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Vulcanelli post=4350 wrote: I am getting a bit weary of all this intellectual speculation about what gold is and what is it good for, what is going to happen or not happen. This site is supposed to be in part about hands on what to do for survival, right? So let’s say you have followed the guidelines presented here at TAE and have gotten completely out of debt and are holding cash and cash equivalents and have made the decision to hold some precious metals (I am thinking of silver) as well. You are no longer interested in rhetoric you want to know what to do. Are there things one should look for and things one should one beware of in purchasing. If you have never purchased precious metals it would be really helpful to hear the experience of those who have rather than try to sift through all the promotional sales information on commercial websites.
You know, you might have a point here actually. Keep in mind though that finance will continue to be the Achilles heel for the majority of people in the near-term (i.e., no one is completely self-sufficient, and having something of value to pay for necessities can be the difference between life and death).
Now with regard to your point about preparation, I just discovered this smart, interesting woman on the internet who goes by the name Patriot Nurse. She covers some very practical advice about preparing for your own health care in a systemic collapse. Excellent advice.
Not meaning to hijack the thread. Further discussion about health care should go under a new thread–I just wanted to respond to Vulcanelli’s point. In the video below, Patriot Nurse talks about antibiotics. And I suppose it might even be relevant to this thread, since it really makes you realise how medicine can quickly become much more valuable than gold!
I agree there might come a time when there is a total loss of faith in the US dollar. But we’re not there yet. A lot of things have to happen first. Which means we’re in a fiat world in the meantime. And a credit-driven fiat world at that. So while many super-gold arguments are persuasive, they all imagine an end to the current system and then gold filling the void at that end. The problem is that financial collapse doesn’t mean the end of the fiat system right away. A lot of banks can go bust without fiat ending. Fiat’s end is an unpredictable process, and I don’t think all the gold bugs will outlast that evolution. I don’t think I could, anyhow.
Robert Precther on gold:
davefairtex post=4329 wrote: play forward the situation six months. Assume Greece leaves the eurozone and returns to the Drachma. Assume a certain amount of repression – say a Bundesbank desire to reduce its (extensive) Target2 liabilities cause it to reverse ex post facto all savings accounts transfers from Greece within the past 12 months. Greece slaps on capital controls, and perhaps even makes cash transactions in euros illegal. Then they default, and devalue by at least 50%. […] As default and repression drive capital into gold, that will likely drive the price higher – perhaps not to the heights FOFOA suggests, but certainly higher than it is today.
I think you’re right in respect of gold holding pretty good value against a reissued drachma (barring extreme gold controls). But I think we should keep in mind that we could similarly argue gold will always increase in value against SOMETHING TOTALLY WORTHLESS. Going forward, gold will probably hold its value very well in terms of Research In Motion stock. Or in terms of Zimbabwe trillion dollar notes. Or in terms of over-inflated cliff-side houses in New Zealand with a view of the ocean and a soaker tub but no room to grow a garden and one slip away from a broken neck or your entire house falling into the sea.
If you must choose between new drachmas and gold or RIM stock and gold, then maybe you’re wise to be over-weighted in gold. But if you have the choice to diversify into some other cash currency that is stable, I think gold will seriously under-perform in terms of these currencies. If I were Greek, I’d be buying US dollars. They’re currently a bargain, given the appalling state of the Eurozone. And keep in mind that there is a lot of recent history to show that US dollars serve as extremely effective black market currency in the face of capital controls. Nearly without fail. Gold…not so much.
But I’m glad you mention the Bundesbank. Because they’re on record saying that they are able to cover their astronomical exposure to peripheral Euro debts BY SELLING THEIR GIANT GOLD HOLDINGS. When countries start selling gold, the gold price is in serious trouble. And maybe you could argue they’ll refuse to sell their gold even while their citizens are starving to death…but they certainly won’t be in a position to buy any more of it!
Yes, Golden Oxen, I think we’d all agree with you that gold holds some special properties. It will never be worth zero. It’s just that in 2 or 3 years it will be worth less than it is now. Guess what–so will real estate. You might as well also buy land from this point of view (most of which will be worth less in 2 to 3 years too). Except at least with land you can “eat it”.
I feel like many gold bugs forget the final step in the gold equation. If it’s money, it’s used to BUY OTHER THINGS. Like food and gasoline. It’s currently too far a stretch of the imagination to see everyone in town using gold coins to conduct such transactions in the near future. There will have to be some intermediate form of currency, whether it’s paper money or the barter-able items themselves (e.g., 10 oz gold for 100 crates of coffee, which coffee you then trade for carrots, milk, gasoline, antibiotics, vodka and cigarettes). Given that there is a bigger market for food items, and it’s more “liquid”, the fiat collapse you paint would probably entail most people rejecting gold in favour of items of intrinsic value as the currency.
Certainly, you can’t buy more gold with gold.
How do such exchange systems work when almost no one except you has these gold coins? You’d be an impossibly rich gazillionaire and we’d all just sit on our cows and chickens and carrots staring at you in wonder as we’re forced to continue exchanging “something else” between ourselves.
Thanks for returning to this, Ash. The perpetual return to gold analyses underlines what a paradox gold presents for us. On the one hand, gold price over the past decade exhibits the disturbingly familiar growth curve of every other asset class–it is EXPONENTIAL! We all know that these curves “always” end the same way, right? Nothing is really “different this time”, or so we should believe. But of course, something is a wee bit different. At least compared to the past 90 years. The system is headed for some form of re-set, and we don’t know what it will look like. Therein lies the paradox. Can that exponential curve really defy the inevitable histories of all such other curves?
In the near-term (the next 5 to 10 years), I’m reasonably convinced that it cannot defy the history of such exponential curves. They scream “bubble” for a reason. I believe we’ll look back at that exponential growth only to see it follow the same trajectory down we’ve seen in all such exponential climbs. The true re-set that will finally indicate that “this time is ACTUALLY different” is still a ways off and it will take longer to arrive than gold’s current price can withstand. Note that a systemic financial catastrophe is not the re-set. It’s the catalyst to a re-set. The re-set will be a process that evolves as a result of such systemic collapse. Gold’s role in such re-set is anyone’s guess.
