Financial topics

[Higgenbotham]

http://www.washingtonsblog.com/2011/11/ ... -fail.html

Three years after Iceland’s banks collapsed and the country teetered on the brink, its economy is recovering, proof that governments should let failing lenders go bust and protect taxpayers, analysts say.

“The lesson that could be learned from Iceland’s way of handling its crisis is that it is important to shield taxpayers and government finances from bearing the cost of a financial crisis to the extent possible,” Islandsbanki analyst Jon Bjarki Bentsson told AFP.

This was self-evident 3-4 years ago. Now I read that this week the US government will backstop the derivatives clearinghouses.

http://www.zerohedge.com/contributed/20 ... inghouses-

I see no possibility at all that the US is going to recover - ever.

In the article below, you can read that the US has done everything exactly right in terms of balancing austerity, restructuring of debt, and printing of money. I believe this guy is absolutely, totally off his rocker but what do you want from a hedge fund manager. The destruction of the middle class, the destruction of government finances, and the destruction of normal market operations are the bread and butter of the hedge fund industry.

http://online.barrons.com/article/SB500 ... rticle%3D1

[Marc]

Three years after Iceland’s banks collapsed and the country teetered on the brink, its economy is recovering, proof that governments should let failing lenders go bust and protect taxpayers, analysts say....Now I read that this week the US government will backstop the derivatives clearinghouses.

http://www.zerohedge.com/contributed/20 ... inghouses-

I see no possibility at all that the US is going to recover - ever.

I caught that one myself yesterday in regards to the backstopping of the derivatives clearinghouses, but you beat me to the punch in mentioning it here Just remember: a quadrillion here, and a quadrillion there, and like pretty soon, dude, you're really talkin' big money.... (But getting back to that derivative-protected day-trading suggestion I just had, you can now really ultra-short-term trade with confidence, and not worry about micro-credit events that fall through the cracks!)

I would have to respectfully mention, however, that as tempting as it is in many quarters to just let the big US banks fail, I'm wondering how that might affect European unrest, and especially Chinese unrest, if our allowing such failures turns into an uncontrolled implosion of sorts. It could mean seeing WWIII happen rather soon, although WWIII happening eventually seems, of course, like a good possibility (but maybe if we're lucky, we'll just get a Chinese civil war as the worst of it). But, as far as the US never recovering, I kindly tend to feel that what cannot go on forever simply won't. Yet, trying to put Band-Aids on all of this "forever" could maybe lead to a Fourth Turning in America that goes especially bad; let's hope not....

Thanks again for the great insights. —Best regards, Marc

[Higgenbotham]

I would have to respectfully mention, however, that as tempting as it is in many quarters to just let the big US banks fail, I'm wondering how that might affect European unrest, and especially Chinese unrest, if our allowing such failures turns into an uncontrolled implosion of sorts.

If the banks had been allowed to fail in 2008, it would have been relatively painless but I have to agree with you that letting it happen now will be much more painful given where everything is at - which goes beyond the banks being a whole lot bigger on average and a whole lot deeper in debt (and derivatives). I don't have any answers at this point.

[Marc]

Thanks, Higgie, for the further cogent words here. You've mentioned in the past that a recovery in the US, given what we will have to recover from, will leave the US in a form that is almost unrecognizable. I'm just curious — do you have any predictions regarding how things might be radically different? (You don't have to tackle that if you don't care to, but I thought it might be fun for you and others to speculate on ) Thanks again! —Best regards, Marc

[vincecate]

Now I read that this week the US government will backstop the derivatives clearinghouses.[...]

I see no possibility at all that the US is going to recover - ever.

This probably makes my long term SLV options a bit safer.

I think the 50 states will have some hard times but then recover after the US Federal government is gone. With all those taxes and regulations gone, and some new more honest money, and serious competition between the states for investment and business, they will probably have high growth rates for some time.

[Higgenbotham]

You've mentioned in the past that a recovery in the US, given what we will have to recover from, will leave the US in a form that is almost unrecognizable. I'm just curious — do you have any predictions regarding how things might be radically different?

