Professorlocknload
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“maybe just maybe the FED has so many tools and ways of manipulating currency that they can get us out of this mess”
Would these be the same tools that manipulated us into the mess? Will the Fed find “religion” and change it’s spots from those of central planning Corporatism to some form of egalitarian benevolence?
Unfortunately, the most Valuable thing of all has been lost here. Liberty.
As people are forced to line up at the public trough, like cattle in a feed lot, their choices diminish daily. Such is the Faustian Bargain of sacrificing liberty for security.
Again, sans pitchforks, absolute power will continue to corrupt, absolutely.
What was the “Value” of the Zimbabwe Stock Market through the years of massive devaluation there?
How has the “Value” of the Dollar held up along a trend line over the last 100 years of Fed stewardship?
Could the Financial Markets be the new ATM? The Fed’s factory outlet for liquidity? Can’t forget, many of those “Rich” market participants are Pension Funds and Annuity Holders, no?
Maybe what’s being foolishly engineered here is a grand trickle down experiment…that hasn’t really begun trickling yet?
Ben has warned us of what is to come, that he has a “printing press” and knows how to use it.
Soon, when the trickle becomes a Niagara Falls, we’ll see the mettle of the “Great Men” tested. And as long as there is a Central Bank issued Credit based Currency, there will be no deflation. That’s the stuff of Real Money, not IOU’s. (A Silver Dollar?)
My position is, we are at the construction/fabrication stages of the Crackup boom here. When the Fed loses it and can’t stop the avalanche it will have caused by the excessive creation, distribution and stacking of binary “Values” , upon being deposed by some Populist Pol, elected by hot consumers irate over $15 Ground Round, the long awaited deflation will take center stage, after the destruction of the present monetary regime.
At that point, after electronic entries achieve their intrinsic “Value” of around 14 cents a kilowatt hour and paper currency hit’s it’s tonnage value of a hundred bucks, (real) the bricks and mortar and resources of productivity will hopefully remain standing. Therein, “Value” will be found again. Though not priced in “What Was.”
https://www.zimbabwe-stock-exchange.com/top-10-by-market-capitalisation/
And absolute power has now corrupted, absolutely. The Fed is a purely political animal, anointed immunity from The Rule of Law, and will stop at nothing in it’s quest to dominate the World, one incremental step at a time.
It now controls the Means of Production through it’s successful, at least for the time being, substitution of credit for wealth, driving out most forms of honest money.
As the Fed is now the economy, QE must continue, but will most likely be renamed and classified, in the “interest” of National Security, as the rein tightens.
When it all enters an information dark age, one might guess the question will be, will the periphery be reduced to ashes and rubble again this time, or simply economic destitution? The answer might be based on whether the Fed uses it’s in house Pentagon, or just the Credit Creation machine this time around.
Meanwhile, look out for false flags.
Relax, none of these problems involve money. They are all denominated in bank “notes.” ie; Credit.
And Credit is worth whatever the producers of it decide. Solvency and insolvency are moot.
Kinda like, we are all working for the company and must shop at the company store, using company credit…only on a grand scale.
Things will remain this way as long as State command and control remains the order of the day.
Hell, think big…https://www.youtube.com/watch?v=so_4qX3nrkc
I like it. Need to come up with a little release mechanism to drop eggs on assorted .gov registered vehicles. And maybe some teabags filled with high sudsing detergent into the fountains at Amazon’s headquarters. Possibilities are endless.
“One can only imagine a neo-feudal end to this extraordinary experiment…”
Especially disconcerting is a huge Defense Contracting Industry sitting on excess capacity, large parts of which are located in financially distressed States and Cities. Detroit, Chicago and California come to mind, among others. Add masses of Military aged people who can’t find employment. The reasons war is generally the political “answer?”
Syria intervention failed, but the next attempt will be much better orchestrated.My, my. Looks like the Fed has a lot of Muni Bonds to purchase. Certainly, if they can “disappear” $4 trillion in MBS, $4.7 trillion more in Muni’s shouldn’t be a problem. And that’s a win-win on their part, they believe.
As they buy up all this toxic paper, monetizing along the way, they will meet a point of intersection between fewer bonds outstanding, and a massive devaluation of the currency, negating a large portion of the debt’s value, as it is locked into dollar face value.
