Debt Rattle February 6 2018
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• Dow Jones Hit By Biggest Single-Day Points Drop Ever (Ind.) • Stocks Crumble In Vicious Sell-off As ‘Goldilocks’ Trade Unravels (R.) • Europe
[See the full post at: Debt Rattle February 6 2018]“something is badly wrong with our societies and our economies”
What’s wrong with our society is our economy. The ‘deceit’ is merely the carrier; the concept of exchange is the ‘bug’. It’s why *all* of this is “invevitable”, Ilargi, not just some minor disconnect between speculation and commodities values.
Meanwhile, Prechter long ago noted that epidemics spread in the depths of bear markets, the deepest of which is dead ahead of our now-hull-breached ocean liner. I’ve been telling locals here that our community (and university) is way overbuilt for the coming decades, and that’s without any major hit to population along the lines of a plague. (They still have ‘faith’ in growth.) Household consolidation has been underway for years and continued right through the supposed recovery. Now, US population, no longer bolstered by immigration (mostly from Mexico–no comment), has begun a permanent decline (to join Europe and China among others). This delusion isn’t all money-think, it’s just leveraged by it to a point of tragic degree.
So, four institutions (‘rings’)? No, only one.
LOL, a cursory glance at the opening graph I read as Everest, not “ever”.
But Mt. Everest is good, no?SteveB
Basically agree; but nobody is truly prepared for what’s coming, IMO.
Because what’s coming; is beyond their ability to see the world as it really is…
If I were young; seeing what I see, would scare the holy shit out of me.
As it is, I’m not young and am resigned to the coming chaos; but do not envy my wife and her family…Definitely pulling the plug on the old system and telegraphing it. Accident? No. Plans.
Hey, anyone remember last month when Powell said the market is effectively a paired trade, short volatility? And the day he gets in, they not only jam volatility, break the pair, but actually bankrupt two of the major VIX ETFs, leaving Hedge Funds naked? What a coincidence!
So, they’re just going to let this drop, and not respond. Riiiiight. No, they’re going to respond, and they have plans. I may not know the plans, but they have them. No doubt they have an entire plan/decision tree with 15, 150 end points in a model run by a supercomputer.
Problems? Rates have cracked, and could not be held forever anyway. Debt is extreme. US$ reserve system reached its 40-year expiration and Cheney-n-pals’ plan to take over the unipolar world failed in flames. And anyone remember the 1988 cover of the Economist?
Funny ol’ world. Weird how that turned out exactly like their white papers said they would make it. So how do they reset? Well if they’re going for a weaker dollar, as said in the election and to inevitably default on the debt then crack the bonds. If bonds rise, money will flood out of the mass glacier of UST’s and into…where? Normally stocks, but they’re quite high. Foreign currency, but they’re in the same condition we are. Gold. Cash Dollars, which at least won’t actively LOSE money like bonds will. And in this case cryptos, as a sort of foreign currency/gold-like asset.So as they pull the plug by watching the UST hit 3%, what do they do? By golly, gold is set back. Cryptos. And the Dow. You know, the exact three things that are in danger of running away. The US$ is put into uncertainty with a yes man/no man tag team. So they start the run from a lower level.
Since we already know from multiple paid fines worldwide that we no longer have markets, the market is whatever Powell et al says it is. And he needs to drive Yellen’s irrational one-sided speculation out of the market. What’s more, he needs to drive it out quickly before it causes political damage to his boss. Then the bonds, being easily 10x larger than stocks, will drive it back up again and Cap’n Crunch can take credit for awesomeness of what is essentially inflation + velocity finally unfrozen. Although it may rise at first, ultimately the US$ drops 50-75% and our debt is restructured by a bankruptcy/restructure expert. Tariffs + Currency lead to reindustrialization while we also discover we’re the world’s 1st or 2nd largest oil producer (see recent headlines and pipeline builds).
Do I like it? No. Nor do I like the endless lies about how great the economy is, how low unemployment, but once you had a party where you sold the furniture and let the roof cave in, every remaining decision is a least-bad one. They welded this debt collapse into the nation’s steel foundation by 1979, and we’ve only been playing it out since then. They got to live it up on credit and as V. says, give it to the young good and hard after retiring with the loot.
