skipbreakfast
Forum Replies Created
-
Posts
-
Viscount St. Albans post=4997 wrote: @ skipbreakfast
I raised this topic in large part because I agree with the general thrust of the TAE deflation argument. […]
All that said, I was surprised to discover the actual rate of increase in my living expenses when I actually did the numbers. I expected that the growth in annual expenditure (cost of living) would turn out to be less than CPI — given that I agree with the TAE deflation theme, that was what I expected.
Then you must forgive me for going on my lengthy argument against inflation. Because I actually totally 100% agree with you that it’s interesting to question why some living costs are increasing in a deflation…except that it’s nearly impossible to avoid people reading into such a conversation that we must be in an inflation. Because this is what most people think:
“Anyone who thinks that inflation doesn’t exist is a complete idiot.”
That from a post from Sovereign Man via Zero Hedge: https://www.zerohedge.com/news/guest-post-some-clear-thinking-debt
Of course, Sovereign Man then goes on to warn of hyperinflation because of money printing, and inexplicably because of “capital controls, wage and price controls, pension confiscation, and selective default”. Uh, all of those are seriously DEFLATIONARY conditions (other than the money printing of course). How do you get inflation with major capital controls?! Capital controls IMPEDE our spending, which is pretty much a guarantee of deflation.
Anyhow, glad you’re on the same page, Viscount.
Of course, some of my living expenses are going way up in New Zealand too. But I’m not surprised. I’m not even going to consider the effects of major droughts–the effects on prices haven’t yet hit. Instead, I’d attribute such cost increases to massive, speculative, credit-backed bets on food commodities. We’ve clearly hit some bubble territory in food commodities.
Some argue that QE is expanding the money supply, and that it is in turn responsible for food price inflation. But there is a lot of evidence that the QE is only plugging the holes of a deflating (or illiquid) money supply. And the speculative credit has chosen some commodities to inflate, while abandoning others in the vacuum left behind by the real estate and tech stock implosions. I expect some food prices to fall as the credit backing those speculative bets evaporates. Let’s remember that there is still a lot of credit money chasing returns out there. Credit supply will continue to be eroded at a faster clip, and that will make it hard for any commodity, no matter what the stuff is made of, to continue to go higher in price. Hey, oil is pretty imperative to our lives, and yet oil has dropped significantly from the highs.
Starving populations can increase food costs, because that is higher demand. But it’s not like the population of Earth suddenly woke up and realized it was starving last year! Obviously if it were totally connected with supply and demand, prices would have been going up in lockstep with population. Instead, population has expanded steadily, and food prices have spiked only recently.
Finally, I’ll say in regard to other “costs of living” like taxes–I fully expect these to INCREASE as governments get more desperate under deflationary pressures. In a deflation, there is LESS money to go around, but the government wants to keep the gig going. They have no choice, therefore, but to try to raise rates. Property taxes will rise. Water rates will rise. Eventually no one can pay them. They fall because the whole system collapses in a deflation. In the meantime, I’d be afraid to own much property if only because the property taxes will skyrocket, to say nothing of the price drop in the asset itself.
Ah, that distinction is totally reasonable to me: the rise/fall of your personal cost of living versus monetary inflation/deflation. But it did sound like you were critiquing the definition of inflation/deflation which underlies TAE’s analysis of finance and economics.
I think it’s still important to continually reflect upon the TAE perspective on inflation/deflation. Because the rise in basic costs of living can be a distraction from the much bigger problems we’re about to face. Yes, the problems heading our way are bigger (for most of us in the developed world) than whether tomatoes or toothpaste went up in price this year.
I don’t want to dismiss the impact of rising grocery prices on people’s lives, which especially impacts the poor. When you’re starving, no other issue is more pressing. Nevertheless, a lot of people cite rising grocery costs as proof of monetary inflation (i.e., expanding money supply) with the implication that we are heading towards an inflationary collapse. This is a red-herring. And it’s a dangerous one. Because it tricks us into making the WRONG preparations for what is coming–and what is coming is a deflationary collapse.
For the poor, rising food prices (triggered by many things, like drought, and not necessarily money supply) devastate their lives. It’s unsustainable and leads to riots and malnutrition and worse. However, for anyone who earns or has amassed enough money to pay for food with any money left over, the rising grocery costs factor less and less into your financial equation. For example, tomatoes may rise in price costing you another $100 per year. But if you’re also shopping for a house, the cost of that house is dropping in most places much more than $100 per year. Similarly, prices of things like cars, travel, computers, clothing and services like plumbers and dentists are dropping faster. And these price drops are like dominoes falling throughout our society, as they trigger job losses, business failures, abandonment of infrastructural improvements–basically society breaks down if it goes broke, and when business fails and there are no tax revenues to collect from the people, we’re broke.
Most importantly, determining whether we are in a true deflation or inflation has profound implications for how we prepare our finances for the worst that is yet to come. Because if we are in a deflation, any wealth you have above-and-beyond your grocery money needs to be preserved in a liquid form (cash) under your control. But if you succumb to the argument that grocery price-increases are proof-positive of some sort of hyperinflation, then you will seriously misjudge the real imminent threat and surely lose most if not all of your wealth. Preparing for inflation is very different than preparing for deflation.
This is the main reason I bristle at the debates about rising food costs, especially in a forum about deflation (because there are many more blogs about inflation you can participate in online). Grocery costs are a very immediate and visceral aspect in our lives but it’s one that actually distracts us from the truth–that assets are going down in price, and you won’t have any money at all if you don’t properly judge the inflationary/deflationary outcome. Eventually, many food prices will drop as no one will have the money to buy them at any price. As TAE has mentioned many times, however, such necessities drop the least and the slowest since it is the only thing we cannot live without. Eventually, however, lower food prices won’t matter to a lot of people who didn’t prepare, because they will have no money at all, especially if they bought equities or investment properties or other speculative assets that are supposed to protect you in an inflation.
Viscount St. Albans post=4962 wrote: TAE doesn’t include living expenses in its definition of inflation/deflation.
Hey wait a second. I shouldn’t take too many liberties trying to speak for TAE, but from everything I’ve learned from Ilargi’s and Stoneleigh’s essays and talks, they never include ANY “expenses” in their definition of inflation/deflation. It simply does not have anything to do with their DEFINITION (which has everything more to do with the growth/reduction of money supply). Rather, prices of things are an EFFECT of inflation/deflation.