Add a dollop of Interest Rate Manipulations and Ceilings to hide the Feds tracks, re definitions of CPI and voila. The grand Reset.
And of course, Moral Hazard and such, the biggest spendthrifts will get the bail outs, at the expense of the prudent. So any municipality with a surplus might want to look into borrowing as much as possible here. Double digit raises for all? Expense accounts all ’round? Even for the Judges?
California, Illinois, NY, Michigan are all too big to fail. The wealth will be transferred to them, what’s left of it.
Remember, the losses are all to be socialized. It’s the New Normal.
“But the U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost.” Ben Bernanke
How many electrons in a keyboard?
“Thus, as I have stressed already, prevention of deflation remains preferable to having to cure it. If we do fall into deflation, however, we can take comfort that the logic of the printing press example must assert itself, and sufficient injections of money will ultimately always reverse a deflation.” Ben Bernanke
Sufficient injections? No limit?
“A striking example from U.S. history is Franklin Roosevelt’s 40 percent devaluation of the dollar against gold in 1933-34, enforced by a program of gold purchases and domestic money creation. The devaluation and the rapid increase in money supply it permitted ended the U.S. deflation remarkably quickly. Indeed, consumer price inflation in the United States, year on year, went from -10.3 percent in 1932 to -5.1 percent in 1933 to 3.4 percent in 1934.17 The economy grew strongly, and by the way, 1934 was one of the best years of the century for the stock market.” Ben Bernanke
Deflation remarkably ended? And all it took was a 40% devaluation? A 300% devaluation might be even more remarkable!
https://www.federalreserve.gov/boarddocs/speeches/2002/20021121/
Still believe deflation is just around the bend?
Inflation first, then the Crack Up. Then deflation, after the Fed has imploded, along with it’s FRN’s. Cue Steve’s Confederate note link.
“and the benefit to the economy would be $17,000. That couldn’t fail to create jobs.”
And inflation. In a big way. All in a one time frenzy. And it would most likely be leveraged into car loans, and installment credit, creating another debt bubble. Guess the banks would get it back anyway.
This is ultimately what they will try. Hell, if $10,000 would be “beneficial,” why not $850 billion a month and $100,000 per household x 1.7?
Or is printed money not real wealth? Maybe all it would do is cause price spikes and negate it’s effectiveness, along with debasing the currency?
We’ll see how this sort of thing develops in Venezuela.
“Never pick a fight with people who buy ink by the barrel.” Mark Twain
However;
Could this be a symbolic move to rein in the blogsphere? A small step toward forcing registration, licensing and regulation of internet information outlets? Another attack on the First Amendment?
Most assuredly.
We can only hope the above statement by MT still holds today. And a whole lot of e-Ink is applied against this tactic.And, greenpa, yup, “effective intimidation.” 8k is the opener. These fines will most likely rise until only the “Preferred Providers” remain.
ps A little difficulty signing in, something ’bout an “Internal Server Error,” but got here on the second try. So, guess ya’ll gotta put up with me again.
Why does JP Morgan still have a license? Maybe ’cause a certain account is held by;
https://blog.timesunion.com/capitol/archives/187258/cuomos-blind-trust-worth-over-1-75m/
And, his old Chief of Staff is;
https://en.wikipedia.org/wiki/Benjamin_Lawsky
Two simple google queries. I’d delve deeper but would, judging the way Corporatism works in the world today, be further disgruntled with the results.
Man, now I can see why the Secretary of State said the internet makes it difficult to “govern.”
What’s in store? https://www.acting-man.com/?p=26928
…and when that tsunami of liquidity finally hit’s the streets, these articles will be about the masses being forced to eat dog food because that’s all their food stamps will afford. There will be shortages of everything when it happens, even labor, as the astute buy forward, cleaning out the shelves, and re-suppliers hire in a futile attempt to meet demand and keep supply chains open.
By the time the “inflation” word is mainstream, the Crack Up boom will be in full swing, destroying the currency. And that’s also when the above photo will be transposed onto the present day. Blue Chinese tarps replace white canvas, SUV’s substitute for ’29 Fords and Chryslers. Tar Paper will again come into vogue.
