Debt Rattle Jan 24 2014: Argentina Returns to Villa Miseria
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Arnold Genthe Ice wagon horse wearing a hat in New Orleans 1923 Argentina is once again in very bad shape. It rose out of the ashes of its 2002 crisis
[See the full post at: Debt Rattle Jan 24 2014: Argentina Returns to Villa Miseria]There is one economic factor in China (and Argentina) you do not speak of; nor does anyone I’m aware of: organized crime. I’m not talking about the sector that operates in the open by noisily pretending to be legitimate, while they arrange to have laws written to their benefit (J.P.Morgan, et.al.) but the organized crime that runs submerged everywhere; sells drugs, does paid kidnappings, etc.
The organized crime in China is the oldest, most highly evolved, on the planet. They are far less publicly visible than the newer Russian “mafias”; but also far smarter and far more powerful. When the Communist Party succeeded in taking power, Chinese organized crime took a bit of a hit, and submerged even deeper – but certainly did not disappear. They are thriving and expanding now- to the point I would bet they can control bank interest rates and direct the Party.
They make decisions based on their own welfare. But unlike cruder criminals- the Chinese have understood for millennia that they must not entirely destroy those they feed on- so their actions are much more complex.
I grant you- that’s a very difficult bit to factor into attempts to understand international economics- but it is a very major force. And not going away, ever.
Well, Greenpa, I have used the word ‘mob’ alongside ‘shadow banking system’, for obvious reasons, and I think they’re a huge threat to politburo control. But since we can’t keep track of the mob, just filing it under shadow banking is maybe the smart thing to do. They’re of course part of Beijing as well, and probably taking over as we speak. I see no reason to keep the apparatchik model going, though.
Cash is Dead. Long live E-Money.
Think back to the year 2000. If someone said the word, “Google”, you’d suspect they were choking on an air bubble.
How about Facebook in 2005?
How about Twitter in 2007?
Have you noticed the recent proliferation of the word “Bit-Coin”. Forget the specifics, the news is never intended for that. It’s role is the dissemination of memes. Your cash is getting moldy. Better spend it while you still can.
More from Martin:I agree, Bit-coin sounds clumsy. Old fashioned before its time.
How about some sea food:
Squid, Octopus, Oysters. They all sound yummy to me.
Squid: https://www.squidcard.com/
Octopus: https://en.wikipedia.org/wiki/Octopus_card
Oysters: https://account.tfl.gov.uk/oyster?App=8ead5cf4-4624-4389-b90c-b1fd1937bf1f&returnURL=https://oyster.tfl.gov.uk/oyster/security_checkAnd yes, the notion of the squid controlling my money, that makes me giggle too.
Just wanted to say I appreciate the recent frequency of the Debt Rattle articles. Getting daily commentary, with the occasional in-depth Nicole Foss analysis, is what initially made me love TAE so much. Hope we’re heading back in that direction, as it seems like you’ll have more Canadian content to write about soon (ah, my Canuckbucks… down over $0.05 in a matter of a month…)
@VSA,
I like Martin Armstrong’s work too, but I must say… E-Money risks getting confiscated by those who run the E-Money system, or blown away into the ether when the (inevitable?) Grid-Down event occurs. Better spend it while you still can?
Cheers,
Variable@ Variable. The deflationary cash crunch will create a surge in concern over counterfeits, tax avoidance and petty crime. E-money fixes that — there’s a traceable starting point and chain of ownership for every unit. (See Sweeden’s example). Old paper notes will become illiquid as increasing #s of vendors balk at acceptance (due to storage and verification costs) and plastic notes and e-money become the norm.
The #1 driving factor to E-money: Negative interest rates. You can’t have cash in a world where bank deposits cost money, as they must when T-bill rates drop below 0. Cash transactions will need to be penalized to equal the playing field.
Just amazing. Did you see there will be a 50% tax on internet sales in Argentina now? And how do you think that is going to work out? Well, I imagine this is contained or something. Great work here as always Ilargi.
Seconding V81’s comment, This was an informative and fast collection of current topics and the format is enjoyable. I save Nicole’s wonderful book length analyses for the occasional day when I can still concentrate 🙂
Humm, 50%tax on internet transactions. Imagine a 50% tax on e-money transactions, as well. All traceable, down through the chain.
The unofficial economy will always need physical currency of some sort to function. And function it will.
The trouble with gold and silver and paper currency — Counterfeits. For a currency to work, it needs to be credible in the absence of extensive counterfeiting checks. That has been true in recent time, but it only takes a few examples to send a chill though the hearts and minds of merchants. Gold-plated tungsten? Silver plated cupronickel? Nobody wants to hold an empty bag, and if the cost of verifying is prohibitive, then the medium of exchange ceases to function, and is replaced. Paper dollars, junk silver, and official coinage are very vulnerable to a tiny bit of scare mongering. And then it’s plastic and electrons or nothing. Or cases or Pepsi.