Some things can rise in price in a deflation, even while the effect of deflation is a general pressure downwards on prices over all. But prices of groceries are NOT part of the definition. Again, prices of individual things have great variability, but inflating/deflating MONEY SUPPLY (including credit) is what constitutes inflation/deflation, which expansion/redution of money supply has knock-on effects on prices, just not always in perfectly proportional ways.
Viscount, you should start by reading the TAE primers and watch the really good DVD “Century of Challenges” if you want to debate the inflation/deflation question in this venue, because you don’t seem to have taken any of it in yet.
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. Was it just Y2K all over again–more smoke than fire? Or is this just a big accident waiting to happen in a world where there are just so many accidents waiting to happen and we can’t even keep track of them all anymore.
Or maybe the CDS are still very much at the forefront of Merkel and Company’s thoughts, even while CDS discussions are momentarily out of sight from the press, and Germany must walk away from the Euro first to prevent CDS payouts on the weaker eurozone countries. After all, Greece would still be in the Euro and would still be technically a non-defaulting country in a vastly devalued Euro-zone. Might be an argument for ALL the stronger countries to leave–avoiding CDS payouts for Spain, Greece, Portugal and all. No one has the money to pay those Credit Default Swaps out to the tune of 10s of trillions.
Golden Oxen post=4938 wrote: I like the reference to Noah. He never questioned God and was guided by his faith. When ridiculed by onlookers and derided as a fool he did only one thing. He thanked God for giving him more time to prepare for the disaster.
Rather than complain that the financial world did not collapse yesterday or today, we should thank God for giving us more time to prepare.
Yes, I totally agree that another day without calamity is another day to prepare for the inevitable, especially given that most of us haven’t done enough. Preparation is a slow process, which is a big reason why I think Stoneleigh has advocated being “early” rather than late. Truth be told, it takes a lot longer to prepare oneself and one’s family than you imagine. There is great inertia imbued by the status quo, in addition to the steep learning curve. Just getting up the will to move your family out of a useless house on a cliff with a view of the ocean (how’s that gonna help you?) can take a lot of time/will-power (after all, it means Josh has to change schools and Steve still has a gym membership close by). Not to mention learning how to garden and build a chicken coop, collecting a store of of canned goods, fishing gear, etc. I’m not the ultimate prepper by any means! Which is why I am thankful I have had a bit more time I needed, and my friends and family haven’t even begun, so I’m still hopeful that a bit more time might help them do something too (though more time also does perpetuate complacency…what ya gonna do).
Of course, more time is a blessing I thank the universe for or I thank the incalculable variability of nature, rather than a non-existent god. Being a devout atheist in these times gives me tremendous peace of mind and spirit. May the universe bless us all.
I only woke up from the Matrix two years ago! Five years is a long while to be holding your breath, bluebird. Then again, Michael Ruppert has been warning and waiting for, what, fifteen?! To get a sense of the destructive effects of being “too early” watch the documentary Collapse, which examines Ruppert’s life as a peak oil activist. It’s moving…and a bit of a lesson for all us Cassandras.
Davefairtex, I think your response to Ted’s questions is very well reasoned and accurate.
I also think that Ted’s questions are totally fair and reasonable.
The biggest risk to the system is that everyone starts to think like the folks who write for TAE (that would entail immediate and total collapse). Meanwhile the biggest risk to the individual is that our best judgment is called into question and restores our faith in the status quo’s con game.
Let’s be realistic–the mindset of the status quo is deeply instilled in the majority of the population. We are swimming decidedly upstream to resist its influences. And so our doubts about whether a financial collapse is coming are probably never totally far from our thoughts. Indeed, the status quo DEPENDS on these doubts–the status quo absolutely DEPENDS on our belief that we can and WILL return to business as usual. They will stop at nothing to propagate this belief, as the system’s survival depends on it. Always has. Given that QE has never been sufficient to truly stem the tide of deflation (which is why they have to keep returning to it), it seems QE has been largely intended to restore BELIEF in the power of the system, rather than actually restore the crumbling system itself (as davefairtex points out, the QE would have to be many-fold larger to actually restore the system itself).
But the status quo cannot resist reality forever. We can only have our better judgment shaken by the status quo a little longer, as the fantasy perpetuated by the majority is often easier to swallow. It’s painful to go against the herd. Most of us are NOT hard-wired to reject the status quo–on the contrary, most of us are built to follow the status quo to the ends of the earth…and right over a cliff.
Can we be wrong? I truly, truly do not think so. Can we be wrong about how soon the real trouble starts? Yes. Absolutely. We can be really wrong in this regard. What if it takes 5 years? That could be a devastating wait in terms of lost opportunity. But in the bigger picture, losing everything is too big a gamble to worry about a month or a year or even 5 years, I’m afraid to say, WHEN YOU KNOW THAT IT WILL UNWIND.
The wait is painful, not because I want collapse, but because I know it will come and, like the horror movie when the monster is somewhere lurking in the dark, you just don’t know when it will strike. There will be false scares too. That darting shadow turns out to be a cute kitten…but the monster is still out there. And we know it has to claim some victims before the movie is over, right?
I like what Ponziworld has to say in this regard:
“I stopped questioning whether my overall thesis [about financial collapse] was right (or wrong) some time ago … from my perspective, each passing day that the point of recognition does not occur, just means that we are one day closer to the event. Time is not a friend to fantasy and delusion.”
https://www.ponziworld.blogspot.com/2012/08/comfortably-numb.html
.jpg)
Incredibly thorough article. I’ve lately been thinking a lot about the costs of infrastructure renewal, if only because I’m traveling in a developing country right now. Stoneleigh writes, “As we move further into financial crisis with the bursting of the global credit bubble, it will become more and more difficult to fund infrastructure investment, and we are living on borrowed time as it is. We have already been coasting on past infrastructure investments for a long time.”
In a massive city like Bangkok, so much of the city appears to have been built between 30 and 60 years ago. It’s all in the same state of decay and disrepair. I’m not sure how long such structures go before they need to be replaced, but I can’t imagine there is enough capital now, let alone in the future, to replace even a fraction of it.
