Debt Rattle Apr 30 2014: The Boy In The Bubble


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    Alfred Palmer Nose section of B-17F “Flying Fortress”, Douglas Aircraft, Long Beach, CA. October 1942 That’s how I feel these days, or I should say th
    [See the full post at: Debt Rattle Apr 30 2014: The Boy In The Bubble]

    Ken Barrows

    It’s funny to see those calling for interest rates to “normalize.” A 4% yield on a UST would destroy the economy that these same people want to grow. QE, however flawed it is, is keeping their delusion alive.

    The task of the normalizers is to find a way to grow without adding debt. Good luck.


    I feel your pain Ilargi. I too suffer the cognitive dissonance of rooting for the economy to fail sooner rather than later, understanding that we continue to dig a deeper hole for ourselves. I run the local food shelf, so I see the front line impact up close and personal.

    Regarding Paul Simon, it seems he’s working on the 51st way to leave your lover. Sad.



    Elizabeth Warren has written a memoir. Re a dinner with Larry Summers:

    “After dinner, “Larry leaned back in his chair and offered me some advice,” Ms. Warren writes. “I had a choice. I could be an insider or I could be an outsider. Outsiders can say whatever they want. But people on the inside don’t listen to them. Insiders, however, get lots of access and a chance to push their ideas. People — powerful people — listen to what they have to say. But insiders also understand one unbreakable rule: They don’t criticize other insiders.

    “I had been warned,” Ms. Warren concluded.”

    To be an insider is to be spiritually and emotionally dead. No other way to explain their behaviour. They are not listening, they don’t care, and they’re certainly not in fear of us.

    I remember reading in a textbook (and I don’t know if it’s correct or not – it was just about two lines at the very end of the section) that the French Revolution began when the poor had no bread to eat, of course, but that it was really the merchant class who instigated it, not the poor. The merchants stirred up and organized the poor people. Anybody know if this is correct?


    Ken – “A 4% yield on a UST would destroy the economy that these same people want to grow.” A 4% yield would end the banks who made stupid, stupid bets, and they don’t want to lose. Like a bunch of schoolyard bullies who change the rules of the game when things aren’t going their way.

    “The United States’ non-financial sector credit is 2.6 times GDP, and China’s is 2.0 in the official system and an additional 0.3 to 0.4 in the gray market. When the interest rate is artificially kept low by one percentage point, all in the name of stabilizing financial markets or stimulating the economy, 24 percent of GDP in income, more than all the income for capital in a normal economy, is transferred from savers to someone else. This is the juice for financial crimes and misdemeanors.”


    Simple versus complex (from page 25 of “The Illusion of the Perpetual Money Machine):

    Interesting piece comparing forest fires in southern California with the Baja region in Mexico. Southern California fought every fire hard; Mexico didn’t, laissez-faire. The result? Southern California had few small fires, but frequent large ones – and Mexico had many small fires and essentially no large fires. Seeing this, they decided to try it in Yellowstone, leaving the fire to burn, but they had an inferno because Yellowstone had had strong fire suppression for decades, and there was tons of wood to burn.

    “What was forgotten is that the favorable situation in Baja California stems from the self-organized dynamics between forest growth and fires that keep them in balance and that has evolved over many decades.”

    When you artificially stop things that are way out of balance/whack, and then prolong this imbalance by propping it up, be prepared for one mother of a fire!


    Speaking of Paul Simon, he does have some good advice for economies, for peoples’ lives:

    You got to learn how to fall
    Before you learn to fly
    And mama, mama it ain’t no lie
    Before you learn to fly
    Learn how to fall

    You got to drift in the breeze
    Before you set your sails
    It’s an occupation where the wind prevails
    Before you set your sails
    Drift in the breeze

    The learning comes from the falling, and we all try to avoid that (me included).

    Ken Barrows


    I think QE is the biggest upward redistribution of wealth and income is U.S. History. The problem is that savers and others getting the shaft hold on to notions of “growth.” Without QE, there’d be no pretense of growth and we’d have to deal with reality. And without growth, what would be the impetus to save in the current system?


    Yes, Ken,

    Currency devaluation always redistributes wealth, by design. To those who receive the new free money first, (the owners/creators of it and their friends) from those farther down the food chain who get it last, and must borrow it in it’s diluted state, because they cannot print their own, (the since disconnected enablers of the former)

    It is Stealth Taxation.

    But, then, all bureaucratic Welfare States morph into fascist ones. It seems to be the nature of things. Happens when the Bread and Circuses necessary to maintain power can no longer be financed by revenues alone, so devaluation is used to create an illusion of wealth ( growth.)

    But of course, this in not organic growth, so it can’t sustain itself, anymore than can the Red Queen eventually break even by running faster.

    Yes, Ilargi,

    It’s painful seeing it for what it is, but knowing what it is can be a blessing. As I said here some time way back, the trick is living through the final implosion while getting as little as possible on ya.

    Can’t tell others what to do, but this, still in my mind and actions, is where it ends. Always has, always will. History proves it out. We just can’t know when;

    “There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.” Mises

    So, I expect Red Queen Jan to do what they all do when they see the steam roller of reality fast approaching. Run faster down the grade. Of course, the roller has the same downhill advantage, and is constructed of durable iron as a long lasting tool of productivity, not flammable, less and less productive paper.

    Humm, take the wheelbarrow, dump the notes?

    It’s not an event, it’s a process. It can take several generations, as in Czarist Russia, or it can happen in a generation or so, as in Weimar Republic.

    Really, in light of the most excellent read linked above, this one has run from the “New Deal” to now, as it is. That’s 80 years of some degree of dependence on the Nanny State by Corporate players as well as Civil. Or, one could take it back to the manufacturer of that debacle, to 1913 and the Federal Reserve Act.

    As mom used to say, ” Patience and Tortoise Food, dear boy.”

    Ps. Wouldn’t bet the ranch on Taper. A tad less poison isn’t panacea. Cold Turkey is, even though the addict believes it will kill him, it will do the contrary.


    The bigger this bubble grows and the longer it continues, I see more people who believe that it will never burst. Now that is scary.


    Yup, bluebird,

    As soon as it’s near unanimous it will never pop, I’m out.

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