SVB collapse will be a big deal to the uninsured if those deposits are not protected. And to think that the CEO was handing out bonuses and cashing his warrants a couple of days before Friday. The kicker is he sits on the SF FED board.
SMDH
@dcarr said:
"Redeemable in Gold", "Payable in Gold", or "Payable in Gold Coin". That was printed right on the currency notes and bonds. That was a promise made by bankers, a promise they had no intention of keeping.
Don't forget the "ON DEMAND" part. Another broken promise by the government. Nothing new.
Was anybody turned down before FDR ?
Before or after FDR it doesn't matter. Once the bankers started massively cheating on the gold standard, the promise to pay back in gold was broken.
@dcarr said:
So the Federal Reserve knew full well that they were massively cheating on the gold standard when they issued 56,000 metric tons worth of gold-clause currency notes with no gold backing at all. It wasn't even a fractional-reserve situation. It was a zero-reserve situation. This was absolutely inflationary in the classic sense (a massive increase in the money supply) and the Federal Reserve Bank was fully responsible for that inflation. When other parties in the know (such as European banks) began to withdraw gold, it lead to the Great Depression.
PS:
"Redeemable in Gold", "Payable in Gold", or "Payable in Gold Coin". That was printed right on the currency notes and bonds. That was a promise made by bankers, a promise they had no intention of keeping.
What inflation ? There was DEFLATION after 1926.
The Great Depression wasn't created by gold withdrawals. Gold changes were a reflection of the underlying changes in economies, not a cause.
Ever hear of the "Roaring Twenties" ?
Massive inflation of the money supply occurred throughout the 1920s. That is what happens when there is a 10 to 1 leverage of the gold reserves (even though a real gold standard would have mandated no leverage). So there really wasn't a Gold Standard that was adhered to after about 1914.
When it became apparent that the gold reserves would be depleted, the economy had to be reigned in, causing the Great Depression.
Had the Gold Standard not been cheated on from 1914 to 1933, economic growth in the 1920s would have been lower (but steadier) and there would have been no Great Depression of 1929-1933.
Much like the humans and the pigs in Animal Farm - the Fed, JPM, Goldman Sachs, and the US Treasury have all morphed together into one type of animal, indistinguishable from each other. Just an observation. The players are ALL interchangeable.
Q: Are You Printing Money? Bernanke: Not Literally
@DoubleEagle59 said:
The saying "silver is not an investment, but is speculation" in my opinion is bull.
The saying should be tweaked a little though.
To be more accurate, I would say.....
"Silver (or any other PM) is not an investment, but is Financial Insurance"
I hope I need not explain.
All PM's -- including silver -- are highly volatile and subject to non-economic forces. They do not pay dividends or interest and they do NOT hold value at a predictable range relative to stocks or bonds.
I agree they can be considered "Disaster Insurance" or the like.
Apply an appropriate haircut to your PM holdings.....or don't count on them for ANY value....and then you can consider their sale a windfall whenvere you have to unload them (or your heirs or estate does).
@DoubleEagle59 said:
The saying "silver is not an investment, but is speculation" in my opinion is bull.
The saying should be tweaked a little though.
To be more accurate, I would say.....
"Silver (or any other PM) is not an investment, but is Financial Insurance"
I hope I need not explain.
All PM's -- including silver -- are highly volatile and subject to non-economic forces. They do not pay dividends or interest and they do NOT hold value at a predictable range relative to stocks or bonds.
I agree they can be considered "Disaster Insurance" or the like.
Apply an appropriate haircut to your PM holdings.....or don't count on them for ANY value....and then you can consider their sale a windfall whenvere you have to unload them (or your heirs or estate does).
It is the stocks and bonds that are the volatile side of the comparison.
Gold, as an asset over 5,000 years, has been more stable over the long run than anything else.
The problem with a gold standard is that the largest economy -- which is usually the reserve currency -- has to run a trade deficit mandated by economic tautology. That means more printing of money to meet demand...higher toleration of inflation....and willingness to run a capital account surplus.
Britain did this in the 19th Century....the U.S. did in the 20th Century. But not all countries are willing to do it despite the benefits.
@DoubleEagle59 said:
The saying "silver is not an investment, but is speculation" in my opinion is bull.
The saying should be tweaked a little though.
To be more accurate, I would say.....