A short-term run-up in gold is not out of the question, but I see it as a last-gasp scramble of remaining credit liquidity. If all that credit-money gets scared out of property and then stocks and then bonds, a lot of return-seekers will happily rush into the next “market” in play. But note that it is CREDIT-money that is making this play. My bet is still on the fact that the gold price continues to be driven by credit (speculative purchasing on margin). Take away credit, and what are we left with?
I mean, what is really driving gold price? Watch the stock market and gold seems to follow its ups and downs in perfect lockstep. We already saw this in 2008 when gold plummeted along with everything else, and despite the financial system’s current fragility, gold continues to bounce along in this dance with stock prices. This is a very strong indication to me that gold price is being set by speculation and margin.
As leverage is chased out of one asset class to the next, I don’t doubt a last run-up in gold. Maybe even north of $2500. But unlike the gold bugs who will see this as confirmation of the re-set and a “permanently high plateau” for gold (as FOFOA postulates), I see this as just the final parking spot of leveraged speculative returns before the credit backing these holdings is wiped out for good. Even this run-up is not a sure thing in my mind, however, as the credit implosion may out-run the speculators before gold can rocket up any further. But given the current system’s desperate need for returns, no matter what the risk, considerable credit-money will chase any bubble it can find in a desperate attempt to survive. Ultimately, I believe the credit implosion will force a massive liquidation in gold for all the reasons that Stoneleigh and other deflationists have argued. I am not going to play this possible run-up in gold at the moment, for the same reason I won’t play a run-up in Apple stock–I just don’t think it’s sustainable, and its reversal will probably out-smart me.
Ultimately, if you take speculators out of the gold market, the buy-and-hold-until-doomsday players become very few and far between. They will not be able to support gold and current prices. And they themselves will probably be surprised that they will not be able to hold their own gold until doomsday after all. They’ll need the cash to live on, plain and simple. The corner grocer won’t take gold for his tomatoes. It’s too difficult to move. It’s too small a market. In contrast, there is a massive, built-in market for cash that has been ingrained in us for a hundred years and it’s not vanishing overnight. I do not think there’s much point in holding or acquiring very much gold at the moment, as far too many variables still have to resolve themselves, most of which will push gold DOWN in price significantly.
Just look at Greece as a crystal ball to our own future: the business that is booming there is CASH FOR GOLD not gold for cash–in other words, everyone is SELLING what gold they have to survive. Wedding rings, coins, nuggets, anything gold that can be sold is being sold. And then the Cash-For-Gold merchants sell that gold for a profit onto the rest of the world not yet in the same dire straits as the Greeks.
We’ll get there though, and we’ll be selling our wedding rings too.
It certainly rings far more true to me that, rather than indicating a healthy uptick in the economy, recent declines in bankruptcies are entirely attributable to (1) banks extending even more cheap credit so they don’t have to write down the original (huge) un-repayable loan, and (2) bankrupts simply being unable to afford the basic bankruptcy filing fees and legal costs to follow through.
And it got me thinking that the only new loan customers for banks are the existing loan customers who have no choice but to refinance even bigger loans to keep going. Banks have no choice but to continue the lending game to stay solvent themselves, and so they hold hostage the customers who have big loans that cannot be repaid except by going further into debt with bigger loans. Because potential new customers, like me for example, are not setting foot inside their doors. There is no other business to be had at the moment or the foreseeable future.
Indeed, somewhere in the past two or three years something changed inside of me. My partner and I both KNOW we will never ask for a mortgage again. At this point, it has little to do with what we can afford, and everything to do with a fundamental shift in our psyche. It’s not even entirely political; although, there is some conscious desire to stick it to the banks too. Rather, it is much more of an unconscious shift, more along the lines of the endogenous subconscious changes in mood that Robert Prechter describes in his socionomics theory. I don’t even know when it happened–it’s that unconscious. After liberating ourselves from our first and only mortgage, my partner and I simply refuse on the deepest emotional level to ever get a mortgage loan again. No house seems worth the sacrifice.
The sense of relief after being cut free of major debts is eye-opening. It’s like seeing the light of atheism–once you are there, there’s probably no going back. We’ll never go in debt again, I don’t think. And are we so unusual? How many more of us in the wider population are simply swearing off the idea of debt. I think it’s contagious, just as the (vanishing) borrowing frenzy was contagious. If the new anti-debt contagion takes hold in any significant way (and I think it will), the banks are truly sunk. The existing debtor hostages will truly be their ONLY customers!
Without much doubt, John, the losers are the rest of us. It’s fairly black and white, in my opinion. Once the largest players (banks) have shifted their bad debts onto the taxpayers/population, deflation will suit them very well, since the strongest of them will be in a position to buy up the best assets for pennies on the dollar. We on the other hand, will be broke as a society. I don’t doubt that many large players will go under, but they in turn will be bought up by the strongest players to make them even richer (just as JP Morgan bought up the best assets of Lehman in the ’08 collapse).
John Dunn,
I’ve read some fairly persuasive conjecture that QE was, just as you speculate, never intended to do much for the populace and was really for the banks alone. Today I came across more support for this perspective from Charles Hugh Smith’s blog Of Two Minds. Smith writes:
Longtime correspondent Harun I. recently described the leverage endgame in this deeply insightful commentary: Much has been made over the Fed’s efforts to “stimulate”, however, IMHO the Fed’s efforts are more concerned with preventing the sudden death of the monetary and banking systems. With private sector balance sheets hobbled, some entity must step in and create enough debt so that debts can be paid and, therefore, maintain the illusion that there is money (debt) in the system.
Ilargi’s article should be widely read. I suspect it will be. It cuts through so much of the fog on the subject, clarifying the truth without trivializing the complexity of it.
It does remind me of a poker game (yet again). Having not played so much poker, and certainly never with any significant stakes, it makes me wonder what the players do when, at 3 am, one player (Germany) has won all the chips. Of course the rest of the players have no choice but to try to coax the game on longer, hoping to win something back. But the player with all the chips knows this is a very good time to go home–politely of course, because there’s probably a gun under the table somewhere. So who gets to call the end of the game?
