as Obama, Congress, Citizens, China, Russia, etc., sit with their thumbs up their asses and do nothing to stop him.
4. Hyperinflation within 12 months.

I certainly think that this is possible, Higgie. But I am wondering about the probability? My feeling at I sit at my computer now, is a very low probability but its worth meditating upon. It would certainly cause a massive amount of hardship. Richard

[John]

Once again, folks, a Weimar-like hyperinflation is absolutely
impossible. I don't mean it's unlikely - I mean it's impossible.
That was a generational unraveling era, and this is a generational
crisis era. That was a reaction by the Lost Generation following the
"needless" war that the Missionaries pushed them into, as society
moved from the duty-bound Missionary culture to the Lost culture
totally lacking in ethics. Today, Gen-Xers have already past their
peak in being ethics-free, having realized that their lack of ethics
caused the financial crisis, and they're now trending backward towards
ethics, and so there will be no hyperinflation.

John

[vincecate]

And again, I must object to the idea that there is no feedback in the system. There is a great deal of feedback in the system, perhaps even too much. The government is indeed attempting to hold together the old financial regime, but this is already ending, even a jobs bill is meeting with great resistance. There is feedback in the system.

If Bernake tried to release hundreds of trillions into the world, he'd be fired. It's that simple. The resistance to such a thing would be incredible.

Bernanke will be doing what Congress wants. I don't see hundreds of trillions early on. First he will just be a "buyer of last resort" when nobody else buys Treasuries to help with the $1.5 trillion deficit. Then he will be buyer of last resort when people start dumping treasuries or they are coming due and the Treasury does not have the cash. So I could see him buying a few trillion over the next year. But that will be all it takes to start hyperinflation. Once people realize that the government is really just printing money and spending it, with a central bank pretending it is a loan, they will flee the currency.