Raúl Ilargi Meijer
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Sir, I would just like to point out that Mr Dalio is strongly recommending the purchase of gold. He claims it is a must to own.
If you’re as rich as he is, you can’t go wrong with that advice.
If you’re not, he thinks your purchases will raise the value of his holdings.
Stoneleigh said…
“I have no reason whatsoever to change my view of reality. Nothing I said hinges on the specifics of timing.”Viscount, this is a rinse and repeat exercise that I don’t feel like participating in anymore. What sets us apart is that you believe in crystal balls and tea leaves, and we do not. When I read the quote above, I’m left wondering what part of it you don’t understand. We are very aware of the fact that timing a crash is difficult, bordering on impossible. Moreover, the S&P is not our main focus, not even close. Not only do you believe in crystal balls, you also feel like gambling. That is something we would never encourage. And that has been clear around here for a very long time.
I’m sorry to see that you still understand so little of the deflationary process that you ask questions such as does it last 1-2 years or 10-20? I’ll refrain from asking where Nicole said deflation would be over in 1-2 years, that would just lead to more misinterpreted quotes on your part. The deflating of the by far largest credit bubble in history will take a long time, that’s not rocket science. And you still use 1-2 years as an option ….
What’s much more important, though, is that it will devastate economic processes as we have come to know them to such an extent that we will have trouble recognizing the world we live in. From that point of view, you might as well say the deleveraging, if you include its effects in the definition, will take many decades to draw to a close. It took 60 years for the South Sea Bubble to give birth to the French revolution.
You say that if the deflation takes 20 years, you start buying hard goods in 15 years. By all means, be my guest. But bear in mind there will be no hard goods to buy in 15 years, or almost none, and the ones that are will cost you all the gold you have squirreled and then some. You’ll also, if you manage that against he odds, have missed 15 years in which to try and learn how to use the tools.
All these things I just said have been said on TAE a hundred times. We haven’t changed the core of what we would like the world to hear, and we won’t. What I’ve also said umpteen times, as you undoubtedly know from digging into TAE files, is that we have underestimated something; not the power of the central banks to prop up banks and markets, as I see suggested in this thread a few times, but the complacency, gullibility and lack of working neurons of the people who are being stripped bare and led into misery by voluntarily handing over what little of their wealth remains to do the propping up.
And if you want to focus on the S&P, I’m sure you understand that, if I can summarize the events into one example, it is at 1460 now because the Greek population will be forced to work 6 days a week 13 hours a day. To keep it at levels like these, that 78-hour workweek will soon come to an economy near you. This fish is being gutted quite thoroughly with a blunt knife, and those who think they can beat the zombie markets are fools. I don’t write for fools.
As for your list of Nicole’s quotes: I’d say she’s been pretty much dead on: at the instances where she pointed out threats, more zombie money was thrown at the system, which simply proves the threats were perceived by the system as real.
Nicole refuses to talk to you anymore, because you’ve “misinterpreted” (see, I’m being nice) her words so many times she’s had enough. There are not many people who get her that far, she’s always willing to talk to anyone and everyone. Maybe you should learn something from that.
synchro
That is exactly what we say. Why would you repeat it as a criticism then?
The problem is that you skip over the deflationary period, and that will be an expensive omission. Gold will not hold its own when everybody has to sell whatever they can, including their gold, just to survive. Once all has been sold, gold will return to its historical value. But unless you have enough other things to sell, you won’t be able to wait that long. As I’ve said a zillion times, it depends on how bad you think the depression and deflation will be. We say: think Tulip bubble, South Sea bubble, but on a global scale. There has never been a bubble as big as we have now, and we think that is reason enough to be very careful. All fiat currencies return to the nothing they come from, but not all at the same time. The USD is the reserve currency, and it will rise hugely, simply because most debt is denominated in it and debtors will need it to pay off what they owe. It’s not really rocket science, is it? But if you want to move all you have into gold, by all means do be my guest. And if you’re lucky, this will be just another run of the mill garden variety depression, and you’ll come out of it with great fortunes. I see that as a big gamble, and I think there’s been enough gambling lately. But, yes, there’s a vast majority of finance sites out there who proclaim, and profit from, gold as being endowed with messianic qualities. Not this site.