Reverse Engineer post=3954 wrote: At least over on the Diner we don’t CENSOR posts and BAN members[…]for speaking their minds and asking questions, or even just for being persistently annoying either.
RE
The notion that it’s censorship to delete or block comments on a blog is entirely specious. In the democratized landscape of the Internet, one has all the power in the world to take one’s unpopular or downright vile words to a blog all your own. For free. You yourself RE have started your own blog, and it sounds like it’s growing like cancer. That’s the antithesis of censorship, mate.
When there is CONTROL of limited access to media, then we have the makings of “censorship”–such as when your point of view is refused by major newspapers or when it costs a true fortune to start a TV broadcasting company. Now, of course the State might take your blog down, and try to prevent you from putting the blog up again in another guise. THAT is censorship. You have been muzzled and completely frozen out from the medium of blogging. But in a democratized blogosphere, it’s ridiculous and actually stifling to presume that every forum and every website must accommodate every point of view or operate the way you would have it operate. In fact, such indivudal strictures between blogs are arguably the polar opposite of censorship–it’s actually a form of freedom. Write what you want, and blog to your own rules anywhere else you please. These are not media empires strangling delicate voices who otherwise would never be heard. Each individual is her own empire. Just take your keyboard somewhere else and say whatever you want and accept the consequences.
When I don’t allow a Golden Dawn Party member into my home, it’s not censorship. It’s just my house. He can go to his own home, and I’m okay with it if I’m not invited as long as I can safely keep mine.
Karpatok, the lecture by Stoneleigh that I attended was by “koha”–that’s what we in New Zealand use to refer to payment “by donation” or “pay what you want/can” at the door. That should tell you a lot about the nature of this enterprise. There is so much valuable insight through TAE that comes to you for free–compare that to the hucksters offering (often perfectly legitimate) economic analysis for a lot of money.
Pretty clearly, the media have convinced an awful lot of people that the elections in Greece will mark some grand signal for Europe’s future. But they won’t.
As I predicted in a comment a month or so ago, this weekend’s election could well see a return of one of the more “mainstream” parties controlling a Greek coalition government. In fact, I’m not convinced that the difference between New Democracy and Syriza is actually all that radical. Certainly, one or the other does not really ensure much radical change for Greece’s future, despite what we’ve been led to believe.
If Syriza were insisting that their win would mark Greece’s exit from the Euro, then it might be radical, but that has never been what they want. Syriza is not pro-“exit”. It’s pro-Euro and pro-“re-negotiate the bail-out”. Frankly, if Pasok or New Democracy wins, they’ll be trying to tweak the bailout too, if without so much grandstanding.
So, not unlike the elections in the US between Obama and Romney, I don’t really see the Greek election results really changing the course of Greek history all that much. Golden Dawn notwithstanding, the leading parties are currently not as different from each other as they or the media would have us believe. The Eurozone will not unceremoniously boot Greece out the morning after a Syriza victory. That would be Euro-suicide. Any exit would still have to be managed. Just as Greece’s exist will still be “managed” when and if New Democracy or Pasok wins. Exit will happen in either event, eventually.
My bet is still on another country leaving the Euro before Greece does, no matter what the election outcome turns out to be. Greece’s election results may only change the timing of the exit by a month this way or that. Meanwhile, markets and the populace will be somehow re-assured that the election results are a good thing for Europe. New Democracy’s win will be seen as a return of order. And even a Syriza win will be positioned as a reluctant push to start re-negotiating the terms of a bailout that everyone now admits was too “heavy-handed”. Talk about extend and pretend!
Oh dear. I’m concerned.
I have voiced some support for RE’s writings on here because I like some of them very much. Today I commended his article about waste packaging, a cross-post from RE’s “other blog” Doomsday Diner. Ash cross-posted this article because he liked the article too. But like Ash, I also hold points of view that seriously diverge from RE and his Diner blog. Like, I mean, SERIOUSLY diverge.
It reminds me of my dismay when TAE quoted the nearly-infamous and thankfully now rather silent Ann Bartlet, a Wall Street “insider” who was whistle-blowing on the dangers in the financial system. Because Ann Bartlet also holds some deeply disturbing and dangerous views at the same time. I was “corrected” by Raul here on TAE, when he essentially stated that one doesn’t need to agree with all the views of such an insider in order to still get some benefit from their insider insight. “Know thine enemy” and that sort of thing. Fair enough. I thought it was a reasonable justification in the circumstances…even though I would never myself quote Bartlet–there are too many other insightful commentaries from insiders who don’t voice equally disturbing racist tirades. (Granted these insiders might still hold the same views, who knows–but at least they don’t publicly spread them around to provide more justification thereof.)
So, here we are on TAE today, where I gladly take note of RE’s comment that El G has a new post over at the Diner. I go to read El G’s latest with some interest. After all, I was disappointed when El G vociferously rejected TAE’s comment section, apparently over his disdain that TAE’s editors refuse to accommodate his conpiracy theories or some such. And it is with a heavy heart that I now admit I’m glad we’re rid of him. And while I formerly expressed my belief that RE and I would make great neighbours even though we held some diverging views–we are, in fact, very much in agreement on some of the most serious issues facing humanity at this time–unfortunately the truth is that the fundamental differences will divide us for the foreseeable future. I don’t see El G and RE as allies anymore. My worst fears are sort of being confirmed. I tried to brush my concerns aside, as most of my concerns stemmed from “reading between the lines”. Not enough justification to write off some otherwise really well-informed, good writers on many “doomy” subjects. Until today.
Note, I entered a greatly long debate with RE (in which Ash was even more engaged) to object to RE’s declaration of some kind of holy war (in the most literal sense of the term!) against the bankster conspirators. Feel free to have a look at that long exchange under the comments for “Desperate European Bankster Puppets Exposed”. Part of why I cared so much to enter that fray was the incredibly dangerous and, now I’m going to say it, ultimately deeply anti-Semitic rhetoric (there I just opened that can of worms) behind this supposed “holy war” and indeed behind much of the frightening conspiracy theory bull-crap being bandied about by average, inarticulate Joes in the Zero Hedge comment section and elsewhere. I thought that we had learned our lessons from the Nazi Party’s atrocities. The same thinking that rose in the financial crisis of the late 20’s and 30s is, like clockwork, rising again (can we even spell “Golden Dawn Party”?).