And the good that will be derived is “The long run” will have finally arrived and the Keynesian dream will be dead.
When? Could start tomorrow or in 5 years.
Cue the Fed. If it can keep the Ponzi alive with the purchase of a Trillion dollars of MBS and other like paper per year, it can certainly “afford” a Trillion dollars in Muni Bond “purchases.” (Buy it and Burn it is the reality)
It will be most interesting when all this comes down to bailing out California, and it’s plush high five, and six digit public pensions. That’s where I figure the buck stops.
CA is 13-14% of the nations GDP, and a whole lot of what’s for dinner across the land, and much wine with which to wash it down. Not to mention it’s massive Defense Contracting Industry. Definitely, at least in the minds of Financial Alchemists and Spendthrift Politicians, TOO big to fail?
Maybe California is on a “High Speed Rail” directly onto the Fed’s balance sheet, with some estimates of Unfunded Liabilities of $640 Billion? Might make Detroit seem trivial when the time comes, since it’s shortfall wouldn’t make the interest payments on that.
Meanwhile, in case I haven’t mentioned it here, a fun read from 1849, https://www.classicreader.com/book/2026/1/
And we know how that ended… eventually.
“For the last 30 years, the right word is “print”, not tax. “
And print it will be, though printing is just “Stealth Taxation.”
Must have been quite the high for the bureaucrats, spending every dime of income believing the pensionless producer would be forced to pony up in the end.
And now they have eaten the “golden egg” laying goose, and will be coming to take her furniture.
Atlas has Shrugged.
Ken,
Perhaps of interest. “Help GDP. Burn your house;”
Ilargi et al,
As facts/events change over time, and it’s been a while since a general overview of your, and Stonleighs outlook, might there be an update sometime here on any changes of mind you may have on the general scheme of things? Understandably, as time allows.
The glorious 70’s. I remember them well. Working 60 hour weeks, the spouse working 50, and still prices rose faster than we could keep up.
Wages lagged inflation all the way through the stag-flationary 70’s, but we were all poor together, so I guess the standard was set pretty low.
Add to insult, my tax bill was 45% of an income that was gone before I received it.
But, there are lies, damn lies and there are statistics. And if a statistic is massaged enough, often enough, it becomes accepted as truth. So, “statistically,” I guess we were in tall clover.
Now, experience tells me “poverty” just ain’t what it used to be.
So, how far will rents fall, to make land lording unprofitable? The “it’s different this time” collapse of rents will certainly be a first in my lifetime and that of my parents.
Or, as the worm turns on a 30 year dis-inflation cycle, what will it take to convince renters no one can save as fast as inflation robs their purchasing power, unless he is a nobel anointed member of academe, complete with six digit inflation adjusted salary and a pension to die for.
Granted, it all looks stable and calm now, but when the dollar typhoon is unleashed, a fixed rate mortgage, especially at these absurdly low rates, will once again be a safe haven.
The last place I want to be is in cash or equivalents when the grand reset takes place. My take on this house price uptick is, it is early realization of that age old phenom. House prices have had 5 years now to back up from an over shoot. Yellen is not an inflation hawk, she’s a Keynesian. The next print will devalue the buck at least 40%, and looking at food prices, it is well underway.
I remember the despair in the voices of renters in 1972 in South Silicon Valley, “How can we buy when prices go up faster than we can save?”
A home could be had for around $36k about then. $650K today? A Million and a quarter in 10 years?
Aside, I get it,,,Demolition,,,Nobel,,, Dine-O-Myte!
“Leaving the poor alone is not what’s seen as fair in today’s societies.”
Of course not. The producers of wealth will simply pass the tax on to the consumers.
As always, authority uses upper classes as tax collectors. Anyone remember all those folks rallying around Jimmy Carter’s “Windfall Profits Tax” on those evil Oil Producers, when prices skyrocketed due to shortages created by price controls and excess Fed printing?
They had no clue where that tax revenue would have originated. Even as they pumped “over priced” gas into their cars, they demanded higher taxes on the producers.
All moot, really. The old way is over, and it’s every man for himself now. Justice and fairness are no longer viable in a world where Moral Hazard has been let out of the bag. One must align oneself with .gov, or prepare for a rough ride alone.
