Professorlocknload
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“How did we ever get here?”
Moral Hazard?
” as long as the Fed feeds them for free”…
…there will be no deflation.
“American crude now sells at a discount because of a massive surge in production in Texas and North Dakota.”
Ah! So oil becomes non-fungible? Now, if gold production in the US exceeds domestic demand, and an export ban is put in place, will it’s price be lower at the exchanges here than in international markets? Could the dollar become non-fungible as well, through a ban on it’s export?
Trade wars, and resultant regulatory mispricing of resources, will certainly have bad consequences. But they would be good for the defense industry because when goods stop crossing borders, bullets do. And that’s where this ends.
Weak return on German renewables? Maybe, like with my local government protected monopoly power supplier, it’s because they offer a generous 2 cents a KWH on power I might generate, while they charge me 14 cents for power they supply? Must be because I’m non union or don’t own a politician or something.
Green Capitalism? You mean Green Corporatism? Any system that needs to be subsidized is not otherwise viable. Building it is a waste of resources. Only the Government/Corporate partnership can excuse such boondoggles. A true* Capitalist knows better than to throw scarce Capital down a rat hole.
As with most government sponsored systems,( Fukushima?) it’s the end result that tells the tale. Like the Nukes, and other back end loaded authoritarian machinations all ’round the globe, who pays to decommission and scrap the warn out wind parks, ethanol plants and rapidly deteriorating Photovoltaic panels littering the landscape , when the subsidy is no longer possible?
Here’s a proposal. Pull all subsidy including tax breaks, from all energy production sectors. Let the price float to meet what’s left of the market. Can we spell conservation?
But then, .gov’s solution to economic dilemma is to break all the windows and burn off any surplus fuel in a nice global war, so, whatever.
* Endangered species
QE is played out. The Lady behind the curtain will instead Shock and Awe. I expect Keynes on steroids just ahead.
Possibilities?
Some sort of Executive Ordered New Deal to pad the coffers of campaign bundlers. Their justification will turn to “In the long run we’re all dead,” so it’s going to be wild.
Or maybe some sort of MyRA scheme to deposit government paper directly into the accounts of special interest voting groups, in the name of the “little people,” of course.
And the Fed does have plenty of MBS and Treasury paper to sell these days, past QE and all. Exit strategy? Dump it on the Proles?
The apparatchiks in this country have for years been enamored with the “Government Controlled Capitalism” (misnomer, really fascism) experiment in China. I can’t help but wonder if they don’t envision themselves in the shoes of the Communist Party there. Never mind that it is now teetering on chaos, “they just didn’t do it right.”
Meanwhile, the Fed continues to print too much money chasing too few drilling rigs and seats in fast food joints.
Stock up on popcorn before it all becomes E-85.
“I’d be a sustainable-living northern Ontario bushman by now!”
Variable,
my view is there will be sustainable living in small to moderate sized cities as well. Hard for bushmen to rely on community, and resources will be brought in from ‘out there’ back to the ‘core.’ Including the “bushman’s.”I’ve prepared along those lines.
“What do you get when you combine Drones, Hi-definition digital cameras, and facial recognition databases?”
There is always risk in standing on Principal. Most likely, the pain threshold is not yet great enough in this hemisphere to push folks into accepting it.
Another consideration is what the devil we don’t know might resemble, in comparison to the one we do.
Still, I sense progression in all this. The status quo isn’t likely to reestablish anytime soon. The wheels are in motion. Interesting times ahead.
@variable, what you suggest requires truth. Problem is;
“Statists and Politicians, unto whom Ragione di Stato, is the first Considerable, as though it were their business to deceive the people, as a Maxim, do hold, that truth is to be concealed from them; unto whom although they reveal the visible design, yet do they commonly conceal the capital intention.” Thomas Browne
Could it be we are running out of other peoples money? Is Atlas possibly Shrugging?