Case in point (I finally get to the point): El G’s latest Diner diatribe, in which he writes, regarding the banksters’ sociopathic designs for the ordinary human’s destruction, “They are psychopaths and have been self-bred for psychopathy for centuries (at least). In addition, they are covertly conditioned as children to reinforce their genetic tendencies.”
Read that again, “They…have been self-bred for centuries [and] conditioned as children to reinforce their GENETIC TENDENCIES.” The scientific evidence to absolutely, positively refute the existence of such genetic tendencies between “races” or collective groups of human beings is long-standing. I refuse to even go there. Do some damn reading on the subject. No, the knee-jerk lie (because it’s as much a lie as anything the banksters have pulled) that genetic tendencies separate “us” and “them” leads to no where but total, absolute evil.
Ash, stop cross-posting to the Diner. It’s going to lead nowhere good.
Witnessing the wrath that RE brought down upon another commentator in TAE, I can only imagine what sort of fatwah will now be placed on my head. And here I thought we could have been friends. But RE’s and El G’s ideas are positively dangerous, frightening, eugenic witch-hunts in disguise. They’re just very angry and hateful, and the financial collapse is a perfect breeding ground for such hate. I don’t see the benefit of this cross-pollination with Doomsday Diner. TAE doesn’t need it. Indeed, I’ve never found writers with so much integrity and clear-thinking than on TAE, and I don’t expect TAE is about to change now. Over and out.
I’m so glad you wrote this pithy, relevant article, RE. Makes me feel not so alone–I too have become an admirer and hoarder of precious (but apparently disposable) glass containers. It’s getting out of hand, though, as I don’t know what do with them all yet. It just makes my heart and head hurt when I see everyone tossing out glass containers when surely we will be unable to sustain such production indefinitely. They’ll be a nostalgic remnant of a by-gone era soon enough.
Oh, and less romantic but equally wasteful is cellophane wrap (e.g., Saran wrap). I have stopped buying the stuff entirely, and it made me realize how unnecessary the stuff really is. For example, your food actually keeps BETTER in the fridge if you just put a small saucer/plate over the bowl rather than cover it with Saran wrap! Just try keeping your cut lemon in such a dish, rather than wrapping it. The lemon seems to keep for weeks, and you just use the one glass/ceramic bowl with a lid/saucer to keep it fresh. Not to mention that you can keep 90% of the saran and aluminum foil that new food products come packaged in. So when you need some Saran just use some of the “disposable” packaging from a sanitary, perfectly clean food product you bought from the store earlier in the week–packaging you would otherwise just throw away.
And no, I don’t live in a gross pile of dirty old hoarded things. Keeping some foil or Saran wrap from other products or using a bowl/glass dish to keep food fresh is clean and easy. Cheaper as well!
I too have long considered these recycling bins a bogus trap to ease the minds of some anxious consumers. Essentially recycling just gives most people licence to keep consuming. I have known one rabid recycler who glared at me for daring to doubt the utility of recycling at all–her eyes alone said “You’re an Earth Killer.” Meanwhile, she’s gone on to have two new children (doubling her carbon footprint) and building a brand new house…with new bamboo floors of course…because bamboo is more environmentally sustainable. The hypocrisy. Recycling bins just keep people blind and buying. Just how they want us eh.
Note I specifically said in the quote you bring up, I don’t want to blame the vicitm. And I don’t. I won’t. But I will blame somethign systemic, which requires change from each of us. Demanding change from each of us is different from assigning blame.
Ultimately, our debate comes full circle. I intervened upon K’s question to you: “name the evil masterminds behind this mess.” My answer was there were none–not in the sense K was suggesting. You insist there are such evil masterminds. But when asked how we begin making them pay, I pointed out that you can’t just eliminate one, 100, or 1000, because more just pop up in their place. The hydra as you aptly put it. And I point out that we then devolve into an endless blame game against a fantasy hydra where nobody wins–you cannot eliminate the evil masterminds through targeted violence because there are no evil masterminds per se (or conversely they are infinite and just as elusive as a result). So they’re a fantasy. If it’s systemic, the whole “system” is responsible and must be changed. That is different from blaming Joe, John, Josephine, you or me. We must CHANGE as individuals to address the sytemic evil. We don’t PUNISH Joe to address it. That would be wrong. The distinction is encouraging change from individual victims’ behaviour versus punishing the victims for something they supposedly did wrong in the past. Like Hansel and Gretel I don’t think most individuals deserve blame for their predicament. Moving forward, I do argue we should all change though.
Who said I endorse playing by the rules? I certainly don’t. Break them and stand your ground. That is different than the genesis of this debate: are there evil mastermind villains at the very top who should be captured and beheaded? Returning to this core of the debate, I see no reason yet to budge from my argument that they don’t really exist. Not in the way that they can be hunted down in any effective, sane, useful, helpful or moral way. The evil is systemic, not individual.
I think with regard to your point about not “blaming Joe-6-Pack” for the mess “he” is in, it’s really important to return to a brilliant insight from Stoneleigh in which she recalled the fable of Hansel and Gretel. The analogy she made argues that we would never blame Hansel and Gretel for their predicament (they’re nearly eaten) despite the fact that it was an innocent sort of greed that got them there (they were happy to accept the witch’s offer to eat as much of the candy-house as they wanted). Because faced with such an offer, any child would accept! Now, Joe-6-Pack, and his better half Josephine (or John?) were similarly led by the bankers (the witches) to the easy (and incredibly complex) all-you-can-eat credit buffet (the gingerbread house). Not surprisingly we all gorged on it until we’re choking, and were none the wiser…until now. Bankers are paid hundreds of thousands if not millions to figure out ways to get Joe, Josephine and John to fall into the trap. It’s not a fair fight. No wonder we fell for it! The guy making $30K a year fixing mufflers was trained to believe his banker. Oops. So it is important NOT to blame Joe. Truly, it is not his fault, and he should not pay the price. The well-informed bankers lent the money out, knowing full well what the risks were (unlike Joe). Indeed, the bankers wrote the rules! Their take-it-or-leave-it mortgage agreements, if you will. And so let’s enforce those same rules against the banks. Not against Joe. And re-write the rules that were wrong to begin with. I totally agree that the banks and bondholders should pay the price for their terrible bets–after all, they really did know better. The banks are a systemic evil that needs addressing. Systemic evil isn’t solved by violence against a few individuals, however. There are many other rule-breaking tactics that can and undoubtedly will be employed to make necessary changes.