And don’t let any of those bales of $100 bills falling from the sky flatten you, as you keep in mind the larger number of them you collect, the greater the tax take for “The Power.” Nice incentive on their part?
Ish,
Sounds like your government stands to make the most profit from all this. All that Vat tax and what do they produce for it? Mandatory Fracking.
I’ll never understand how folks can look to government for solutions to anything. The bigger they get, the greater the oppression.
Next up, carbon tax…or in other terms, the Financialization of the Climate!
To add; The dollar is credit. It is no longer backed by things real. Why would I want to hold a “Federal Reserve Note” Bearer Bond IOU in an inflationary, let alone deflationary crisis?
Why would the “promise to pay” factor be any different for a “credit dollar” than it would be on a defaulted bond which backs it? Promise to pay in what, pray tell?
A note is a note is a note.
“when price increases are solely based on oil shortages”
Beg to differ. Nominal price increases are based on currency devaluation at present. Again, a silver quarter still purchases a gallon of gas. Commodity for commodity.
Same silver quarter buys 18 fake quarters.
Debasement of the currency is the core cause of nominal oil price increases, not shortages.
Sure, too much funny money can cause shortages by falsely pricing things, but I don’t see that as the case quite yet. And as long as oil is openly traded, it will compensate. Not like in realms where it is “price controlled” which always creates bottle necks.
It’s coming though, when velocity turns on a dime with a mass rush out of the depreciating paper (as now seems to be taking place in cash flowing into Western US RE markets).
Central banks and their governments have no other choice but to “devalue” their obligations.
Unless one can show me a major nations currency destroyed by hyper deflation in history, short of it’s resultant inflationary “solution.”
Might be the “velocity” spoken of here is picking up just a tad, in the West at least 😉
https://thehousingbubbleblog.com/?p=7889
Don’t list a property here and get in the shower. It’ll be sold before you soap down!
“However it plays out it would appear that gold and silver will come into their own as the Frankenstein monster of fiat money finally dies.”
Yeah, GO, I would imagine a pre-65 quarter will most likely always buy a gallon of gas 😉
Matter of fact, in real terms (Ag), gas is cheap today. Guess the Fed can’t print oil, but it sure as hell can print it’s price, at least until no one will take anything for a gallon, except a silver quarter.
At that point, Ag will have survived another Central Bank and it’s government.
On the politics of it all, the Neo-Bolsheviks are probably in some planning sessions about now, on how to sweep Capital Hill in the event of a collapse of the Funny Buck.
Outta the frying pan and into the fire.
But, not hard to figure out how these survived. https://www.hostzone.com/TsarNicholasIIGoldCoins/
Eh, sorry, no. Capitalism self-destructs when growth runs out.
Corporatism and Finance Ponzi schemes self-destruct when growth runs out. Capitalism would adjust for limits to growth, if it was allowed to be practiced.
What the Fed is really [strike]saying[/strike] doing.
At a controlled burn for now, until the wind comes up…https://www.zerohedge.com/news/2013-07-25/whats-inflation
Don’t need calculus to figure out less groceries go in the basket and less fuel in the tank on a c-note these days.
Political math wonkery and economist bafflry aside, all J6P understands is ever rising costs, but he is locked down by phony .gov CPI illusions (read manipulations), unless he is in gumnut or a protected sector of it.
Could be, a combo package of devaluation and jubilee are in the works. For sure, the former goes without saying. The latter will be a bone thrown for political purposes. Atlas (the conventional saver) is just odd man out.
Seems the catbird seat here might be leveraged to the max or all-in invisible assets, or both. Maybe equally, to make the “hypothetical” balance sheet read zero?
As the .gov’s of the world crack down on rational behavior, it’s going to get interesting.
Ilargi, excellent run down on the mess our great men have made. Thanks!
Seems Central Planners profess to know more than all the markets and market players.
First there was TARP. QE is the second phase. 200,000 tons of $100 notes, in 3 wire bales, falling from the sky, accompanied by a $25,000 tax rebate, is the last. (Or something as absurd…new currency, devaluing the old at 2 to 1?)