Oh, well, we don’t need no stinkin’ savings, the gumnut will take care of us. Simply hand over your land and resources in exchange for security. All will be well. There will be free iShit and subprime car loans for all. We can jump in the 72 month financed SUV and text on the way to the circus, for free tickets and big mac’s.
And maybe those super productive egalitarian .gov employees, politicians and bankers we pay, including their pensions, to the extent we can’t save for our own futures, will be kind enough to share their largess with us some day?
Fat chance.
As in the rest of nature, when the life form is too old or lame to hunt, the fittest will survive. The same nature that bats last. Act on it….Or “hope” for change, it’s your choice.
I wouldn’t expect time to stop and wait for me to catch up, though.
One potential playbook, from 1849,,,,may we at least come back to haunt them, until the Bolsheviks do? https://www.classicreader.com/book/2026/1/
Dang, it’s a toss up. Should I buy that farmstead in Oregon and fight the elements for subsistence, or simply move to Utah, declare myself homeless and get a free house?
“A sound banker, alas, is not one who foresees danger and avoids it, but one who, when he is ruined, is ruined in a conventional and orthodox way along with his fellows, so that no one can really blame him.”
And isn’t it sad this hasn’t come to pass? The bankers themselves being the very source of the creation of the credit based currency. All guaranteed by their purchase and ownership of governments.
Only “fire risk” for cash I see here is devaluation, as I cook this 15% more costly than last year ham, with this more expensive Natural Gas.
Seems all the things I need are going up in price, while the things I don’t need are getting cheaper.
I can agree, though, that pre ’65 coins might meet “dual” fire loss prevention needs going forward.
And this, “When there is deflation, debt becomes a much more serious problem,”
Ah, yes! And what is it that makes Centrally Planned economies go ’round, as well as grants monopoly power to the planners?
Oh, and this one, ” Europe has to live with the fact that we’re struggling to find the right path.”
Right on, there, Senior Planner, you certainly must know more than all the worlds market players about the “right path.” How else could your ilk have created such chaos as we are experiencing today?
Green Peace? Alternative Fuels. Sure, OK, I just got a bid on a grid tie solar system. Seems the Quasi Government local utility will see clear to buy my excess power for 2 cents a kilowatt hour. In return, they will ‘only’ charge me 14 cents per Kwh for what I use nights and with heavy load appliances like dryers and AC’s.
Damn, I could have the 15 year productive life junk on my roof paid off in 30 years or so. Then I can try and figure out how to dispose of the heavy metal toxic waste, along with all those “green” mercury laden cfl bulbs I converted to a few years back.
Clean? Dirty?
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.
Stagflation, leading to a currency crisis.
That’s where this ends. Skip deflation. It won’t be seen until the present dollar is abandoned, and either real money again takes it’s place, or Authoritarian rule is established, in which case money won’t much matter to the Proles.
Why would the paper of S&P 500 companies be worth “something,” and government IOU’s become worth less? Well, some of the former actually represents capital production, the latter only capital consumption and redistribution.
But then, in the end, it is all paper, or bits of electrons harnessed and directed in one form of manipulation or another.
On employment, sans government safety nets, there would be a much needed deflationary reset sooner. With these unnatural programs, only further economic distortions will result, the reset taking place later, and with the total destruction of the currency.
An old school sailor once told me, fewer are lost overboard on a sailboat that has no lifelines.
I think we are going to be hearing a lot of “But the Government Promised” in future.
Like when the Kremlin fell, there they all were, sitting on the curb, hands out, with not a clue how to take care of themselves.
Accordingly, work for (depend on) the State, or work for Yourself. It’s getting time to choose.
I’ll try and stay with the debate, but hard to do with outdoor temperatures in the 80’s here this week.
The only thing I see at this point that can help avert this disaster from it’s ultimate destructive end game, is a re-backing of the currency with something real, and an admission the debt must be allowed to clear by natural process, default.
Since as many have looked at the inside of the vaults at Ft. Knox as have looked into the Feds inner workings, I’m not banking on that kind of solution.