There’s no good story that ends that way, but maybe we can start a new story, once this is over, because you can’t stay drunk forever.
Dr. D
They got to live it up on credit and as V. says, give it to the young good and hard after retiring with the loot.Would you care to extrapolate a bit on that? Because, I said no such thing; given I’m the V. referenced, or not…
You may recall that incoming Fed Chair, Jerome Powell let this slip last December, about the Fed needing to unload it’s short-volatility position.
“It is about $1.2 trillion in sales; you take 60 months, you get about $20 billion a month. That is a very doable thing, it sounds like, in a market where the norm by the middle of next year is $80 billion a month. Another way to look at it, though, is that it’s not so much the sale, the duration; it’s also unloading our short volatility position.”
[Powell had given fair warning, and got right to work on his first day.]
https://www.zerohedge.com/news/2018-01-05/fed-chair-makes-striking-admission-we-have-short-volatility-position
So what is taking the least heat? What will central bankers support as cleanest-dirty-shirt, to send the stampeding herd into? I think they actually want the herd in the crypto corral.I’ll just go ahead and clarify what I meant by being old.
Here’s what I said;
Basically agree; but nobody is truly prepared for what’s coming, IMO.
Because what’s coming; is beyond their ability to see the world as it really is…
If I were young; seeing what I see, would scare the holy shit out of me.
As it is, I’m not young and am resigned to the coming chaos; but do not envy my wife and her family…
Where do I even imply sticking it to the young? They’re already fucked.
The young have no clue and become victims of a system they do not understand. They’re fucked! Through no fault of their own; victims of an economy and society gone mad!
I’m getting my $1200 a month and nothing else; you want to live on that? It sucks!
But, I left, seeing the future, and the bloody present of March 19, 2003; and George Bush’s wanton butchery of the Iraqi people.
The American young? They’re fucked and may the god’s help them; nobody else will.Allow me to add to this irrepressible fount of optimism, on behalf of the American young, that being fucked is a time-honored means of becoming pregnant. They may indeed encounter daunting challenges of which they have no knowledge, but they are young; they can deal with it, notwithstanding the blathering of impotent old men. Thank you very much.
Deceit as the big killer.
Anti-logos as our contemporary Yersinia pestis. I like the way this guy thinks.
The young need to know the truth about the way it really is.
Lies, in the form of propaganda and the like, will not help them start a better world.
I wasn’t suggesting your intent, just that the young have been screwed.
If they could see it clearly, and many do, they’re so overwhelmed by trying to survive the week, they’re viewed as stupid and complicit. Really, it’s more like being in a war: after this fire-fight over rent and the car and some medical bill there will be another fight tomorrow, and another, and another, through Normandy and the Black Forest all the way to Berlin. But right now you can’t think about that, only about today, enjoying clean socks and a cup of coffee when you’re not being pulled over and shot, sleeping on the basement couch which is at least not outside, and keeping your equipment (cell phone) in perfect order in the chaos so you can survive tomorrow’s firefight (zero-hour job hunting). And tomorrow’s, and tomorrow’s, forever and ever until death. It’s only by not looking at that bigger picture you won’t be scared sh-tless and can function. So what’s the point? The war will find you, go home, eat ramen, and hit Netflix until they shut it off for non-payment.
My addition is that this was chosen for them in 1969, 1979, long before they were born, by eliminating restraint and choosing the national debt instead of Carter’s sweaters. It was said in “Guns-n-butter”, in 1980 when Reagan talked about debt “enslaving our children”, and reported every year of my life since I was born. They put the debt on me, America’s children, every year, 100% of the time. And however it worked out, they got the party; a debt-boom economy until I was in the workforce, then a booming stock market until I was old enough to invest, then an expensive house until I was priced out, then health care in retirement that’s denied to the young-and-working. Meanwhile, I got all the bills, but I’m supposedly the slacker here. In America it couldn’t be clearer, on average the old are 10x richer than the young, and like London and Melbourne housing, it leaves not only no money, but no hope.
Notice the break here is about 60, back when there were young wages that could compound.I’m sorry it worked out this way, and those who have saved for years will naturally have more net worth, and certainly the process locked out a lot of pensioners as well, but the income disparity is off the charts. Normally, the young have jobs and income, but now having no jobs or income, cannot save normal amounts even if they wanted. How do you compound no money added when starting at the market top?