Humm, and I remember when I was called “off Balance” for suggesting the Fed would buy MBS trash?
In between, expect manipulation of public perception, extraordinaire. At all costs, these Machiavellian Princes must keep natural Human Action at bay.
First of all, the very numbers the “authorities” are using as targets are phony. Mandating 2.5 % “inflation” (CPI?) using an index that is concocted and tweaked in house, is nuts.
Not to mention the maniacal suggestion that inflation (devaluation of the currency) is what the economy “needs.”
Then, targeting unemployment, in an environment where there is rapid decline in workforce participation, coupled with underemployment, is deceitful at best. Hell, just instruct Social Security to issue Disability grants to all who are not working, and unemployment falls like a rock.
Imagine using GDP as a target, then simply start a war and voila, target bulls eye. Forget the Broken Window Fallacy, it’s the missile and tank production used to achieve such goals that count. Besides, all the broken windows will be “theirs” “over there.”
Goal Seekers, all!
Maybe they should take over engineering the outcome of each game in the NFL, if they’re really that good at micro-management 😛
My only wish is that this bankster Machiavellian Art of War operation was more challenging than taking candy from a baby.
Triv,
As long as folks demand security in lieu of liberty, they will be managed.
dave,
I see the 10y as a foreign retail paper conduit to the safety of the dollar, thereby helping put a bid under it, short term. Besides, “Taper Terror” was a bit over done. “Shot across the bow” in Ilargi’s terms, but I think it was “Firing for Effect,” and Beardo didn’t like the echo.
But we are in uncharted waters, no doubt. And desperate Central Banks can do some crazy things.
I’ll most likely soon be hunkering down in local FDIC coverage and some cash. All else is in place. New avatar ‘splains the road I think we’re traveling.
GO,
I absolutely agree. Financialization is nothing short of a license to operate a casino. One must look at the portion of GDP represented by the Financial sector and ask, what does it really “produce?” Other than enhancement of it’s own empire, that is?
The latest absurdity? Financialize the Climate! We’ll see how THAT works out.
Sure, GDP is a poor measure, as it’s the same GDP which rises when an Air Force purchases a missile and destroys a factory with it, but what else is there to use as a marker? (Humm, financial instruments of mass destruction? Ha!)
Again, not to sound gold buggish, but what are those Wiemar Bearer Bonds worth today? What of Caesars Municipal Water Improvement Bonds? Or Joe Stalin’s War Bonds? Bank of Saigon…awe, hell, point made?
Where does it all lead? In a word, lift up the edge of the TARP over the Derivatives World and peek in! In VK’s expose, around a Quadrillion in these derivative “somethings” needed to be added to the bottom line of that, to turbocharge the impact.
But wait, “it” can’t happen here…we’re special, yes?
I’ve likely mentioned this here before, but during the fall of Saigon, gold coin bought a chopper ride out to an Aircraft Carrier. Piasters bought a bullet, to make room for another gold tender.
So, put chopper fare away there at the bottom of the pond, then play the games of chance as best as you can, with an eye on the exits and a hair trigger on the cash out button, maybe?
Might be this rings a bit sophomoric, but I HAVE been around the world once, and to a couple county fairs 😉
dave,
Don’t misunderstand, I’m not a “gold bug” in the sense it is an end all to investment philosophy. I don’t speculate with a core portfolio, a part of which is in gold related instruments. I don’t sell core PM’s. That will be a task I will hopefully leave to my heirs.
That said, since I am a net buyer, attention to price trends is necessary to maintaining a low dollar cost average. One of the reasons I backed up the truck in 2001, and filled my IRA. At that time, I had spent some time at a significant gold mining region and deduced a production cost of around $350-$400, so had to consider the “educated” portion of that decision overweight to the speculative.
On to devaluation, I don’t invest in inflation hedges with hyper inflation in mind. I do so with an eye on slow erosion of purchasing power over time. Assemble any basket of necessary goods, and over time, project the trend in purchasing power of a dollar, and I believe you will see my point.
Because my dead reckoned average production cost analysis is in the range I quoted earlier in another post here, I use that as a guideline, or point of possible entry, if you will.