There is only one other way that will prolong the Status Quo long enough to allow it’s maintainers to stay in charge, and to set up off shore havens. Print, by any name it’s assigned, PRINT!
Ilargi,
Disinflation is enough to drive Central Bankers to panic. We have most definitely experienced that these last few years.
Indications they will do the monetization dirty? From the get go, TARP, Twist, QE 1,2,3,,,that we know about. Unless you have had a peek at the Feds balance sheet, what’s in there we don’t know about? And the big question, “What more are they willing to put onto that secrete ledger.” Junk car loans? Mastercard balances? Municipal debt? The sky is the limit!
It’s not recommended one waits bated breath, for the Central Bankers of the world to step forward and announce capitulation, close up shop and go home. It’s just not what they do. It is my book here that they have gone too far over the falls now to back pedal.
Raleigh,
couldn’t agree more. Deflation is a natural process of Free Markets, much along the lines of Natural Selection. It creates real prosperity, increasing purchasing power and wealth. I have yet to find a nation destroyed by it.
However, the nemesis of Free Association is, of course, Authoritarian Control. Therein, is the problem. Central Planning always ends in this sort of thing because it distorts natural process.
They never learn, those who grant absolute consent to authority.
On Velocity. Where does Velocity go from all time record lows? Especially if massive reserves begin pouring into a system suddenly sparked by “Animal Spirits?”
Helped along by pent up demand for dilapidated plant, equipment and rolling stock, a “New Deal” or three, along with bank’s change of heart from hoarding to being afraid of missing the boat?
How fast could the rate of change in Velocity move to the inverse of the rapid fall on the chart above, when the creators of the currency, and most all credit, pull out all the stops?
Reminds of a sign an old friend put on his ranch gate. “My dogs can make it to this gate in 20 seconds. Can you?”
And who knows what will trigger the inevitable perception that the train might soon leave the station?
Feel lucky at timing?
Is “Luck” a sound investment philosophy?
This is going to be a very expensive tact if the timing of the cycle is miss read, and we have already passed the Deflation phase and are heading directly into the Crackup Boom.
I mean, the very headline, as cocksure as it sounds, might stampede the more vulnerable into doing some rash things with their scarce resources, maybe?
Folks, I don’t mean to sound in defiance of the meme here, but it is not wise to jump to conclusions based on punditry, mine included.
But, could it be the “D” scare has already been exercised? The Fed is shaking in it’s boots? It has, so far been pouring money into the bucket faster than it is running out? If shocked enough, it will fill the well to the point money is running back up through the holes in the bucket, and it floats away on a green tide?
Lot of questions here? ??
Meanwhile, I’ll wait for that new car to deflate to under $12k and the price of a cart of groceries to fall from $300 to $100. And a movie with popcorn to fall back under a buck, six bits again, before I congratulate such a confident call here.
Y’all do what you will, I’m hedged for several possibilities, and will adjust strategy as the cards fall.
Perhaps of interest?
Disclosure, I still own Real Estate, but would NEVER buy a property to live in, that wouldn’t rent to cover it’s costs plus a return equal to the Corporate Bond rate.
That way, if times got gnarly, I could rent it out and go live in the woods for a while.
Best of Luck.
The Fed really can’t exit this thing gracefully.
Control the official short rates as they might try, well, what is the price of shadow money in China about now? (One of the reasons I can like TAE’s partial (20%?) cash/equivalent holding strategy is, I might be persuaded to loan some at multiple digits farther down the line, with the right collateral) If it doesn’t work out that way, it’s not hard to trade into tangibles.
The reckoning is going to be in the spread. Short of Tyrannical Executive Order, that Tug-of-War rope between the Fed and the rest of what’s left of the Economy can only stretch so far before it breaks.
As it stands, the Fed’s mandate here seems to be to print whatever Wall Street, and it’s Congress, spends, plus interest. When this all fails, and Congress points blame at the Fed, to save it’s own ass, the paradigm will shift.