This is a power pole I snapped a couple weeks ago–it’s not as spectacular as the Indian illegal load-sharing wires, but some of the Thai power poles are pretty “impressive” nonetheless.
The choice is all of ours not to repeat the egregious evils of our past. The previous financial collapse of the 20s was accompanied by the very same conspiracy theories. In this age of the Internet, it’s the same phenomenon just dressed up in a digital suit and tie. Simple answers, like grand conspiracy theories which target a small identifiable “race” or culture simply satisfy our basest needs. It’s the easiest and most evil of our human traits.
We have a responsibility to do more for the people of the world, and for the planet itself. Let’s start by getting people to think about how we consume as individuals and as a culture, how we must reject debt, how houses don’t answer our prayers for riches, how we need to become more community-based and self-sufficient. There is quite a lot of work there alone, given most people would rather just buy Apple stock and supposedly live off the windfall.
Darkness is everywhere and within us. And people like the dude you’re endorsing are going to take us down even darker paths than we’ve gone yet. Don’t let them.
Jack, the dude is a total anti-Semite. Don’t be fooled. And it’s a shame you’ve broken the incredible track-record in the TAE comment section which avoids legitimizing such conversations (unlike the plethora of other financial collapse blogs, such as Zero Hedge et al.).
Check out The Armenian Weekly essay entitled, Jacobs: The Outrageous Claim of Christopher Jon Bjerkness: The Jewish Genocide of Armenian Christians.
If you refuse to read the well-written, and well-argued article in its entirely, here’s a snippet or two:
It is a mainstay of anti-Semitism and anti-Semites that conspiracy theories abound, most especially about supposed world-wide Jewish power and Jewish behind-the-scenes control and manipulation of all those currently in positions of political, governmental, economic, and military leadership. This has been very much in evidence since the beginning of the 19th century with the publication of the notorious Russian forgery The Protocols of the Learned Elders of Zion, a totally spurious and fraudulent document supposedly telling the story of a secret midnight cemetery meeting of a group of rabbis at which their leader spells out their plans in twenty-four “protocols” for world take-over.
And, with the advent of the aforementioned technological assistance of the Internet and the ease of constructing websites, the haters have proliferated and continue to spew their filth through slick and professional-looking sites including streaming video, PDF books and documents, and the like. Indeed, a case could conceivably be made that the international community of haters—for this is truly a world-wide phenomenon and not confined to any one geographic locale—has become “unionized,” or, if not unionized, then, at the very least, networked. One finds much of the same material, including conspiracy screeds and downloadable and printable copies of the Protocols, available on many of them.
One such site—www.jewishracism.com— is that run by Christopher Jon Bjerkness (b. 1967) (“B’yerk-ness,” though I personally prefer to pronounce it with a “j”) of Chicago, IL, who, according to fellow traveler Henry Makow, PhD, of Winnipeg, Canada, and author of the anti-Semitic text Illumnati: The Cult that Hijacked the World (BookSurge Publishing, 2008), “a scholar who know what plagues mankind and believes his knowledge is necessary to stop Armegeddon”[iii], and whose site is “dedicated to protecting all Jews from the anti-Semitism and inhumanity of racist Jews.” […]
If you think you can trust Bjerkness, ask yourself why he has such a fascination with this Armenian genocide. Why is he struggling so hard to expose this genocide? Why is he writing such extensive books, doing so many interviews, and even traveling at his own expense from his home in Chicago to Glendale, California to give a speech about the genocide to a group of Armenians?[…]
He also employs such rhetorical devices “it is a well-known fact that” (pg. 16), “it appears unquestionable that” (pg. 17) without any source citation whatsoever. Early on, he makes the following claim (without any supportive evidence) which appears throughout the text: Jewish leaders then placed Adolf Hitler in power in the hopes that he would chase the Jews of Europe into Palestine. (pg. 20)
Not content with this absurdity, he also rails against “the Jewish controlled book publishing industry…Jewish controlled academia…Jewish control of the press” (pg. 24), tropes which are also included in the Protocols.
Etc…etc. Goodnight.
Just met a Syrian living in Switzerland on holiday in Thailand. Without any prodding at all he said everyone he knows in Switzerland is preparing for “collapse”. Again, I didn’t bring up anything about this–he did! I didn’t show my cards as a crazy collapse-nik even for one moment. I’d say the guy is about 25. He says all his friends are leaving the cities and trying to find a place to live in the countryside because they are expecting the absolute worst. Maybe only anecdotal, but interesting. Is this how fear spreads?
timothwc post=4755 wrote: The automatic earth is beginning to look like a hangout for paranoid misanthropes. But then again it could be said for any financial blog.
I read them because they help me keep an eye on the market, but this increasing social commentary is starting to bug me. I usually ignore them, but Chrissake, the world was s**t, is s**t and will always be s**t, so what’s the point of worrying about it?
It’s part of the conversation. You can’t extricate our environment from the economy. And the world might be even shittier than we thought. Worth considering the “risk” even from a financial point of view. But we can only talk about “making more money” so much, can’t we? And what’s the alternative–the environment is all going to be just fine, so don’t worry about it?
I envy that you don’t worry about how rotten things could get. I also hope you’re right that it won’t really change that much. In the meantime, I rather enjoy learning to live a simpler more self-sufficient life. I don’t really see it as a sacrifice anymore, but both a necessity and a challenge.
Vortex post=4748 wrote: All of you insane freaks who want to kill billions of people, by all means.
But we’ll start with the lowest form of human shit known to mankind. Who is that…that would be you.
You sick freaks can blow your brains out, die of starvation or any hundred other ways to die. Makes no difference to those of us who wish to live.
I’m not entirely certain, but I think you may be confusing two separate aspects of the debate regarding both a financial and an environmental collapse: what we want to happen, and what will happen. I don’t think anyone here WANTS to kill anyone! I know I don’t. In a perfect world, I want us all to have more and achieve our life’s ambitions. I want everyone born, whether that is 7 billion of us or 14 billion of us, to have a peaceful, healthy life with good jobs and lots of spending money. I naively used to believe we could achieve that. I now realize that no matter what I “want”, there are extraneous limitations on a finite planet that are going to have a lot more to say about things.