My point is, that if you are saving your money for an uncertain future, why would TAE suggest you keep those savings in cash, which is continuously declining in purchasing power, when you can keep it in gold, which is not?
Because in a deflation, cash is definitely king, and gold is definitely not.
LOLOL!!! You contradicted yourself in consecutive sentences.
No I didn’t. You just don’t understand what I write.
They aren’t using ‘taxpayer money’ for QE3.
Oh, is that so? Who’s going to pay then? I’ve written a million times about future tax revenues being used for today’s debts.
You are stuck with the idea that the USD is toast, and blind to what will happen until it actually is. I have done more than enough to explain why you’re wrong. You read with blinders on. Hammer meets nail.
ilargi said, “the debt MUST be deleveraged, there is no other option. Hence, deflation MUST ensue.”
Actually, that is not quite correct.
Yes, it is.
You need a boolean statement at the end of your sentence.
No, I don’t.
Let me finish it for you.
No need. I can finish my own quite well..
‘Hence, deflation MUST ensue, IF the currency remains intact.’
The deleveraging – re: deflation – will take place while the currency, i.e. the USD, is intact. It already is.
The USD is as doomed as all of them, but it won’t die tomorrow morning. There are far too many wild ideas of gold at $10,000 and US hyperinflation and the death of the USD around, and too many Americans who think they live on a financial island. People need to check their bearings in the face of these wild ideas or they’ll end up rudderless.
John Williams is a good data gatherer. But like so many of his ilk, he should shy away from interpreting it. Williams has predicted hyperinflation for years now. No rabbit in that hat.
That rising money supply thing is at least suspect, and more likely just bogus. Ambrose Evans-Pritchard has posted a whole slew of shrinking M2 and M1 numbers this year. Velocity of money finishes off the picture.
Not that it really matters: the debt MUST be deleveraged, there is no other option. Hence, deflation MUST ensue. Hyperinflation in today’s US is but a weird dream or theory that doesn’t deserve anyone’s serious attention. We can at least try to comprehend the basics.
Vulcanelli,
We run one of the few finance sites that doesn’t proclaim PM will go to the moon. And also one of the few that doesn’t have one link or another to making money of selling it.
Nicole and I have often explained why. Most importantly, we see it as a gauge of how bad the recession will become. If it is a lukewarm (lukecold) one, then gold would be a good way to go: one could hold wealth in a relatively safe asset, close the outside doors and wait till it’s over. Well, unless one has too many peers, of course, that would obviously distort the entire picture.
If, however, the recession starts to really bite and drag down the economy, the picture changes dramatically. We say it will, and in that differ from most others, who still see recovery of one kind or another on the horizon.
A really deep recession, the one we say is coming means that most people who hold gold will be forced to sell it, to pay off debt, buy essentials etc. It means you would need to be rich, $1 million bare minimum, to sit on your gold for 10-15-20 years without having to touch it. After that, gold will hold its long time value again. But not in the meantime.
Adam, that’s basically what I have written so many times now it risks getting stale. I don’t know why you think your notion of it is unique, but it certainly can’t be as a reaction to my articles. You phrase it in ways that I find painfully romanticized though; it’s not some fcuking dream, and I don’t like it when ‘there will be blood’ is presented as if the whole world is Hollywood. People will rise up only when they realize they have nothing left; by and large, that means they will rise up too late. And until then many will continue to exhibit many features that are so drone like it hurts. For that is just as much human nature as rising up when you’re hungry and miserable. Man is prone to be a drone. (S)he’s sort of nice as long as you feed and heat her, and you can make her jump through all the hoops you want. Stop the feeding and freeze her ass off, and the stories of heroic traits like rising up together and limits to tolerance will be all the fashion again. The trick is to hold on to the heroic parts when you’re bellyful and comfy. But we’re not very good at that one, are we?
As of July 2012, she refused to acknowledge that the markets had surpassed their Spring 2011 levels. I pretty much gave up at that point.
The “nice” thing about the internet is people can say whatever they want. The Viscount has tried to put words in our mouths countless times, made references to things we never said. We responded umpteen times, and then gave up on him/her. Useless. Nicole is at the moment at a conference in Sweden as a keynote speaker, so she can’t make it umpteen+1 times, but even then. You can’t have a discussion with someone who hears only what they want to hear, not what you say.