I’m still confidant my Morgan Dollar will buy me dinner or 3+ gallons of gas when this is all over. As usual.
Yeah, pipefit, I hear ya. I also wouldn’t rule out the Military “Solution.” That’s usually where these things end.
Faber said it the other day. Something like,’The Fed, Treasury and Government are one in the same.’
And I add, they also have an in house Pentagon.I should have added, as well; in the Fed’s eyes, deflation, once started can’t be stopped until universal default is complete. But since the currency involved is theirs, they believe they can control inflation through interest rate and special market operations, and other forms of voodoo.
But it, too, can develop a life of it’s own, once confidence in it’s creators fails.
Watch COLA Reform for clues.
First shot across the bow is the canceling of said COLA’s for retired military.
Debasement becomes less “efficient” if protections are in place to help the average Prole.
So, no we can’t purchase our way out of debt, but we can surely inflate our way out,,,for a spell, anyway.
With the “value” of the debt itself denominated in credit instruments, ie; “Federal Reserve Notes,” rather than in money, what other choice does the issuer of said “credit notes” have, but to devalue?
Re-valuation (deflation) of these “promises to pay” (in what, wampum?) at this point would result in the implosion of the entire Worlds financial systems in one big irreversible Bang.
Devaluation, on the other hand, kicks it all down the road a little bit farther, buying time, until it all dies with a whimper.
Maybe that’s why GMO sees it all going down like this, in “Real” terms, not nominal,,,over a longer time span?
https://globaleconomicanalysis.blogspot.com/2014/01/bubble-valuation-blues-gmo-7-year.html
I’m with Mish on this. Periods of high inflation and minimal deflation (or, more like dis-inflation) extending out years, or even decades. Slow, controlled burning of the excesses, until their dollar is no longer accepted.
No free lunch? Who coulda node?
“But, for everything else, there’s mastercard”,,,
,,, I used to think to myself, when my entire crew would pile into their $30k 10 mpg trucks everyday at lunch time and drive bat out of hell 8 miles to a fast food, finishing up the last of the greasy french fries as they pulled onto the job just in time to go back to work. Humm, I used to kind of enjoy the old days sitting around talking with the guys over lunch on a lumber stack.
Remembering the days when we all brown bagged lunch every day, thought it a real treat to eat out once a month, knocked down multiple errands in one efficient loop with the single 12 year old family Jitney and patched up the old blue jeans to get another couple months out of them. Boots too, when we could find a good saddle maker or cobbler.
Sharpened our own hand saws, rebuilt the power saws, repaired the old ‘carro’ ourselves,,,’cause we had no choice.
We closed off rooms to save power, switched off lights when we left one, used rabbit ears on the 15 year old teevee to watch a movie once a week or so, squeezing in a Gunsmoke here and there, filling in the time with conversation and reading and sitting on the front porch shooting the breeze with the neighbors. (Still do when one of ’em ventures out of the hermetically sealed box to talk)
Damn, we even mowed our own lawns, sometimes with a push mower when the money was short of a power mower repair. Washed our own windows too. After work, some of us headed for the “side job” to earn enough extra to break even. Or pay down that 12% interest mortgage.
And for recreation, a walk down to the park with a loaf of french bread, some mortadella, cheese and a jug of cheap gallo with a couple water glasses. Or head down to the docks and con a fishing boat crew out of a crab, enticing them with a dozen homemade oatmeal cookies.
Guess it’s all relative. Some would think of the above as pleasures, others purgatory, I guess.
Might be some withdrawal symptoms on the horizon, or even blunt trauma, maybe?
Decoupling of energy from wealth? How about the decoupling of Currency from wealth? That’s what has happened here. I posted the following earlier, but feel the need to post here as well.