RE, that’s just a bit of emotional propaganda (or worse, a threat). Bush used it too. If I’m not with the mob, I’m not with the mob, period. It doesn’t mean I necessarily get trampled. There is just as much reason to believe I’ll live to fight another day if I avoid the mob rule you’re describing. Besides, isn’t the status quo the current mob? Take your logic further, and we should just go along with that wave for all we can get or we’ll get crushed. You’re endorsing opposing it. I’m all for opposing the mob of the status quo, but not in all the ways you endorse. We do have “numbers” on our side–the more people who get burned by the status quo, the more of “us” will be dissatisfied with the current state of things. Our sheer numbers can effect a lot of change without building a single goddamn guillotine. Endorsing roving militias in search of the ephemeral villains behind this financial mess is not the only way, and is not the best way either. Indeed, chasing ghosts is just going to shed a lot of unnecessary blood. We should focus our energies for more productive gains.
Nah, not hypocrisy. Knowing a mob is inevitably coming is not the same as endorsing it. And I still see it as my moral duty to oppose violent mob rule, even when i know it’s going to be an inevitable part of the unwind. Remember, the unwind is going to hurt a lot of people for a lot of reasons, violent mobs being just one of them. I want to help people mitigate that pain as much as possible, so they survive to build a better community at the bottom of this mess.
That’s not to say I oppose owning a gun, or even shooting it to protect your rights and property. Hopefully I don’t have to ever pull a trigger, but I expect I’ll try to learn more about shooting all the same.
The debate is an interesting game of dialectical chess…or British bulldog…not sure which. Of course, the irony is that TAE has predicted all along the rise of angry mobs intent on cutting off the heads of their oppressors. It’s part of the unwind that TAE has been warning about, and so far with tremendous accuracy (if without tremendous accuracy of timing). And so, here Ash is trying to convince RE of the error of RE’s desires/agenda while at the same time I’m sure Ash will also admit that we are going to inevitably see these very same agendas carried out the world over.
Like Ash, I will continue to argue against these war-like agendas, despite their inevitability. They will undoubtedly be part of the unwind, but as much as they are an inevitable part of that unwind we must also foster a return to a philosophical, spiritual basis for a better new beginning. Not all “progress” has been a waste. The wider spread notions of equality are part of that progress and worth preserving. I don’t want to throw the baby out with the bathwater. I’m not interested in a loss of justice (in its loftiest sense) for the sake of throwing out the ogres who used the “system of justice” for oppression.
The world can be better after a reset, with stronger communities, a healthier environment, and also preserving the right of the individual to live freely without violence and discrimination. I won’t sacrifice one for the other, even while so many people inevitably will and I know that. I’ll still speak out against it though. I just don’t really see the difference between using financial profit as a reason to destroy my individual freedoms and using the “campaign against the profiteers” to destroy my individual freedoms. I wind up in the same hellish place.
I find it somewhat ironic that the gold holdings of countries, even Greece, are somehow seen as sacrosanct. Their debt is papered over with still more debt in the circular ponzi maze that Raul describes. And yet the sovereigns hang on to that last vestige of financial civility. So far… I expect very soon all of those countries will be forced to sell off their gold. How can they not? Just as they’ll be forced to sell off their shipping ports and hydro-electric facilities. Unless they reject the whole charade and abandon the debt game–default and run for the hills. And then we really do have a European implosion…which will probably necessitate a sale of their gold anyhow, just to feed their populace. Things have tenaciously maintained the appearance of “stability” and “sameness”…but I fully expect things are going to start looking really different really quite soon. How can they not? It simply can’t go on forever. Expect massive sovereign gold sales rather than bonds, that’s my bet.
I can’t help wondering if there’s a stalemate between the Fed and the consumer. The Fed wants credit growth, but the credit-worthy consumer is refusing to borrow (as much as the lenders won’t lend to anyone “less”). And I just can’t help wondering if these credit-worthy consumers have dug their heels in. They are refusing to budge. Contrary to the Fed’s expectations, these consumers are shrugging off 0% returns because they are going to wait this out in cash, no matter how low the Fed’s rate goes. And so the irony is that eventually, it may become apparent that the only way to increase spending is to capitulate to the consumer and give them yield on their savings. Once they have yield on their savings, THEN they will spend something. Only then will they feel richer and use some extra interest income to buy a nice car. Because as it stands, the 0% policy just makes the wealthy consumer feel poorer and poorer and even while he loses spending power to inflation, psychologically he feels like he still needs to hang on to that money for dear life. It totally flies against conventional wisdom….but I can’t help wondering if that’s where we’re at. An interest rate boost would actually increase the wealth effect rather than decrease it. The less credit-worthy would be more broke, but they aren’t going to spend no matter what. They’re broke either way, with or without an increased interest rate. However, the cashed up consumers, even as a wealthy minority, might start to spread some wealth around if it was earning something without having to engage in ridiculous gambling risks. Just a thought, somewhat different from the typical deflationary explanation that insists the consumer waits for things to be cheaper to explain the psychology behind his refusal to spend.
I can’t help wondering if there’s a stalemate between the Fed and the consumer. The Fed wants credit growth, but the credit-worthy consumer is refusing to borrow (as much as the lenders won’t lend to anyone “less”). And I just can’t help wondering if these credit-worthy consumers have dug their heels in. They are refusing to budge. Contrary to the Fed’s expectations, these consumers are shrugging off 0% returns because they are going to wait this out in cash, no matter what the Fed does. And so the irony is that eventually, it may become apparent that the only way to increase spending is to capitulate to the consumer and give them yield on their savings. Once we have yield on our savings, THEN they will spend something. Only then will they feel richer and use some extra interest income to buy a nice car. Because as it stands, the 0% policy just makes the consumer feel poorer and poorer and even while he loses spending power to inflation, psychologically he feels like he still needs to hang on to that money for dear life. It totally flies against conventional wisdom….but I can’t help wondering if that’s where we’re at. An interest rate boost would actually increase the wealth effect rather than decrease it. The less credit-worthy would be more broke, but they aren’t going to spend no matter what. They’re broke either way, with or without an increased interest rate. However, the cashed up consumers, even as a wealthy minority, might start to spread some wealth around if it was earning something without having to engage in ridiculous gambling risks. Just a thought.