Similarly, with finance, I do not want a deflationary collapse. I am young enough to still have ambitions I thought I was going to be able to fulfill. I want us to live the “American” dream we were promised no matter where we happen to live. I realize now that wishing is not going to make the deflationary collapse go away. And so I have decided it’s important to prepare, and hopefully I can convince others to prepare too. I’m not really even helping the situation by offing myself so there’s one less person. What would that accomplish?
A financial collapse, and possibly a later environmental collapse, will happen no matter what I want. It’s a darker place to hang out in. I prefer my old world where I believed we were all going to get BMW’s if we just worked hard and smart enough. Alas, I think now that was woefully naive. And ironically, refusing to discuss economic alternatives is what is going to maim and kill.
davefairtex post=4735 wrote: skip –
If you actually live in Bangkok, you don’t buy water from 7-11, at least not more than once. You reuse your plastic bottles and refill them from the ubiquitous reverse-osmosis water filtering machines scattered all around the urban jungle. Cost: 1 baht/liter. (Water at 7-11: 14 baht)
If you look closely, the Thais have a large number of very low energy ways of getting things done. While westerners (and rich Thais) take taxis, the regular people use buses and specially-constructed red trucks with benches to get places cheaply. Often the 4-person family car is a 110cc scooter.
Locally produced natgas is used to fuel a large number of taxis and buses. There’s also a thriving business in fixing things – every neighborhood has some guy with a sewing machine and a table who charges 20 baht and takes 10 minutes to fix your old clothing. A different guy fixes shoes.
I’m not sure I’d count the Thais out so quickly. They might end up doing better than other places that have further to fall, and less of a culture of small business operation. Almost everyone in Thailand has their eye out for a way to start a small retail business, and many have family members that own a small farm upcountry. If you do something well, your Thai friend will notice this, and suggest that you might want to open a shop – something much preferred to working for someone else.
I think Thailand will do much better with less than America.
Have fun in Bangkok. 🙂
Very interesting insights. I am hardly an expert on Thailand. After all, I’ve only been here 24 hours so far!
I wouldn’t count them out either, based on the reasons you mention. But…I think witnessing the sheer impact of such a population in a small area is pretty hard for me to discount. I expect there is adaptability and a connection to traditional means of survival here, which we’ve lost in the west. But most of the vehicles I’m seeing on the motorway are cars with only a passenger or two in them. As you mention, I do see entire families on motor scooters though–the little ones rarely with helmets. Hey, you do what you have to do, and we westerners do get bogged down in regulations that only increase the complexity of life without adding much to efficiency.
I counter that typhoid and polio are increasing at a fairly alarming rate here in Thailand. That must indicate something. And after spending about 3 hours going up and down the Chao Phraya River I didn’t–see–a–single–bird!!! Not overhead. And not on the water. That is a big water course, with not a bird in sight. What does that mean.
I think your point that the populations with the least to lose–those who have continued to be self-sufficient out of necessity induced largely by poverty–is very well taken. They will serve as an example for us. But there is no way 10 million of them in this city alone aren’t hanging by a thread. If things get really bad, I do expect you’re right, though–the survivors in places like this know what they’re doing. But I can’t help but see another 10 million people who, like all of us, believe we should aspire to “have more”, without any true understanding of the price we’ll pay for it.
I just feel so bad for the planet. I’m afraid simply opting for more motor scooters rather than cars probably won’t do the trick, in the long run. But I would be so, so, so relieved to find out that was the case.
You only have to come to a city like Bangkok, where I am now, to witness the costs of our lifestyle–the costs we have exported to poorer countries to keep it all out of sight and out of mind. The environmental degradation is invisibilized in North America and Europe. But clearly, life hangs by a tenuous thread: far too many liquids of unknown origin running through the gutters; constant stream of 10 million people in emission-belching vehicles; air conditioners running 24/7; millions and millions of gallons of precious water housed in diposable plastic bottles for sale at the ubiquitous 7-11’s.
I see this trip as our “apocalypse tour”. I feel it’s a bit risky to travel to such placesnow, because you just don’t know when it’s going to fall. But I figured it might be our last chance to see some of this stuff.
Hey, not only does Kunstler like TAE, Tyler at Zero Hedge might just read the comments here too. This latest ZH analysis of the Draghi ECB speech looks precisely like the one I blathered on about above: https://www.zerohedge.com/news/order-be-saved-spain-and-italy-must-first-be-destroyed
Okay, I may well be flattering myself here. After all, I think the conclusion I came to a couple days before Tyler is quite obvious if you actually listened to what Draghi said…but the markets sure don’t think it’s obvious (they’ve ignored the real implications of the Draghi “guidance” completely)! And I haven’t seen anyone else arrive at such conclusion in the financial press either–most continue to herald Draghi’s speech as a window of hope!
Zero Hedge goes into even more depth than my overly long comment. Time will tell whether this take on market-raction to the Draghi “guidance” is accurate…though one has to wonder how much time this will take. In theory, it could only be days…
steve from virginia post=4681 wrote: The Spanish have gotten screwed by an idea just like the rest of us.
Just too damn true. And why we’ll continue to get screwed. We don’t seem capable of making the changes we need to make…until we’re forced to.
Wow, market desperation never ceases to amaze. I did watch the entirety of Draghi’s press conference, and I was not surprised when markets tanked–he offered nothing in the way of the much hyped “we’ll do anything it takes” to stabilize the Euro. And then lo and behold markets rally. The business press attributes the rally to a suddenly different take on the meaning of Draghi’s words. Again, something doesn’t add up.
Hey, maybe it really comes down to what Robert Prechter says: markets react to endogenous mood swings that are, ultimately, unrelated to external forces like press conferences (i.e., the markets might have a minor reaction at first to something like a government announcement, but then just do what they’re going to do anyway). Nevertheless, this is how Business Insider explains the market up-tick in light of Draghi’s circular, infinitely vague “guidance”:
Draghi set forth criteria that EU political leaders must abide by in order to receive monetary policy assistance, while at the same time promising that EU countries like Spain and Italy won’t fail in the short term. https://www.businessinsider.com/draghi-just-staged-a-dramatic-power-play-2012-8#ixzz22Wh5YMrt
If the market rally is based on some new-found interpretation of Draghi’s words, well, I guess I’m suspicious no one actually LISTENED to them and investors are just, yet again, running with the herd in hope and desperation. Because the “criteria” that Draghi specifically set out was this: a country MAY receive this life-saving financial assistance IF the country first applies to the EFSF/ESM…but then only IF the country also institutes sufficient budget cutting austerity measures to do the heavy-lifting itself. That’s paraphrasing, but my point is that Draghi is hardly offering anything spectacular here at all. It’s not even new! And certainly not realistic! Basically, it means IF the country makes the formal application to the EFSF/ESM and also thereby commits itself to the stipulations required by such an application (i.e., guts its spending and institutes severe taxation according to external dictates–again entailing a loss of sovereignty over one’s own national budget and tax authority), only then MAY this still undefined liquidity be released to the sovereign.