Regarding treasuries, you lost me on a rising dollar and a falling 10 year price. My take on that trade is again, as safe haven aspect. Seems to me at this point, the 10 year is target one for a dollar investor, especially in a low inflation, bordering on deflation crowd mentality, but I welcome your input on that. Certainly, a 2.60 yield is going to fall if short rates go under zirp?
dave,
ps. Not to mention all currencies being devalued simultaneously, or that chart might indicate a general down trend.
I’ll admit as well, I just completed a minor round trip out of the ten year at first whiff of taper talk, and back in at economic slowdown rumors. 2.00? Gotta stay with Stoneleigh’s deflation theme, no?
Yeah, dave,
I probably should have used a term like declining faith in currencies in general, by the proles. I am amazed at the people I meet these days on the streets who are wealth preservation savvy.
My statement was more directed towards stickiness in the gold price for these reasons, than it was at FX indices influenced by specializing institutions and central banks.
Many distortions here, no doubt. The PM related ETF industry and other similar factors might be the counter force, who really knows.
Very interesting article and arguments. All well presented, yet all over the board.
Religion of science vs creationism vs futuristic speculative projection and a dash of who’s fault it all is…all in search of a hopeful glimpse of a random and unknowable future. (Hopefully the argument isn’t ‘won’ by any particular faction, or tyranny will reign.)
Man just isn’t a good planner. He simply puts one foot in front of the other, one day at a time, tripping over, and stepping around obstacles, on, as Kristofferson put it in song “His Wandering Way Back Home.” Some days the hunter wins, others the tiger.
In the end, the only solution will be exerted by market force, ie; natural laws of physics and nature. Sooner, if allowed to function unimpaired, much later and more severely administered, if encumbered by political force.
Human action will accommodate, as it has no other choice.
Until then, guess I’ll live for today and accept it all for what it is.
I would, however, suggest getting somewhere where minimal heat and AC is required, a long growing season exists, close to marine fisheries, lots of water, woods, and lightly to moderately populated. Might make the transition a bit more tolerable in case the worst of the doom and gloom materializes. For sure, no one is coming to save us, just as it should be.
“Been through some terrible things in my life, some of which actually happened.” Mark Twain
Dave,
2 trillion in reserves would not be an effective limit on lending either.
Ain’t THAT the truth! Not sure a Keynesian threatened by the “D” word knows any limits.
On Keens piece, still trying to wrap my mind around that one.
Nassim,
Housing fixation= American Dream and Castles. Also, one of three historical components of “Great Estate” building.
My take on India and Gold is, years of Colonial abuse ingrained a sense of self reliance and distrust of authority.
China, similar, especially following “The Long March” through poverty and oppression. Some of those same minded power brokers are still at the helm there. Insurance seems warranted.
The real chills come when you realize that their hidden losses are far greater than any of these numbers.
Referring to the Derivatives overhang combined with the Feds balance sheet, I presume?
Golden Oxen,
I’m with you. Official CPI and John Williams stats vary lots.
One of my measures of inflation has used silver and what it will buy in pre 65 face value, on average. A quarter still buys a gallon of gas, and around the same quantity of food staples.Though I can also see gold a bit over shot here. Most likely caused by the shunning of the buck over seas, and the economic uncertainty factor.
My back of the Mc Donalds wrapper still has gold production cost around mean $850-$950 in an environment of average demand.
That said, in the end, governments debauch currency. It’s a given…and it’s what PM’s are suited for. A bridge to what’s next.
Great article! I’ll be sinking my teeth further into that one tomorrow over a double shot of espresso. Keen is a credible source.
That comment on 2 trillion in reserves manifesting into 20 trillion in potential credit/loans sent chills. What we could have here is one of the most tightly compressed monetary springs in all of history.
Would the hoarding of these reserves change course if the Fed put rates paid on them into negative territory? Seems that could put banks falling over each other to beat each other to all the origination fees such event might reap?
That said, there is another factor putting pressure on gold, which is ETF selling to meet cash redemptions. Even gold has been financialized beyond its physical quantities. Seems this exponent is only going to distort further…until equilibrium is achieved. Then what? Can’t print physical, no?
@ Golden Oxen,
Ya gotta admit, due to it’s density, gold does make a better door stop than paper 😉