On the unknowns regarding quickening or slowing of economic activity, (not deflation) to relate to that factor in Ilargi’s article here,,,
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A big wild card in the basis for all the latest prognostications is, in the past, deflations took place because real money was involved. Money backed by something of value.This time around, the dollar is not money, but is the product and property of it’s handler, the government. Unlike real money, it can be revalued, devalued at whim. Impossible in past episodes, short of confiscating the very backer of it as in 1933.
Since there is nothing to confiscate behind the Feds “Bitcurrency” there is nothing with which to price it other than the quantity at which it is being created, or the quantity that is being absorbed by Fed actions.
Sure, some things might drop in price while the necessities might rise, but over all the result will be guided by the owner of the currency to fluctuate between Inflation and disinflation, not deflation.
Deflation is the stuff of Honest Money, which has been driven out of circulation now by dishonest debt currency.
In short, the Buck has the backing of the “Full Faith and CREDIT of the Federal Reserve,” and the Federal Reserve is backed by the “Full Faith and Credit” of the Pentagon.
Used to be, the government had no money, it belonged to the people and was intrusted to the government to do their bidding. Now, the people have no money, it belongs to the government, and they “allow” us to use it.
A big wild card in the basis for all the latest prognostications is, in the past, deflations took place because real money was involved. Money backed by something of value.
This time around, the dollar is not money, but is the product and property of it’s handler, the government. Unlike real money, it can be revalued, devalued at whim. Impossible in past episodes, short of confiscating the very backer of it as in 1933.
Since there is nothing to confiscate behind the Feds “Bitcurrency” there is nothing with which to price it other than the quantity at which it is being created, or the quantity that is being absorbed by Fed actions.
Sure, some things might drop in price while the necessities might rise, but over all the result will be guided by the owner of the currency to fluctuate between Inflation and disinflation, not deflation.
Deflation is the stuff of Honest Money, which has been driven out of circulation now by dishonest debt currency.
In short, the Greenie has the backing of the “Full Faith and CREDIT of the Federal Reserve,” and the Federal Reserve is backed by the Full Faith and Credit” of the Pentagon.
Used to be, the government had no money, it belonged to the people and was intrusted to the government to do their bidding. Now, the people have no money, it belongs to the government, and they “allow” us to use it.
Now this is a very thought provoking article!
Not so much on the speed at which transition takes place, but a bit of elucidation into forms things may take as they evolve.From the strain of the feeling of having to conform to ever more baffling complexity, to the natural relief of simplicity. And maybe slowing the passing of time just a tad, as bonus.
Been working on creating a new reality in this crisis. Articles like this add insight.
@Cory,
Please excuse my butting in, however, no one…NO ONE! knows what the future holds. It may sound cold, but, Hedge Accordingly.No one is coming to save us. We must rely on ourselves.
It’s always been about influence and power. Everyone, this site included, has something to sell. Human nature, no? The art of finding ways to get over on others, or at least get by at others expense. The politics of power, envy and greed.
Even at local levels, pecking orders are soon established and the group falls into line behind their Alpha Dogs. I sometimes think more than half the people demand oppression, or at least regimentation.
Consent gives them comfort. Cave dwellers seem to prefer close walls. Too much “space” leaves them feeling vulnerable.
Man is a pack animal. Dinner with two wolves and a sheep?
Using the opening image as a guide, might be a few tobacco plants could be in order, out behind the barn.
Interesting scenario. Rising interest rates concurrent with currency appreciation. And as everything is falling in price, what is the incentive to paying high rates of interest to purchase goods now that will be lower in price in future? I would think credit would be shunned is such case, reducing it’s carrying costs.
I can see the “staying liquid” theme because when the money creation storm hits, cash can be disposed of fast. But in a blanket devaluation, one must be light on his feet to move rapidly out of the “devalued” medium.
Venezuela’s recent 1000 for 1 stock market split comes to mind.
Could it be Dr. Doom has better sense than to fight the Fed?
Maybe his strategy is to live to fight another day?