Cash in your pocket, but you can’t buy a tuna sandwich on an airplane, even if you offer the stewardess a $100 bill (keep the change). What happens when Walmart charges an extra 30% to pay with cash?
In case you were wondering…..
https://articles.latimes.com/2010/jan/24/business/la-fi-lazarus24-2010jan24@ VSA,
“Nobody wants to hold an empty bag”
E-money is the biggest empty bag I can think of. Its an electronic equivalent of IOU’s (only worse, as there’s no underlying tangible good like in our current system where at least some of the money supply is not debt but physical cash), and prone to all the dangers of anything illusory / unreal.Systems can fail, get hacked and/or be manipulated. At least with tungsten-filled gold I can melt it down and get some of my gold value back. And my friends’ wedding band is tungsten, so its not a complete loss if I can also learn to fashion jewelry 🙂
But more seriously, I can learn to spot fake coins – I can’t learn how to unmanipulate a controlled digital money , or ensure 100% that the systems will be hack/failure proof.
I appreciate your / M.Armstrong’s views on the future of money, but I think its a flawed view based on the extrapolation of past trends which may start to reverse themselves in the near future. Some people are already starting to hoard physical dollars… and many of the people I meet who don’t/won’t are so far in debt I suspect they’ll be debt slaves for the greater part of the next 30 years come the Collapse.
Furthermore, I think it is a view that discounts peoples’ desire to have something of tangible value (or perceived tangible value anyway – paper money are IOUs as well but at least is not based in the ether) within their reach.
Lastly, people seem to chase after rising markets/commodities/investments – with so many currencies starting to fall (my Loonie included) and the US dollar on the rise, perhaps the unwashed masses with anything left to invest will start to see the allure of the undervalued USD and start to go long… Can’t really imagining money disappearing in a scenario like that.
Cheers,
Variable@Variable – I agree. While electronic money is easy and convenient, cash is tangible. Swiping a credit card buying stuff at Target has now compromised over 70 million people’s personal info. And who can forget the multi-week bank holiday in Cyprus where there weren’t any electronic transfers, but people could get a bit of cash from the ATM.
Raul said, “The no. 1 problem[in Argentina], again, is the lack of foreign reserves.”
I’ll buy that. And that is the exact same problem we have in the USA, no significant amount of foreign reserves. And most of the gold in Fort Knox is long gone too.
So you just made a fairly rock solid case for the hyper inflationary ending in the USA, perhaps inadvertently.
There’s no escaping hyper inflation here [usa]. Most labor that can be exported to low wage offshore centers has been exported. Most savings of foreigners that can be ‘borrowed’ with dollars have already been ‘borrowed’, at least at current Treasury rates. And the dollar is losing ‘World Reserve currency’ status, slowly, one bilateral trade agreement at a time.
My guess is that before hyper inflation sets in, the dollar and other leading fiat currencies will be declared null and void and a one world fiat imposed in their collective place. For dollar savers, this will feel very much like hyper inflation.
After reading through the article in its entirity I came to a general feeling that people don’t play by the rules and it gets everyone in trouble. We play games that are so old and predictable. As the old test states vanity of vanities everything is vanity … nothing is new under the sun what seems new has happened before.
So 100 years ago Europe played money with names/titles and ritual. Americans came refusing both ritual and names really upsetting the apple cart. They were undignified, uncultured and didn’t match the rules society wanted. Society lost that battle.
Now we are today saying China and India are not playing by our rules. What makes us think that we still get to be a judge?
Don’t forget it was American banks that came up with no credit no income no problem loans. They were the worst possible conditions that would seldom result in anything less than foreclosure. These were placed in stacks and marked AAA status and then some were sold to China and India. All criminal action took place inside America and no one was brought to justice – maybe this court we talk of should be looking here.
Last week a company call Shell did something suspicous. Oil companies get risk investors to invest in field exploration. The oil company overstates the amount of oil found and the money flys wild. After this the company finds a year with profits and wants not to pay for it. Well what you do is reevaluate the size of the field reducing close to your income. On the books you just lost an inventory within the ground and may even end up with a loss at the end of the year. No real losses ever occured for the oil company just peoples pension funds.
This happens legally due to government fraud. When we talk of black market operating in the government we don’t have to look beyond allied countries. What the courts don’t like is someone else defining the rules. But who is the economy?
Do not China and India produce most of the worlds products? Is not China and India the majority of the people? Maybe they get to decide what the world rules by and not us.
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