RE! I just know you’re intelligent enough–based on much of your writing–to see that it’s impossible to line up all those guilty of “knowingly enriching myself at the expense of others”. Every profit is at someone’s expense. That is inherent in the definition: one cannot have profit without another’s expense. If I sell someone a shirt I know he doesn’t need, maybe catching him at a weak moment, I’d be guilty according to this edict! That is insane. Unworkable. Dangerous. Scary. Nonsenical. And certainly not the well- considered doomsday plan I have come to expect from you. Your contributions are too valuable to waste on such distractions.
What we are doing ain’t working! Totally agree! Oh boy, and is it ever NOT working.
Here’s an unsettling perspective: “The End Game: 2012 & 2013”
https://www.zerohedge.com/news/big-reset-2012-and-2013-will-usher-end-scariest-presentation-ever
We don’t have a lot of time to run after those guys at the top. I might not even have enough time to build my chicken coop!
Eventually, if we are forced to rebuild from the ground up, I expect we will be wiser and pissed off and will be happy to bring a few people to a (more effective) court of law. Then again, there might be so much water under the bridge at that point that we’ll have completely lost track. We’ll just want to get on with building something new.
RE writes: “Its also a Hydra problem, where when you cut off one head, another grows to replace it. The trick in killing a hydra is to lop off ALL the heads simultaneously. A challenge, but not impossible to accomplish either.”
The hydra is an excellent analogy. A mythical creature which requires mythical strategies to dispose of it. Best left for comic books.
And besides, it’s starting to sound a wee bit….crazy.
Again, let’s focus on what we CAN accomplish. Survival. Community organisation. Education. Asset protection. We’re getting a chicken coop soon! Yeeha. 🙂 My biggest fear in that regard is that when the hens stop laying (due to age) I’ll be too attached to eat them. Modern life has made me soft. I’d be useless at killing hydras even if they did exist!
Say you can finally winnow down your search for the three or four genius masterminds behind the problems now facing billions of people. Then what? You think that by cutting off their heads the problem is solved? Obviously not! There are so many more that will happily take their place. So then, I suppose you’d argue you’d have to cut off more than three or four heads. How many exactly? Hundreds? Thousands? What degree of culpability for our predicament shall we use to determine their fate? How on earth would the degree of culpability be measured?! No. I really do love RE’s contributions here, and I have a feeling we’d get along rather well as neighbours (I’ve lived in the far north myself), but I wholly disagree that the search is worthwile for these mythical evil genius masterminds, who apparently manipulate even the Jamie Dimons and Jon Corzines like helpless puppets on a string. And I’ll say it again: there isn’t any such ultiamate evil genius at the top of the pyramid anyhow. It’s just rich people doing what rich people do–that is being human like the rest of us. The whole greedy lot. We just haven’t done a very good job at keeping things in check.
I’m not saying we don’t need to get revolutionary on some asses. And some people deserve long jail sentences. But the whole thing is far more systemic, and no one has a master plan with an all-seeing eye for present, past and future. They’re not that smart. No one is. Too much chaos to track.
History is replete with a minority of oppressive rich people crushing the poor. In fact the 20th Century freedoms from this repression are more of an historical anomaly, from my understanding. It’s not surprising we lost the plot. But we can still get it back, I think. I’d rather we focused on things we can actually achieve, rather than chasing ghosts and mythical creatures with supernatural powers.
What about our own individual responsiblity in this whole mess? We’re voters. We’re consumers. We have free will. I don’t want to blame the victim. But I also want to avoid wasting time on blaming Puff the Magic Dragon.
I have no doubt heads will roll before this is over. They will largely be symbolic gestures, and not necesarily true justice. Again, let’s recognize we are party to a big system that is corrupt, and we have enabled a lot of really corrupt people to make things worse and worse. Is it too trite to say “change starts with us”?
Karpatok post=3270 wrote: While most writers on the subject seem to be in agreement that every thing is enacted to benefit the banks, I would like to address the ownership of said banks or masters of the puppetry above the scenes. If even the Dimons and Blankfeins, the Obamas, Hollandes, Merkels etc. are second tier or even below, who the hell are we talking about. Who is at the top of this mess. Now Ashvin, Re, you are pretty smart guys, and I know that you have strong opinions. So have a little courage and stop hiding in generalities. NAME SOME NAMES. Because when I become Robespierre, I will want to know who I am sending to the guillotine. No more milkmaids, but the real evil stuff. Now SAY IT! Who are they? Or who do you in all fallibility think THEY ARE?
I think you will be disappointed in your search for an ultimate mastermind. In a world of highly complex systems, human beings at all levels of society–including the very top–are buffeted by unforeseen forces and ultimately unable to control them. That isn’t to say that the rich and powerful aren’t incredibly opportunistic, but I’m convinced they take advantage of change rather than explicitly effecting such change. My concern is that the human need to search for mastermind geniuses behind our woes has a terrible track record in our history. We usually end up blaming entirely innocent groups of people. The SYSTEM needs to change, and we can be part of changing that system. Cutting off an individual matermind’s head will do nothing one way or the other (except add to another kind of evil).
I think your proposed scenario makes so much sense that…well…most students are already doing it! 🙂 Getting an interest-free student loan (available in some places) sure beats unemployment. With no other options, it’s definitely the way to go. I think your scenario highlights that not all debts are the same, and not all debtors are the same. For such a tactic to be advantageous, however, one really has to have NO other options. Even if one can get a minimum wage job now, or arrange room and board on a farm in exchange for work, the job would offer more advantages in my opinion. Student loans could dry up in a year or three, as I’m sure you’d agree. Then again, a year or three is better than nothing, and a savvy student can still be planning for the inevitable unemployment at the end. Who cares if you even pass the classes!