This is what Draghi meant when he said the formal application is a “necessary but not a SUFFICIENT condition” of monetary aid. He said that emphatically twice. So making the formal application is a required first step to aid, but only the first step, and not sufficient to trigger bailout money. The country must still do other things, which Draghi intimated include sufficient austerity measures.
Haven’t we been here before? How is this any different? If a country is capable of cutting its budgets in order to stabilize its own finances, I think it would. But for the Euro-periphery like Spain, the cutting required is so catastrophic that the country can’t do it. It just falls into a depression and you have riots in the street. But Draghi is definitely saying here that severe austerity is also an implicit condition of a bailout. I just don’t see this in any way as a market-positive promise (depressions usually aren’t good for business activity!). And I don’t really see how countries like Greece or Spain are going to do it.
I think if the ECB was actually serious about bailing out a country and saving the Euro-zone at this point, it would provide the bail-out money NOW and worry about the austerity once order is restored, not the other way around. Wouldn’t you save the patient first and then require that they start an exercise program and eat less deep-fried food? You don’t get them to start their diet as a condition of life-saving surgery as they lie dying in your emergency ward. Given Spain’s bond rates are over 7%, it’s definitely bleeding to death, and quickly.
So, at best, Draghi’s “guidance” is another tactic to dissolve sovereign powers under a single Euro authority (that could get ugly). At worst, it’s just a tactic to stall the collapse of the Euro zone a little longer with vague promises that can’t and won’t be fulfilled so that the richer countries have more time to cover their financial arses until they must all go home to count their money, washing their hands of the Euro experiment once and for all.
Maybe the smart money actually comprehended the full meaning of Draghi’s words, as the rush to the Swiss franc save-haven just accelerated in earnest, despite this market upswing: https://www.zerohedge.com/news/what-do-swiss-bonds-know-nobody-else-does
Mario Draghi just made it official. Still no QE in Europe! And following Bernanke’s feckless showing last week, it’s all just further confirmation that so much of what TAE has foreseen is materializing, plain as day–central bankers are increasingly impotent.
In fact it’s getting downright pathetic. Obviously, markets have been waiting with bated breath to see what Draghi would bring to the table in terms of his promise to do “whatever it takes” to maintain “stability” in the Euro. Many saw this as a declaration that the big guns were coming out–as in outright bond buying by the ECB itself. But then we got some rumblings from German finance ministers that no such policy had been agreed. So what was all this bluster from Draghi about “we’ll do anything” and “just you wait and see…it’s gonna be like major awesome” (here I’m paraphrasing).
Apparently, he’s got nothing. Absolutely nothing. I just stayed up late to watch the live press conference and the guy was a joke. Hey, I’m not just being flip when I say that–the whole spectacle was actually comical, and at one point a journalist couldn’t help herself. I heard a distinct guffaw from a journalist in the room when Draghi repeated (for the seventh time?) in his presentation that “we MAY act if needed.”
You mean that’s it?! The big plan to save the Euro is that “we MAY act if needed”? His emphasis was on the word “MAY”. I’m not even adding that myself. So Draghi’s announcement is that they might, or might not, do something, which might be any manner of things, quote, “within our mandate to do whatever is in our power to maintain the Euro as a stable currency.” The guy is talking in circles.
Oh, but the Euro is “irreversible”. That is his promise, cross his heart and hope to die. When a journalist asked for a specific meaning to this supposed “irreversibility” of the Euro, Draghi answers, “It’s pointless to bet against the Euro. It’s pointless to short the Euro. It’s pointless because the Euro will stay.”
Right. The markets will not bet against the Euro because you say it’s irreversible. But you are not buying Spain’s bonds. You are not proposing any definitive action at all except to come back to us again once the committees of the ECB have made a decision. It’s another agreement to agree on something unknown at an undetermined future date. Swear to gawd, he couldn’t even bring himself to say that any decision has been made at all, and that his pronouncement was in fact “not a decision” but “a guidance…to design the appropriate modalities for such policy measures.” Oh, appropriate modalities. Good to know.
So more than a few heavy weights said that Euro had only a few weeks left before the markets took things into their own hands. That was, like, uh, a few weeks ago? And this is the best Draghi gives us? A “guidance” for “appropriate modalities”?
So does Europe only have hours now? Because that was really, really lame. If I were Draghi, I wouldn’t have even shown up. I’d have left town and I’d never come back. I’m still waiting for the day when one of these clowns does just that. I think it’s coming.
This my first Great Depression. It’s probably yours too. So things aren’t precisely as I would have imagined, based on what I’ve seen in photos of the 1930s.
I just came back from Sydney Australia. Now THAT city is booming. No for-lease signs anywhere. Prices sky high. A permanent party-on atmosphere. Incredible infrastructure. Line-ups at the movies going out the door just like back when I was a kid. And yet…here is Australia’s PMI (dark red is indicative of serious contraction).
Something doesn’t add up on the surface–clearly a modern economy is incredibly complex and weakness doesn’t show up everywhere at once. Conclusion: this collapse is deceptive. Be warned.
I wish I could say that PonziWorld is my blog! It’s quite brilliant. As you’ve noticed, there are a lot of essays on his site worth reading. I don’t know the guy either–though from his super-short bio I read that he’s a fellow Canadian (now based in the U.S.). 🙂
PastTense post=4588 wrote: Skipbreakfast: Trivium has retirement accounts.
For your normal salary you pay income tax on this salary. For retirement accounts the idea is you DO NOT pay income tax on this money before you put it into the account–instead you pay income tax after you are retired, when you take the money out of the account. Then you are probably at a lower income tax rate.
And as a discouragement for people to take money out before they retire there is a 10% penalty–if people didn’t want to save the money for retirement they shouldn’t have put the money into this type account to begin with.