I don’t know what to say to that, but that’s what happened, and once you can rig markets, the largest demographic group will probably always demand that government make their assets rise. Wall St goes along for the ride. Then that demographic, being richer, has more political power too in a spiral upward. Ultimately that demographic owns everything and the others own nothing because wealth comes from somewhere. Then it reverses. That used to happen when farmers and miners were the voting bloc, then reversed to manufacturers, then 401k speculators, or in countries where one ethnic group is the voter. Advantages are always by insiders, but this time it was also by age. Raul posts daily on the desperation of the young over housing and jobs throughout the Anglosphere and Europe as well. And even though poor and plundered, people don’t choose much different today. But that’s what was chosen for them by their parents before they could vote, and applauded for 40 years as “winning.” And they certainly won. Trouble is, retirees are supposed to sell their assets TO the young-and-working. They cannot, and the whole economy has frozen, young and old alike. This is true of every extreme income disparity.
More productively, what do we DO about it? How do you make housing affordable in Melbourne again without collapsing the whole nation’s collateral, breaking the market, and destroying the pensions? Because we’re here now, and we’re supposed to be in this together. While it’s too late for me and I will no doubt die here, if the young are young enough, they can still catch up. How does it become fair again? By markets being allowed to find real and fair value? Wouldn’t that be by the Dow falling 11,000 points, wheat tripling, and housing going back to 3x income, or $75k? That may have winners, but it would have losers too. What would that do to a pensioner with a failed 401k, housing cut in half, and food tripling? You don’t equalize freezing by putting your head in the oven. You don’t make the young rich by making the old poor, although that’s what historically happens: historically, it collapses. So how do you fix it when even fair market value would destroy an economy built on lies?
“Nel mezzo del cammin di nostra vita
mi ritrovai per una selva oscura
ché la diritta via era smarrita”“Midway along the journey of life I woke to find myself in a dark wood,
for I had wandered far from the straight path…” — Dante’s Inferno, A description of hell.“So how do you fix it when even fair market value would destroy an economy built on lies?”
You end it (fix it, if you prefer), Dr. D, by ending markets and economies, and therefore the motivation for the lies. To do that requires ending the cultural belief in the concept of exchange (or so it continues to seem). Ask again and the answer will be the same.
WOW!
Good presentation“So how do you fix it when even fair market value would destroy an economy built on lies?”
The solution depends on the meaning of “fix” and on who is “you”.
I’m not part of the wealthy and powerful bully of our existing social/economic structures.
I’m part of the poor and powerless victimized majority being held down by those who will not accept any changes that would negatively impact their elite positions in our social/economic structures.
While financial debacles may be the cause of near-term misery, the big problem is simply too many people living high-energy consuming lifestyles on a planet with limited space and energy. We won’t “fix” the problem and don’t need to. Life is not just humans, but an elaborate interconnected self-supporting network. Nature will eventually balance things out, by massive reduction of the human population. Hopefully if any humans remain, some of their more harmful characteristics will have been selected out and they will live in small communities with low non-essential energy consumption, focused on spiritual rather than material matters and using communication for truthful purposes. We shouldn’t fret too much about our descendants. If they are meant to survive they will be lucky and have intrinsic skill sets that are useful for short and long term existential challenges. We should humbly rejoice in the miracle of life and any good we have been able to produce while our cognition permits. We should not get too upset at the power-and-wealth crowd as their over-reach destroys the monster they have created, all powerful Fate snickering in the background.
if Donald John Trump cannot do anything for the victims (the majority) then I’ll wait for the next savior.
Dr. D,
I take issue with your notion that tripling the price of wheat triples the price of food (unless you are eating raw wheat berries). In processed products such as bread, the price of the wheat is a small percentage of the price of the loaf the end consumer pays.
Getting wheat to a parity price would help the economy tremendously. Wheat prices are badly manipulated down by the commodity markets. Paper contracts in wheat are approximately 3 times (if not more) the amount of wheat actually harvested on an annual basis.
There is an economic paradox few people understand. Cheap food makes hungry people.
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