Certainly all the permabear stopped clocks will be right again for their usual brief moments in the grand timeline scheme of things, but won’t this just hasten the next reset? Beside, to who’s advantage are drawn out deflationary depressions? Wouldn’t we think the general psychology would lean to digging out of the negative and moving toward the positive?
With durations that can’t go any shorter, maybe it’s time to test the waters again? Capital preservation (cash/securities) has been a “lose less” tactic for the faint at heart, but pales next to the gains made in equity prices the nattering nabobs insisted would be at 666 S&P by now. Not to mention RE gains in over sold markets. Numbers which simply penciled out to excellent ROI’s at the bottom.
Might be the important distinction in surviving these things is separating the what “is” from the way we think it “should” be.
To summarize, bet or fold, but you’re going nowhere trying to hold up the game, because the cards are already dealt.
Ted, if trading countries don’t employ the Planners paper, with what will they trade? The Fed knows this, so is exporting it’s devaluation.
The only thing holding it together (the dollar) at this point is the example set in Libya, Egypt, Syria, Afghanistan, Iraq etc. Trade…or else!
“It will eventually, but for now the PBoC looks like a tool for the government, not the banks.”
Like the Fed, the top dog in the PBoC is appointed by the top dogs in political power. It’s just that the image of the Fed is marketed as “independent,” in order to maintain plausible deny-ability on the part of pols. As you said. it keeps things behind curtains, so the buck can stop somewhere in the twilight zone when things go awry.
Surely, in China the top dogs have their fingers in the banking pie, as well.
“The men at very top may have less control over the economy than they think and/or desire, but they sure still control the army, and may well feel they have the right to use that army to defend their positions.”
The common denominator the world over. The MIC. It takes banks to run tanks, and tanks to secure banks. That’s why economic dislocations end in wars. As a means of redistributing real resources after the phoney ones are exposed?
“Deflation can happen very quickly as confidence in debt instruments is lost, and therefore asset values can fall sharply as well.”
And inflation can happen very quickly as confidence in the premiere debt instrument, the dollar, is lost.
“History is cited throughout this article but ‘Cenrtal Banks’ have always sacrificed the currency to keep ponzi going? Why would they not today?”
And to add, there is a difference between then (The Great Depression)) and now. In the GD, the dollar was money, backed by PM’s and Semi PM’s, against which it could be devalued. Today the dollar itself is nothing but credit. The Fed is/will continue to purchase debt with debt (dollars) until their FRN notes are rejected. How will a rejection of a currency be deflationary?
There isn’t much precedent in history relating to a completely unbacked centrally controlled credit currency, sans Wiemar, Zimbabwe Venezuela, Argentina et al.
Also, where is “smart money” selling anything but dollars? Seems to me, a lot of players are trading Fiat for Real Estate (including farm land), Equities, Commodities and other real things, not the other way around. Are the nominal appreciations in these entities all created by “dumb money?”
If this is all a matter of stoking velocity, is it not foolish to think the owner and creator of Fantasy Promissory Notes doesn’t possess the tools to move decimal points as far to the right as it wishes? As it always has? Or is a cup of coffee still a nickel in your city?
And to think I remember all the “Deflationary Depression” talk of the 70’s, when a house cost $10k and gas was 40 cents a gallon. Sell, sell, sell was the mantra. Those who did were taken to the cleaners.
Not saying a Deflation isn’t in the cards, just that it won’t come until the absolute collapse of the currency, in a vain attempt to save ass. (Unless one can show me a Nation State destroyed by Hyper Deflation?)
Deflation would also mean the loss of control of TPTB. We must ask ourselves, do these power brokers really want to just step back and let it all go? If so, why are they doing this?… https://www.amazon.com/Currency-Wars-Making-Global-Crisis/dp/1591845564
Can’t imagine the tonnage of new “Stamp Scrip” dropped from aircraft onto Cities and Farms when the slightest whiff of deflation is in the air. Free C-Notes for all.
https://cla.calpoly.edu/~lcall/50_million_marks.jpg