Ah yes, this is much as I believed it worked. It’s almost identical to the RRSP plans in Canada. It’s sheltered from taxation with “penalties” if it’s withdrawn before retirement age (and at the highest possible tax bracket, if one is still working).
pipefit post=4589 wrote: skip-“It doesn’t mean we’re not in deflation though.”
Instead of looking for a few outlier prices that are bucking the inflationary trend, why not focus on figuring out what is wrong with your deflationary model. Why isn’t wealth destruction on a massive scale resulting in a drop in consumer prices? The preponderance of the evidence indicates that it relates to key shortages that I mentioned in my prior post, but there are probably other factors as well.
Keep in mind that measurements and definitions of inflation and deflation are extremely contentious. There is no one measurement anywhere that I would conclude is definitive. I think it’s important to recognize that how YOU intend to spend your money is as important an indicator of inflation as anything. I am not picking a “few outlier prices”. I am picking the essential prices based on where I would spend my money. If one only has $10,000 per year to spend, then it may seem that one lives in an inflationary world as a greater and greater percentage of living costs is eroded by a rise in food prices. If one has $1 million per year, then one is living in an entirely different world and the broad inflation/deflation definitions do NOT apply equally. The individual with $1 million per year is NOT going to spend it all on groceries! The individual with $1 million per year couldn’t even spend the interest (where I live) on groceries if she tried. Therefore, what would the individual with $1 million spend it on? Pretty much everything that individual would consider buying is DOWN in price.
You could argue that the people with only $10K vastly outnumber the people with $1 million. You’d be right. Again, inflationary definitions apply differently to different people. Low-income or marginal income individuals will experience a squeeze in standard of living as basic essentials like food increase even a few percent in price. But it seems to me you are actually picking outlier prices (groceries) as an indication of inflation. And in fact, rising food price is a deflationary pressure, as there is less expendable income available in the greater economy for ANYTHING else.
Yes, yes, you’re relying on shadowstats. I don’t rely on them alone. I rely on a wide-range of measures, including the ones in my own life, which are the “least manipulated” and “most measurable” by me. I know how far my money goes on certain things in my own life. It’s going less far in food (a fraction of my spending) versus much farther in terms of bigger ticket items across the board, including travel, vehicles, petrol, land, etc.
EDIT: I should add that “prices of things” isn’t even a definitive indication of whether we’re in deflation/inflation. I think it’s a “practical” one though. The supply of money/credit is MUCH more influential in the long-term implications. Deflating money/credit is going to have a much more far-reaching implication for our lives than the individual price of tomatoes or cars.
EDIT 2: No I don’t have a million bucks per year to spend. But I have more than $10K per year. Just sayin’ in case y’all think I’m a Rockefeller.
pipefit post=4585 wrote: A store owner today told me that fruit, vegetable, and other grocery prices will be going up 30% across the board in two to three weeks. This is going to happen across the country. So you see, the Lumpenproletariat will be expanded greatly this year, but the sheeple won’t understand the underlying issues. Just the opposite, they will be goaded into begging the govt. to increase the defense budget, if I’m reading the situation right.
Hm, let’s see. I buy about 5 tomatoes per week. In my outrageously inflated country, that costs me $7 USD. If it goes up 30% that’s another $2 USD per week or so. Let’s go for broke and say $3. It means over the course of the year, I’ve spent another hard-earned $156 on tomatoes. My entire average grocery bill will have “inflated” about $2300 per year. That’s a lot…especially if I’m already living hand to mouth.
But wait…the house I want to buy– [sarcasm] because in a hyper-inflation, land ALWAYS goes up [/sarcasm] — has dropped at least another 5% this year. Where I live, that’s about $25,000. The used car I was going to buy last year was $12K…this year the classified listing says NEWER models of the same vehicle are selling for $8K! That’s $4,000 less.
I could go on. If I’m only measuring my life in tomatoes (which the poorest of us are! and that’s important!) then I’m in trouble. Food prices really hit low incomes the hardest. It doesn’t mean we’re not in deflation though. Compared to the rapidly dropping prices of bigger ticket items–TVs, houses, cars, computers, oil, gold–over the past year, it sure looks deflationary to me. Just the house and car has deflated nearly $30,000 easily wiping out the $2300 annual inflation in my groceries.
Golden Oxen post=4564 wrote: This is what gold is all about. It is honest debt free money. Until we go back to it and tell the banksters we are done with their corrupt dishonest fiat we will suffer the consequences.
I’m all for telling the banksters we are done with their corruption, but the religious devotion to gold could be very risky. You continue to ignore all the warning signs that we’re in a deflation and that gold might not be exempt.
Here’s a great article posted today that talks about the undeniability of deflation and the definite lack of “hyper-inflation”. Gold is knocked on its arse too.
https://www.ponziworld.blogspot.co.nz/2012/07/relentless-deflation-mind-output-gap.html
@Trivium, @PastTense, @Lucas, @bluebird, @Franny
This is interesting advice regarding Trivium’s IRA account conundrum. Not being a US citizen, I am completely unaware of all the IRA account nuances. But it raises the dilemma I have also wrestled with in Canada and New Zealand (where I live). Because absorbing the penalties and fees incurred by withdrawing cash out of the system can really sting. It reminds me, however, that one of the primary purposes of these penalties and fees is to DISCOURAGE PEOPLE FROM WITHDRAWING THEIR MONEY. Clearly, the system prefers that we do not, and indeed depends on the fact that we do not.
There is undeniably an element of political resistance in deciding to withdraw everything no matter the “price”. But that for me is only icing on the cake. I am actually more concerned about the fact that if it costs X today to get my money out, it will NOT be cheaper later and will almost definitely cost X*Y, if you can even do it at all. Having recently looked my bank manager in the eye as I moved money out of their institution, it was clear I was a bizarre anomaly–from her reaction, no one else is doing it really…not yet anyhow. I felt awkward and almost criminal, like she must suspect the worst (drug dealer? weapons dealer?!!!). She didn’t dissuade me, although she did gently inquire as to the reason. “Chicken coop”, was my answer. (In greater seriousness I admitted that I just didn’t trust the whole mess and she didn’t argue.)