Debt resistance seems to be the new strategy. How many of you still promote ‘getting out of debt’ as one way to prepare for the collapse?
There is no other way. There will be no jubilee. Not under the present system. Which has it hands firmly on the steering wheel, white knuckles and all.
I think its more accurate to say that Bernanke and Draghi would be happy to save our economies, but its beyond their capacity to do so. Maybe that’s just splitting hairs.
They don’t care. Other than in passing. Anyone would like to save an economy if it doesn’t cost any effort. Anyone would claim to come to the rescue of all sorts of things, traffic accidents, street violence, until doing so poses a threat to themselves.
But yes, in a bigger sense: no, in the end central bankers have no control over economies.
It’s not a bank solvency issue,
Sorry, but yes it is. However, as I wrote, we are not allowed to know exactly how solvent any – major – bank is.
… it’s a debt-to-income issue. But it might take some time for the markets to figure that out.
The markets figured than out long ago. But they’re not about to refuse free money.
How many more cycles will we have? That too is an unknown. But until you see actual widespread debt burden reduction and/or massive nominal GDP growth, know that the basic problem still remains, regardless of the latest band-aid.
It will only be stopped by millions of people moving into the streets. By then, their money will be gone, though.
I don’t share his confidence in The One True Outcome. The precise shape of the future is uncertain. I don’t know it. Do you? Does he? What level of risk are you comfortable taking?
The entire problem exists because of lost wagers. Yet that would be anyone’s solution too, to gamble more? Not our approach or advice, for sure.
Examples/links would help to evaluate the data,
They always fail him/her.
Again, Ilargi and company, thanks for your diligence, against all odds.
Thank you.
There are a vast majority who cannot ‘get out’ of debt. Purporting that ‘getting out’ of debt is some sort of ‘non-violent revolutionary action’ is classist to its core. How comfortable a position to take when one has access to the resources to do so!
I don’t know who has purported any such thing, but with a high risk of debt slavery as the alternative, it certainly isn’t about being comfortable. And yeah, there are many people who can’t get out, and many who think they can’t get out of debt, but we will continue to urge them to try their best. Debt in deflationary times kills people, quite literally.
It seems that the entire premise of TAE is that there will be a time when the analysis of high finance is no longer needed.
High finance itself will go, as we know it today, so sure, no analysis needed once it does. But that’s a bit too much like saying because Google has a self steering car under development, you can close your eyes on your way to the store today. Or the church.
God is our only hope for an objective truth outside of ourselves and for survival on this earth!
Which one?
Pipefit and GO,
There are a score of articles on deflation in our Primers section. Why don’t you read those and then come back?
Hyperinflation won’t happen for a long time in the US. It is simply too addicted to the international bond markets. Which would punish any attempts at it relentlessly.
And by the way, gold is not going higher, it’s dollar that has been going lower lately. Check it vs the euro, for instance.
Ilargi, any thoughts on how long that ECB boondoggle might last before falling apart? I’m guessing a few months, but this is new territory for my attention.
I see people saying three months; don’t they always? It’s usually measured in days, this one might be a bit bigger, but the question remains the same: what happened to the debt? Well, nothing happened to it, it’s still there, and they’re adding more.
Henriksson:
Since I’m 20, my retirement would then be 65 years into the future, the year 2077. You’ll have to excuse me if I doubt you have any idea about retirement arrangements in such a distant future, given that it’s difficult predicting things only ten years hence.
Yes and no.
I think it’s best to recognize that pension plans as a whole are historical aberrations. They didn’t really exist in the west before, say, the 2nd half of the 20th century, and don’t to this day in most of the world. Your kids and grandkids – if you live long enough – are your retirement plan, mostly. China has close to zero provisions for retirement, which is why savings rates are so much higher there. In many countries in Africa and Asia, the very notion of savings is a mirage.
I don’t see how for 20-year-olds today there would be any pensions available in 2077. I really do think our present wealth has been a one-off, simply because of the financial crisis, the energy crisis and the climate crisis.
We live, or have lived, with this idea that we can work today to provide not only for our day to day expenses, but also for our decades into the future ones, and perhaps even our children’s. Try that one flipping burgers.