It’s certainly plausible. It sort of suggests that one would be advised to accumulate as much debt as possible right now, since it would be a gargantuan windfall once the system implodes. The problem with that is that I think one has to be careful about personal debt because we simply don’t know how long it will take to go from today to the grand scale debt jubilee. Nor do we know what mechanisms will be put in place in that intervening time. I think you’ll see militia in the street protecting the status quo BEFORE you see a debt jubilee for everyone. I would rather avoid tangling with them, if I can. The status quo will not exit with a whimper. There will be a lot of bangs.
The populace is quite well trained. We won’t opt for the Mad Max scenario until our humanity has been completely obliterated. The rich and poor alike will sell out each other before we band together and repudiate all our debts at once. I just think it’s going to be much messier towards the bottom, and many of the penalties currently in place to punish debtors will increase before they vanish. Many people could not survive 6 months under such penalties, let alone 6 years.
I agree we’ll organically reach the hard stop you describe. But I think it will take a lot of people down with it first. We won’t all get our houses for free that easily.
This raises an interesting puzzle. Ash and TAE have warned about debtors prisons. Their basic advice is to get rid of debt so that you’re mobile and free of the shackles to the status quo. On the whole, I totally agree with this strategy. There is going to be quite a chaotic slide down to the bottom of this pit, and the more freedom of action you have, the safer you will be. You’ll also be in a better position to take advantage of any form of “recovery” at some point in this mess (which might mean “survival” as much as it means “profit”). Because as we started discussing, fiat money will probably survive for some time yet and you’ll want to have some.
And keep in mind that Dave’s point about paying down debt is somewhat revolutionary–it does shrink bank power. It does choke the status quo, because the status quo DEPENDS on credit GROWTH. But ultimately, if paying off debt is so difficult for the debtor, that they exhaust and break themselves to do so, I think it might NOT be the best option. Hiding your money somewhere and defaulting on the debt–while “illegal” in the current system–would be more revolutionary and potentially would give the debtor more freedom of action. I say potentially because we don’t know how the decline will precisely play out. I believe this is why Ash recommends no debt, since it is safer to have no ties or obligations to the banks which the system can arbitrarily use against us. (The obvious risk is your revolutionary strategy backfires and you go to jail. But hey, being a revolutionary ain’t supposed to be easy is it. It’s why I might want to beat the banks at their own game though by paying off my debt instead.)
I do think there are already signs of increasing arbitrary penalties, and if you’re seen to have any income, then those penalties will just increase. But still, they can’t throw ALL the students in jail who default on their student loan. Eventually, if ALL students simply refused to repay their student loan, the government might be forced to wipe the debts clean. Hard to know which way this will go.
Reverse Engineer post=3214 wrote: In truth, it is community and in your relationships with others that true wealth lies, and in this as in many other things the TAE folks and the Diners are of like mind. This of course is the reason we are cross posting so much these days. […] If we are to make a difference here, there must be a synthesis, not a cacophony.
Totally agree. Though it’s probably too touchy-feely to convince most folks that they will need to embrace this change in priorities. Sometimes I wonder if the promise of financial opportunity is at least the right “bait” to convince people to make a change. This is where the likes of Robert Prechter diverge from TAE. Both Prechter and TAE see a massive, destructive deflation against which we have to prepare. But Prechter also emphasizes the tremendous financial opportunity that could result for those who are prepared (with cash, outside the banking system, for example). TAE has chosen to reach the ordinary folks who just need to survive this and might have nothing spare to “invest” at the bottom of the collapse. And I have a feeling you are of the opinion that the change will be so devastating that there will be no recovery of any kind to invest in. I think there will be some version of re-building that will present opportunity, though it won’t look like the growth and credit explosion of the past 75 years. In any event, it’s a prospect that can be used to convince some of the more reluctant people to make changes. I’ve found family and friends quite unwilling to give up the dreams of perpetual growth. It’s been hard to give up for me too.
Reverse Engineer post=3210[… wrote: IMHO, our Iluminati Masters of the Universe are running around now like Chickens with their Heads Cut Off trying to figure out how best to protect their own “Wealth”, when in fact that wealth is ALREADY GONE. It’s floating around up there in the atmosphere as moelcules of CO2.
This is a lovely analogy. Very quotable.
And as far as the notion that there is nothing left to buy, I think you touch on something that Ash and TAE have discussed before: the real change, and a positive one at that, to come from all this ensuing chaos is the shift in our desires. We must (because we’ll be FORCED to) return to a celebration of community and self-discovery over consumption and material goods. I’m going to learn to play guitar one way or another! Used to be there was a musician in every family. We’ve lost touch with all the things that people need to enjoy. iPads don’t actually cut it, in the final analysis.
davefairtex post=3178 wrote: In some sense, both sides in this debate are talking about a denouement caused by widespread defaults on unpayable debts.
Reading over some FOFOA posts, it does appear that he acknowledges that defaults lead to deflation. But his claim is that the CBs won’t allow that deflation to stand for very long – moments, minutes, hours, or days, and that they’ll quickly react by exchanging money for all the defaulted assets.
Folks here seem to think that the CB won’t be allowed to do this; the Fed will be prevented from wholesale replacement of bank credit with base money. […] But at the end of the day, it all boils down to guessing what the Fed (and/or the ECB) will actually be able to do when the debt default crisis arrives. And that seems to ride on one thing: do the banks still have enough political power to make this happen the way they did in 2008? If they do, then we could well have a confidence collapse in the currency. If not, then we get a deflationary depression. No doubt the Fed would try to thread the needle and print just enough to restore the system, but not so much so as to cause a collapse of confidence. […]
As to the power of CB’s to print their way out of deflation, many deflationists point out that the tower of credit is so vast that the CBs simply cannot print enough to keep up, if credit destruction accelerates in earnest. Obviously, the CBs do not want to erase themselves from existence in some great suicidal printing bonanza. So, while they may truly attempt to staunch the current bleeding via “printing” in the face of deflation, they also recognise that printing to the extent necessary to truly replace ever larger swaths of vanishing credit–a process that has already begun in earnest–would be politically impossible and ultimately not in their own interests anyhow. The “printing” (i.e., quantitative easing) has only been a drop in the bucket, which is why it has been ineffective, despite being the largest such monetary exercise in human history. The CBs simply cannot print enough to replace the 100s of trillions of vanishing credit before one of myriad forces steps up to stop them. The Fed hoped to reignite credit creation by filling bank coffers. However, despite ridiculous assurances of helicopter drops, I don’t think the Fed has any illusion it can truly replace all the credit currently in existence, should credit actually start evaporating exponentially. In truth, the Fed doesn’t believe it will need to do that–it naively believed it could reverse the tide before such catastrophe. Maybe even the Fed is starting to wonder if things are now out of hand, however.