There is tremendous resistance in the system and it’s deeply instilled within us NOT to withdraw our money. It’s actually incredible how powerful the psychological disincentives can be. (More than one financial analyst has written about their shock over how FEW Greek citizens were withdrawing their money from the banks given the risks.) I can only imagine how much HARDER it will be as the months progress . I’d rather do it sooner than later, as it will undoubtedly get more difficult and more expensive.
The advantage of waiting and changing your IRA or moving account-types is that you can see how things play out, and there may be last-minute changes to the rules you can work around. You might be able to maximize gains and minimize the penalties by timing things really well. But I am convinced that the risks grow daily and it will become harder and more expensive to get our money out. Certainly, you don’t want to be trying to do it when everyone else suddenly has the same idea. Better to do it while you’re still an oddity and your bank manager does nothing more than smile, a little bit perplexed.
Golden Oxen post=4565 wrote: The dollar bottomed against what the Euro? Is that really a bottom signaling deflation and a rise in purchasing power for the dollar? Absolutely not!
Well, obviously not just against the Euro. The US dollar has been gaining strength against the Kiwi dollar for the past year (with the Kiwi dollar attaining ever lower highs against the greenback since about September 2011).
Trivium, I think you’re asking for comments about what to do with the $100k in an IRA account.
TheTrivium4TW post=4551 wrote: I’d probably lose about 60% of it by cashing out now […] What would you do with it? […] Would you take the 60% (possibly more) hit on the IRA money now or gamble for a lower unemployed style tax rate later?
We don’t see many specific “financial advice” Q&A’s on TAE, as the site seems to focus more on the bigger macro picture, and for good reason I think–the variables and risks are just so myriad, I don’t think any answer can possibly satisfy the asker. If “maximizing profit” is the goal, we’re almost sure to make the wrong decision 99% of the time. Just look at the investment grand-masters’ call on interest rates and how wrong they were:
https://www.businessinsider.com/21-rates-have-nowhere-to-go-but-up-2012-7?op=1
I would never pretend to do any better than them…although, they were so tragically wrong in this instance, it would be hard to do worse.
Personally, I’ve re-trained my “investing” brain to think about these things a lot differently today. This has taken a while and is still not always easy–I’m only interested in preventing catastrophic loss; gains are secondary. I want to live to fight/garden/build/invest another day.
As such, if it were my IRA account, I would take most if not all of it out now, reflecting the proverbial 40,000 birds in the hand now are worth more than 100,000 birds in the bush later. From a “classical” investing point of view, this is TERRIBLE advice. But I don’t think we live in “classical” times anymore. I’m willing to take a loss today in order to hedge against what I see as a rather likely scenario–you’ll take a bigger loss tomorrow if you don’t. I’m sure “proper” advice would take into greater account what exactly is held inside your IRA account. But even cash might be hard to withdraw once the deflation ball gets rolling (cf. MF Global et al.). I’d still stick with the adage that you want to be liquid and you want to maintain that liquidity under your own control (having it stuck inside an IRA account is NOT in your control).
I can foresee a lot of pension/retirement fund accounts simply being frozen or greatly reduced or vanishing altogether. I feel lucky to get anything out now that I can–lots of people can’t get anything out because they have nothing but debt. I like Stoneleigh’s adage that the only people who “win” in a deflation are those who “lose the least”–it presupposes we’re ALL going to lose somehow, and I think that is accurate.
I’ve concluded for myself that if the worst does not transpire, and a collapse doesn’t occur, then we will return to growth, so I will simply chalk up the “bad investing” to a necessary choice given current risks and move on. At least in a “return to growth” scenario I’ll be able to get a job again. I’m not banking on a return to growth scenario, though. And I’m not banking on making many decisions that will increase my limited money in the near-term either.
Just don’t kick yourself (or me) if you realize in hindsight some other course of action would have saved you another 10 or 20 or 30%. Any money I preserve is pretty much a windfall, from my perspective. We’re all different though.
I have finally concluded that some sort of debt jubilee is ultimately inevitable: debts that can’t be repaid, won’t be repaid. I also conclude such a jubilee won’t arrive until after a devastating dose of deflation, however. But when the jubilee (in some form) finally arrives (because it has to) it won’t be fair–since when has anything yet been “fair”!
It’s natural to bristle at the notion that excessively indebted spendthrifts, who partied like it’s 1999 all the way until 2016, should somehow be absolved of these burdens putting them in the same beneficial position as the modest saver with no debts. But the sorry truth is that the number of debt-free savers is so minuscule, in comparison to the heavily indebted spenders, that it’s very hard to imagine the relatively few savers getting much consideration after the whole debacle.
The indebted (a massive majority) will not vote for the minority of savers’ interests. The indebted will vote and lobby for their OWN interests, which will be in stark contrast to the minority of savers. And so it’s very possible, if not likely, that those with the biggest debts can seemingly benefit from a one-sided write-off. However, most of these big debtors won’t enjoy the intervening deflation in much comfort at all! Many could even die without proper nutrition or medical attention. So, being freed of your huge debt after a decade of deflationary “starvation” won’t be worth the big windfall at the end of this long road, in my opinion. I’d still rather stay out of debt and have some cash for the months and months of rainy days ahead.
Now, for those unable to get debt-free (most of us), a strategic default will probably become a necessity where any cash that COULD be used to pay off debt is hidden from the system’s detection, so you can at least pay for groceries until your un-repayable loans are wiped off the books–a day that will not come very soon nor easily. I recognize the huge risks in taking such a path–all I’m saying is I expect many will have no other choice.
Gawd only knows how the system moves forward after such a jubilee. I think we’ll just have to cross that inevitable bridge when we get to it.
steve from virginia post=4500 wrote:
“Super Rich Stash At Least $21 Trillion In Secret Tax Havens”
What are they to buy with it? What will be ‘worth’ anything?
When their world is gone they will be gone with it.
Everything. They’ll be able to buy everything.
The smart ones–and most of them are smart with their money and ahead of the rest of us–will turn it into real assets, including farmland, water resources, oil resources and so on, before the Dollar vanishes into the annals of history.