You take a step back and it all looks quite convoluted. Not promising.
Still, yes, even if your pension is just 5 years away instead of 10-15, you need to be seriously worried about it. But since just about everything we write and have written over time makes that clear, it doesn’t need to be repeated every single day.
Sorry guys, but we simply don’t have the same obsession with exact timing that some of you do. I don’t find it all that important whether it’s 10 to 12 or 5 to 12. What I find important is that the clock is ticking.
10-15 years is just me staying on the safe side of things. And besides, people are 5 years older than they were when we first started warning about this issue.
Not every pension plan will go down in the same way and at the same time. Some are huge, for one thing, and there is no clear pathway for depleting them, so chaos and diversity is ensured.
Hey Pablo,
As I wrote a while back, it’s when the wealth transfers halt, i.e. when the Basque country and Catalunya no longer receive the financial advantages of staying within the greater whole, that I see them begin to seriously consider leaving. I also think it’s very likely that Rajoy, Madrid in general, will try to take away some of the regions’ powers – and money-, and I don’t see that being received very well in the regions.
Skip,
I wonder why we’re hearing nothing more about Credit Default Swaps. These things were supposed to bring down the entire world…and then Greece semi-defaulted (is that like being a little bit pregnant?) and nothing much happened with CDS payouts.
It was declared to be a NON-credit event.
Or maybe the CDS are still very much at the forefront of Merkel and Company’s thoughts,
That’s a safe bet.
… and Germany must walk away from the Euro first to prevent CDS payouts on the weaker eurozone countries.
I can’t see how that would work. If that were Germany’s biggest worry, they had better keep it all together till the bitter end.
Nassim,
Greece leaving makes little sense as the pressure on Spain, Portugal, Italy, Ireland and France will instantly increase.
But the same is true if Germany leaves, of course. That’s perhaps the main problem.
As I wrote a few times last year, they’ve got themselves stuck in nasty bind. The best solution in theory might be a northern and southern euro divide.
But who would be in it? Nobody will volunteer to join Greece, and Italy will protest most. Unless you count France, which will never agree to join the club of the weak southern eurozone.
Still, if Germany wants to leave, Holland, Finland, Austria will insist on joining it. And so will France. But I can’t see France being acceptable to the others, the risks are too substantial that it will become a drag on their own finances. By the same token, France doesn’t want to be the rich uncle in the club of the weak.
I think the picture I paint in the article above, of the richer countries accommodating, paying, for Greece, Portugal, Spain, to leave, is the least worse path. But I don’t think the odds are high that Angela will listen to me. She will probably try to stretch it all until there’s nothing left to stretch. That means waiting for at least the October meeting.
However, both the stock markets and the bond markets (Spain, Italy) could make that wager turn into a very costly one. She should really try to take control and move before those markets can. But it doesn’t look like she feels she has that sort of control. It’s more likely that she’ll try to find a way to make Draghi’s ctazy plans palatable to her people. Hey, I could be wrong about her ….
Do you ever wonder that maybe governments can keep this going forever.
No.
I have followed the advice of TAE but this doom and gloom that you say here it is just around the corner never comes.
I take it you don’t live in Greece or Spain or own property in Vegas.
I have lost thousands of dollars pulling my money out of 401ks and other actions!
Funny you should say that. I read just this morning that Holland’s biggest pension plan is going to cut payments to pensioners by 15%.
Is it possible that you could be wrong?
No.
And you have too much invested in the doom?
Whether what we write is doom is a matter of opinion. I certainly never use terms like that, or collapse, or Armageddon etc.
You are really hoping for a collapse and if it does not happen will you be disappointed?
We are not hoping for a collapse. But it will still happen, so we won’t be disappointed in that sense. We will be disappointed that not more people have listened.
If there is a recovery you will just say, well just wait and see oil prices will climb and then we will have a crash ….but what if that is not for another 10 years or 15 years…maybe just maybe the sky is not falling.
There are plenty people out there who claim we are in a recovery. What do you think?
It’s fitting that you placed your comment under an article I wrote about debt. Yet another one. The topic doesn’t get nearly enough space lately. Which means that the fact that all “we” do is try to conquer debt with more debt gets snowed under. But it’s no less true, and no less futile.