The deflationists have persuaded me that the trickle of credit destruction soon becomes a torrent and the CBs are simply overwhelmed. They will have to change tack and embrace deflation at some point, by shoring up their own assets, once it suits them to do so.
Reverse Engineer post=3199 wrote: There are other problems the Chinese have besides the actual worth of whatever they might buy is concerned. If they try to dump treasuries, the value of those treasuries will drop faster than they can find buyers for them. Only Da Fed could buy them by printing, and why would they do that? Force the Chinese to hold them to maturity at low to nonexistent interest rates instead.
Far as non-Sovereign holders of this debt is concerned, like me the question is what is a better bet here? The Greeks buying London flats is the Real Estate equivalent of buying Facepalm Stock. That RE has nowhere to go but down, WAY DOWN.
To a lesser extent, the same is true for Alaska RE. I don’t know which will devalue quicker, USTs or a Farm in Palmer. You know, there is a very decent likelihood in about 4 years when the Pipeline has to shut down for lack of enough Oil to pump through it that the entire economy of Alaska will completely TANK, and 99% of the population will move out. Why BUY the farm if that is the case? I could simply walk in and squat it, along with numerous properties up here ALREADY vacant.
I really do not have anything worthwhile to BUY anymore other than Food really and Gas for the Bugout Machines while it remains available. Some folks keep Day Trading around their assets trying to make a Killing here or there, certainly shorting Faceplant is a decent way to make some Toilet Paper these days. I don’t bother with that though because it really doesn’t matter. In the end, just about all these “assets” are going to drop to near ZERO in value, and holding onto Real Property is going to take your own Army. Farms and just about everything else will likely be Nationalized under either a Fascist or Communist regime.
Up at the top, games are being played with comparative currency devaluations, I wrote about that over on the Diner. Overall, the Dollar is the best looking Dog in the Kennel for the next couple of years anyhow I think. Somewhere along the line we may reach a Tipping Point and hit a Sudden Stop event, or the Boiling Frog effect may continue through to the end of my lifespan, but either way there still really is not anything worthwhile for me to buy, I am as Prepped as anybody reasonably can be IMHO. You cannot truly “own” anything you cannot carry with you or anything you cannot Protect and Defend. You cannot count on the “Law” to protect you, as evidenced by today’s article from Surly on the Diner, “Mammon is Hungry”.
It remains to be seen what the Big Boys do as far as shifting assets go to try to protect and defend their own “Wealth” is concerned. I am reasonably certain though at this point that the final Battlefield for this will not be on the Economic Front. War is coming now, to be sure. Whether this will be an International War or Civil Wars on a Global Scale occuring simultaneously I do not know for sure, but one way or the other, a lot of BLOOD will be spilled to try to wash away this debt, that truly can never be repaid at all. Mother Earth herself has been scarred badly, and we all will pay the price for that.
Great thread. And RE, this was a great comment and worthy of being an article in its own right.
We don’t have a heat pump yet, but we’re also researching them at the moment because houses our so damn cold here in New Zealand (no insulation!). Toshiba keeps coming up as a brand that is supposed to be very reliable. I’m interested in anything people know about heat pumps too.
steve from virginia – are you the author of Economic Undertow? If you’re one and the same, your articles are quite brilliant. Complex but utterly insightful.
ashvin post=3066 wrote: I believe that FOFOA, more than any other Austrian-oriented economic analyst or HI advocate out there (yes, that includes ALL the big name bloggers), deserves the time to be considered and critiqued.
Absolutely! Yes. I know I’m very glad you’re doing this analysis actually. Despite the disparagement I had for FOFOA’s claim for a “permanently high plateau for gold”, I think he makes some incredibly persuasive arguments. I really look forward to your insights on this. Because frankly, while I have been persuaded by the deflationist case of TAE and others, I don’t discount other possibilities entirely. I want to understand them all better.
Previously on TAE, I pointed out a FOFOA post a while back that actually has the gall to say that gold will eventually reach “a permanently high plateau”. Those weren’t his exact words, but awfully close. And of course dangerously echoing the words of Irving Fisher re: stocks only three days before the 1929 stock market crash. I was surprised FOFOA would have chosen such language, even if he believes it!
Last I heard, TAE was about to tour Europe. And I believe they sometimes arrange for translators in some non-English locales. But as you suggest, I’m also very interested in what the Greek and Spanish people are saying. We read so much about the crisis there, and so little from the mouths of actual Greek citizens. I am left to simply imagine what is going on in the homes, in the streets and in the minds of the Greek people.
Once in a while someone like Mish Shedlock publishes a letter from a Greek reader (in English). Though you’d think in this era of Internet globalization, it would be easier to get words right from the Greek people. Isn’t someone documenting the goings on in journal fashion on YouTube or something? I haven’t found any sources like that yet. Just this very very funny one:
https://www.youtube.com/watch?v=gfQoms2DpDk&feature=related
I’d love to hear if anyone is following anything from Greece I can tune into in English. Videos like this poor quality clip, below, from a real Greek person on the ground is, in many ways, more informative to me than any slickly polished ABC Nightly News coverage:
https://www.youtube.com/watch?v=D0zrIhIebpg
There is an eerie calm about it when 100 ordinary citizens line up at at an ATM in the middle of the night. And I can’t help feeling like such images give us a window on the events yet to unfold in our own countries too.