The difference in our forecasts is that I don’t see an immediate “event horizon” between this barely-inflationary world and the hyper-inflationary one. I do see some window of deflation in which $21 trillion will be easily spent (keeping in mind we’re still living in a $700 trillion world when factoring in credit). I think the likes of Mish Shedlock agree with you that all fiat, no matter what the sovereign denominator, could vanish in a single blow–he’s a fan of Gold Money. But I continue to be unconvinced we go from a world where dollars are worth “everything” (i.e., oil and food) to a world where dollars are worth “nothing” overnight. The super rich might only need a window of 12 months of massive deflation to convert that paltry $21 trillion (in comparison to the current overall supply of money and credit, which will begin vanishing at an exponential pace).
I expect that those rich folks who are too slow will, as you say, vanish along with their money. But as long as there is some money around to be traded with, humans will continue to trade it until we reach a sort of Minsky moment where we just say to heck with it, it’s too hard to get any dollars and I’d rather have a tuna, so I’m just gonna reject dollars altogether. In the meantime, they’ll keep their billions safe for the upcoming rainy day.
davefairtex… I applaud your poise and decorum! I suppose there’s some room–no, actually a great NEED–for a curmudgeon in the collapse-nik blogosphere to keep us sharp and on track. Ilargi might be our guy! 😉 I have even seen a photo that proves he might be an ogre in human disguise!
But if you want to read another curmudgeon who regularly spanks his readers, check out Garth Turner’s Greater Fool blog–another Canadian writer who has been promising his countrymen a rather serious real estate correction for several years, despite much criticism. Oh, and given some recent Canadian market data, it seems Turner is finally being proven very right (unfortunately, Turner is also a “financial advisor” who doesn’t think the economic system itself can collapse despite yet another major nation-wide real estate meltdown). Now, I only refer you to the unctuous Turner for his bracingly refreshing and downright stinging barbs…a few folks out there should man-up just as you have done dave and take the barbs for what they are–a wake-up call which some need more than others!
Viscount St Albans — why so angry? Are you willing to tell us? Is it because you hoped TAE would lead you to incredible returns on your investments but instead you haven’t made any money in your FX trading account? I am curious — if you’re willing to divulge, please do!
Thanks jal. Of course, these stories make my blood boil.
Not only is their “illegal” garden beautiful to look at (a consideration that will soon be totally irrelevant), back and front-yard food growing is obviously the direction every suburb should be heading for.
Giant green lawns of grass are a blight and waste valuable water with no return. I hope for a day when grass-lawns of over 30% of the front yard are declared illegal. The notion that you cannot use more than 30% of your front yard to grow food is yet another shocking piece of bureaucratic oppression.
Canadians and Citizens of the World, resist!
Rapier (welcome to TAE?) — I agree that the need to appear apolitical can be part of the Fed’s inaction. But given the election is still 4 months away, I have to wonder, if we assume Q-Anything can actually help the situation (I still believe it cannot) then can they afford to wait even this 4 months until the political smoke of the US elections has cleared? A major financial event could come much sooner than that.
On another note, does anyone else think Bernanke is starting to look just plain sad? I think his world is crumbling. The smiling man who promised helicopter drops looks shaky. Or maybe I’m just reading something into his beautiful eyes.
golden oxen,
It seems to me that, for practical and political reasons, Bernanke is hog-tied and cannot do anything more at this point, under any guise. As you mention, he’s “prepared to act”, but it appears he may require a far more extreme, sudden market change to gain the impetus and licence to follow through with more Q-Anything. The paradox is that this will be woefully too late. By the time the “big market event” gives Bernanke that licence, the horse will be out of the gate. He’ll be the poor farmer running through the mud in his gumboots after it. At that point, there will be no amount of Q-Anything within his power to make things right again. Talk about impotent.
Given the massive, unprecedented scale of the asset-price collapse that is coming, the ONLY prediction that is important is the one that gets you out of harm’s way. Staying in the markets to game another year or three of asset-price gains is playing Russian roulette with a nuclear warhead. The downside is far too great. If TAE was all about how to turn a profit in the markets, it might be open to this criticism, because timing would be important to profits. But I’ve never seen TAE claim to offer a route to riches or profits, only capital protection. The crux of TAE’s prediction is about crippling deflation, even when nearly no one else was in agreement. As such, TAE is only wrong if the asset-deflation doesn’t arrive.
Seriously, I’m not making excuses for anyone, but 24 or 36 or even 60 months of being off on the precise timing of a certain level of a stock index is nothing compared to the magnitude of what is really being predicted–that the entire index is at risk of dropping off a cliff. It’s so big, there is currently no risk worth taking unless you can afford to lose EVERYTHING. And most people clearly cannot. So TAE has said get out NOW, whether “now” was three years ago or one year hence. I continue to believe that for most people, that is the right advice. If you want to play the ups and downs in the markets in the near-term, good luck to you. You’ll need it.
I have noticed an undeniable change in tenor from the MSM’s favourite “inflationists” like Marc Faber, Jim Rogers and Doug Casey. They seem to be back-pedalling on a number of calls (such as US dollar collapse in 2012 and commodity prices going to the moon). It’s downright awkward to be honest.
In one interview, Doug Casey finally ends his fumbling justifications for the lack of hyper-inflation with his prediction that we’ll be saved by getting on spaceships and moving to Mars! Yikes. I think he just lost a little bit of credibility in my book. And I’ve seen Mr. “Print-Print-Print” Marc Faber fair no better in a few of his own recent interviews.
Anyhow, my point being many of these commodity super-bulls are starting to look plain wrong, and now they’re trying to cram some deflationary outlook into their story while trying to retain some dignity. Problem is the new story just doesn’t fit very well and they end up sounding like they’re all over the place, self-contradictory and confused. There is some loss of that shiny uber-confidence that these commodity hyper-inflationists shouted at me over CNBC for the past 3 years. (I’m especially talking about you Mr. “Shouty” Jim Rogers who barked at everyone like they were an idiot if they couldn’t see how perfectly obvious his commodity super-bull market and China infinite-growth outlooks were.)
What does it take to just say, “Oops, I think I was wrong”? Guess they depend on appearing infallible and so they cannot admit they are wrong on any count, let alone issue an apology. And being unable to admit that might be their biggest downfall in the long run.
There are some very smart organizers in New Zealand experimenting with alternate locally controlled currencies. Will be very interesting to see where they get to. I got the impression, after speaking to one organiser who has done a lot of research in the area, that it is difficult for such currencies to really take off–probably because we don’t NEED these currencies yet. But the experimentation will probably provide very valuable wisdom when the time comes.