“We” have simply found a new source of collateral for that debt; it’s no longer us, it’s our children (50% or more of whom are unemployed in some countries…). “We” could get away with these debt levels under one condition only: that is, economic growth like history has never seen, and that on a global basis. It would have to be China on very heavy steroids, because we would need to pay off interest and principal on the debt, and have more left over to tackle a growing population, a deteriorating natural environment, and the depletion of easily accessible energy sources.
By now, and I think this should be obvious, we’re entering the realm of fairy tales. And as much as we like fairy tales, we don’t actually believe in them.
“We” will continue to pour more of our children’s future wealth into the cauldron, until “we” ourselves don’t believe any longer that what’s in the pot will actually feed us. To put it differently, the interest we will need to pay the financial markets on any additional debt will keep on rising. Until we can’t service it anymore. This will not happen at the same time at the same level everywhere. The US will be a safe haven, the best looking horse in the glue factory, for longer than Greece or Spain or Germany will be.
But the US is drowning in debt already as well, and will be more so once Europe has fallen to pieces. The eventual outcome is not in dispute. And if people prefer to gamble on the timing, that is their perogative. It will still be a gamble, however, and The Automatic Earth is not a casino.
“When I was talking about the people having power, it was this to which I was referring – the power to withdraw their deposits from the system. If you disagree, I’d like to know more detail about why this is, since I often enjoy reading your perspective on these things.”
There is no such power, since there are no deposits to be withdrawn. The threat of a bank run equals a bank holiday. Doors closed, ATMs empty.
In general, when Nicole says she’ll be surprised if something doesn’t happen, that means she’s surprised if it does. It doesn’t mean that she’s made a prediction and has been wrong. It means she’s surprised. That’s what she literally wrote.
I once said people would be lucky to recognize their hometown by Christmas. That doesn’t mean I’m wrong when some still do, it means they’re lucky. That’s what I literally wrote.
That’s not a cop out, we simply choose our words carefully, because we know predicting fixed dates for events to happen is useless.
If people take these things to be fixed predictions regardless, they simply don’t read our words as carefully as we choose them. And that is important. I write what I write, not what any number of people think I do, who might all have different interpretations depending on the care they read with.
We point out trends and risks, not dates.
The CMI series I did with Doug Short and Rick Davis showed through time that the data were not as strong as we at one point all thought they MIGHT be. That caveat was always very much a part of that series. Which then fizzled out. I’m sure most people have understood that. Sorry to see you did not.
I wouldn’t call that an ad hominem Dave, and I’m sorry you make it that. It’s simply very much not true that the public have the ultimate choice, and we shouldn’t be suggesting that here.
“Awesome find. And totally believable. Mish saw the same thing, likely in parallel.”
Mish saw my article, and thanked me both in his piece and by private email.
“That’s the awesome thing about our banking system; at the end of the day, when confidence snaps, the public really does have the last word.”
Let’s try and get a life, shall we? As long as the public believes that sort of baloney, grand theft auto can continue.
William said:
“Is it a credit crisis or is it an oil crisis? Really if you look carefully it is much like a chicken and the egg concept. Banks lent out more than should based on plentiful oil.”
Sorry William, but that’s very simply very inaccurate. It’s also a very typical mistake made by those – overly – focusing on energy.
The financial crisis was not caused by oil prices. That’s not how it works. We always give the example of the Great Depression, when there was plenty of energy, resources, labor, but one thing was missing: money/credit.
Financial crises have their own inner dynamics, boom and bust. These develop independently of any external factors. We have had the greatest credit boom in history, and that will inevitably be followed by the greatest bust.
This boom and bust will have enormous consequences for energy availability, not the other way around.
It’s simply not true that if we had more oil, we could keep up the economic growth rates based on the biggest credit bubble in history. It makes no sense to presume that more oil would somehow automatically allow us to leverage our economy from 100-1 to 200-1.
Trivium
It’s time to shorten your comments. And we’ve seen enough references to the ultimate history for now.