This would be about 25 or 30 years out. I think the main feature which drives everything else will be a radical reduction in the world population of somewhere around 50 percent. The other feature will be the efficiencies gained from computerization which allow more to be done with fewer people so that the optimal community size is smaller, maybe 10 times smaller or so. The population reduction will vary widely from location to location. Overall, I think the cities will suffer worst. That the cities will suffer worst is highly predictable considering any likely means whether it be war, famine or disease (which I think disease will be the main route of population reduction but probably after a war occurs first). After that, people won't want to or need to live in cities so much and the remaining population will disperse. Since there will be a shortage of people, different areas will tailor programs to attract needed population. Due to the nature of the already existing communications (for example, we as like-minded people communicate from various locations) and the previous irresolvable conflicts there will be a drive to physically locate among like-minded people and to govern accordingly. It's likely, as Vince implies, that the states will still be the umbrella form of political organization and within the states there will be subsets of populations. Each subset of population will have some political functions separate from the state umbrella but mainly economic functions. The economic function of each unit of population will be to produce something unique which can be traded, as well as produce anything possible for their own needs to the greatest extent possible (food, for example - I believe that circumstances will make it more optimal to grow food locally than to ship it thousands of miles). I believe a US federal government will still exist but its responsibilities will be fairly minimal. I think as a whole life will be much more centered on the unique local experience. I believe it will be an economically poorer existence but much richer in human dignity. There wil be dozens of various political models and even more variations of economic models to choose to live under. Many will fail and the successful ones will consolidate population. So I envision that out of the crisis will arise successful political and economic models which are unimaginable today.

[Marc]

Memorial Day "Backtrack Reflections":

"On May 26, 1947, the FBI issued a memo stating 'With regard to the picture "It's a Wonderful Life", [redacted] stated in substance that the film represented rather obvious attempts to discredit bankers by casting Lionel Barrymore as a "scrooge-type" so that he would be the most hated man in the picture. This, according to these sources, is a common trick used by Communists. [In] addition, [redacted] stated that, in his opinion, this picture deliberately maligned the upper class, attempting to show the people who had money were mean and despicable characters.'" [Source: English Wikipedia]

(That darned Occupy movement and their audiovisual propaganda: I guess that even many within the Missionary, Lost, and early G.I. Generations had a beef with it, too.... )

But seriously, as we enter deeper into this Fourth Turning — the same Turning that It's a Wonderful Life had its genesis in — we should all remember the crucial sacrifices made by those who got us through every American Fourth Turning and into the next American High/Recovery phase of a First Turning. Heroes are going to be vitally needed, along with community and unity. Best wishes to all this reflective holiday weekend. —Best regards/Peace, Marc

(PS to Higgie: Intriguing analysis in regards to speculation dealing with the next First Turning; let me mull it all over and respond shortly....) —Thanks again, Marc

[aedens]

Athens – There is no money left in Greece. In the first two weeks of June, the government and the banks will face a huge cash squeeze. Everyday more money leaves as depositors withdraw cash and transfer money out of the country. It’s clear to everyone who lives here. Greeks are not stupid. Either exchange controls happen before the election, or they happen immediately after. The election will not change that either way.

“The lesson that could be learned from Iceland’s way of handling its crisis is that it is important to shield taxpayers and government finances from bearing the cost of a financial crisis to the extent possible,” Islandsbanki analyst Jon Bjarki Bentsson told AFP.

This is a regional issue and polarized. The moderates will be annialated.

[OLD1953]

Greece will collapse, and doubtless governments will move to bail things out - for a few days, then Spain or Italy will go down, and there goes the ball game. The inevitable is going to happen, and soon. I think Bernake and the rest are already adjusting to the fact that it will happen, and they are getting ready for the aftermath.

The future I foresee is too chaotic to make many guesses about anything but the continuing advancement of technology. A people shortage could well be the signal to usher in the massive use of robots.

I've often thought that it would be simple to design a house to be very nearly self sufficient in terms of food, electricity and water, and perhaps after the shortages this will be done as a selling point - a "safe" house, in other words.

[aedens]

Others said cyber weapons technology has inevitably advanced since xxxxx was built.
"The scary thing for me is: if this is what they were capable of five years ago, I can only think what they are developing now," Mohan Koo, managing director of British-based Dtex Systems cyber security company.

That statement sums up how inept they really are.