I defined the The Law of Receding Horizons years ago when Nicole and I were still writing for the Oil Drum. The core of it is based on the fact that as soon as alternative energy sources, from shale to wind to biofuels, start to look profitable because oil prices rise, they no longer are, precisely because oil prices rise, and all alternative energy sources depend heavily on the use of oil in their production. It can be used in many other fields too: there are tons of things that look viable if and when not all costs are counted. Which they’re often not. The idea is loosely based on something Ken Deffeyes addressed with regards to shale in Wyoming, which has seen many instances of boom and bust through the decades. You can see the horizon but never reach it.
“Recently I was chastised by ilargi for publishing material and comments that are beneath the high standards of truth in The Automatic Earth web site. I believe he mistakenly thought I was attacking stoneleigh (nicole) in regard to a natural gas EROI published by her. I wish to state categorically that my critique was of the EROI methodology, not nicole. I consider her a studious and analytical person that wishes to present the data as objectively as possible within the current EROI methodology. Also, perhaps ilargi believes my severely critical attitude towards fossil fuels and nuclear, being that fossil fuels in particular is the dominant energy paradigm at this time, is “fringe wacko thinking” not “worthy” of TAE. I hope, with this post and others to follow, that he reconsiders his opinion and/or debates my posts on the merits and not on a blanket assumption laced with innuendo and veiled threats to censor me by banning me.”
No, you’re not listening at all.
The quality of your post is simply not good enough. As I said, you need to do some serious reading. And the length of your comments is very inconsiderate of other people who read here, no matter what the quality.
Making all sorts of presumptions about why I do what I do, and talking about innuendo and veiled threats where there are none is not helping. Why don’t you just stay away for a while? Take some time to do that reading I recommended. I strongly suggest everyone does that who wishes to enter my joint. Which is where we are.
I’m done with this for now. Don’t need an answer.
Agelbert,
I deleted your obviously far too lengthy comment from this thread. Left it on the other thread for now. I thought I had been clear before. Apparently not. Any additional comments like this will be deleted. This is a forum for everyone, and it’s not to be bogarted.
“But I have been asking this question for 5 years and NOBODY has even attempted to answer it. Please, Ashvin, Nicole, Illargi, someone, what the hell is the pathway? “
What question is that?
Don’t bother reading the whole article, it’s really awful, but the Zoomlion bit is illustrative; it’s part of my next China piece. Today and tomorrow is travel time, so it may take a few days.
Agelbert,
This post (as well as various comments I see from you) is of such a questionable level that I feel I need to apologize to our readership for it having been posted. You renewables claims are nonsensical, and it’s not as if you can claim innocence; laziness perhaps, but not innocence. This is TAE, where especially Nicole is an undisputed energy expert, who has dealt with all these things very extensively. So go read at least all she’s written, here, at our Blogger site and at the Oil Drum pre-2008. And then perhaps come back and write on the topic. I mean it. The way you do it now is useless and unworthy of this site.
ZuluBuddha,
That’s a remarkable tale, so much so I find myself wondering if it’s real; but then, how could one make this up?!
Would you mind if maybe I run it on the front page?
Please contact me at theautomaticearth • at • gmail • dot • com.
Well, Surly et al,
I think, in the light of this board and many others, it needs to read something like:
“It is hard to get a man to understand something he thinks he already understands”.
As long as, just to name an example, we see people here claiming that energy issues have caused the present financial crisis, we have a ways to go yet. And that’s just one of many examples I could name.
Already know the score my ass. That’s just self-delusion.
“There is a science to achieving Truth, a science that begins with self-knowledge – this science is called Philosophy.”
You can’t call philosophy a science and expect to be taken serious. You deeply insult real philosophy and real philosophers. The great philosopher Karl Popper would explain both issues if you cared to listen.
“The State is psychologically a manifestation of the violence of the family..”
Right, whatever. I blame my grandma and her utensils.
“Morality can be proven logically, rationally and secularly…”
Well, take your pick and color the pictures, but it certainly can’t be proven scientifically. Which of course is why you label philosophy a science; if you do that, everything goes.
“…and it provides us with universal rules for universally preferable human behavior “
Preferable behavior? Puhlease. Preferable to whom? You? As in: you’d prefer everyone to shut up and listen?
“If you want to discount what I say, fine, but we both know it will be out of fear, “
Now I’m starting to see a foot stuck in the doorway on an otherwise perfectly peaceful Sunday morning.
“This is the next level of the rabbit hole. I hope you will join us. “
No thanks, I don’t smoke.