"Silver (or any other PM) is not an investment, but is Financial Insurance"
I hope I need not explain.
All PM's -- including silver -- are highly volatile and subject to non-economic forces. They do not pay dividends or interest and they do NOT hold value at a predictable range relative to stocks or bonds.
I agree they can be considered "Disaster Insurance" or the like.
Apply an appropriate haircut to your PM holdings.....or don't count on them for ANY value....and then you can consider their sale a windfall whenvere you have to unload them (or your heirs or estate does).
It is the stocks and bonds that are the volatile side of the comparison.
Gold, as an asset over 5,000 years, has been more stable over the long run than anything else.
Gold certainly is not gutter. Finally, we agree. LOL
@jmski52 said:
I wouldn’t expect a banker to admit any responsibility for inflation when his livelihood depends on the banking system.
Look around your house. See all the trinkets and dust collectors laying about. That's $1000s of dollars of junk that goes to Goodwill or the dump on your passing. Now think about the $1000's you've spent on gifts that just about other people's houses or closets. 99% of that crap made in China. Now think about the $1000's you spent on snacks or smokes or other crap over your lifetime. That adds up to 10s if not 100s of thousands of dollars over ones lifetime. Yet we complain about not having money. We had the money, but we decided to part with it.
You want more money, then stop spending it.
You wanna destroy the banking system, then don't use it.
We always want to blame others, but never ourselves. Such weakness.
I blame YOU (cohodk).
You are always the first one to try and trivialize and dismiss any concerns or flaws in the system that people point out here.
@jmski52 said:
I wouldn’t expect a banker to admit any responsibility for inflation when his livelihood depends on the banking system.
Look around your house. See all the trinkets and dust collectors laying about. That's $1000s of dollars of junk that goes to Goodwill or the dump on your passing. Now think about the $1000's you've spent on gifts that just about other people's houses or closets. 99% of that crap made in China. Now think about the $1000's you spent on snacks or smokes or other crap over your lifetime. That adds up to 10s if not 100s of thousands of dollars over ones lifetime. Yet we complain about not having money. We had the money, but we decided to part with it.
You want more money, then stop spending it.
You wanna destroy the banking system, then don't use it.
We always want to blame others, but never ourselves. Such weakness.
I blame YOU (cohodk).
You are always the first one to try and trivialize and dismiss any concerns or flaws in the system that people point out here.
What good is pointing out a concern or flaw if you cant provide an answer? Better to just whine, right?
If we all stopped buying so much Chinese made crap, we would have more money, less debt, less dependence on hostile countries, greater control of the supply chain, less entitlement spending and a stronger currency. Yes, its thats friggin simple. Keep yer dang credit card in yer wallet!!!!
@jmski52 said:
I wouldn’t expect a banker to admit any responsibility for inflation when his livelihood depends on the banking system.
Look around your house. See all the trinkets and dust collectors laying about. That's $1000s of dollars of junk that goes to Goodwill or the dump on your passing. Now think about the $1000's you've spent on gifts that just about other people's houses or closets. 99% of that crap made in China. Now think about the $1000's you spent on snacks or smokes or other crap over your lifetime. That adds up to 10s if not 100s of thousands of dollars over ones lifetime. Yet we complain about not having money. We had the money, but we decided to part with it.
You want more money, then stop spending it.
You wanna destroy the banking system, then don't use it.
We always want to blame others, but never ourselves. Such weakness.
I blame YOU (cohodk).
You are always the first one to try and trivialize and dismiss any concerns or flaws in the system that people point out here.
What good is pointing out a concern or flaw if you cant provide an answer? Better to just whine, right?
If we all stopped buying so much Chinese made crap, we would have more money, less debt, less dependence on hostile countries, greater control of the supply chain, less entitlement spending and a stronger currency. Yes, its thats friggin simple. Keep yer dang credit card in yer wallet!!!!
Or dont. We all prepared, right?
.
Pointing out things that are not right can possibly change how other people cast their votes.
Pointing out things that are not right can possibly change how other people cast their votes.
.
And the problem would continue to persist. Complaining is not education. And education is not just pointing out a problem. The vote influences don't want to educate, lest they lose their ability to influence. Its up to "we the people" to effect change.
Anyone can identify a problem but very few can provide solutions. And until more can provide solutions, the problems will continue.
To jmski's comment though. Those who think inflation would be controlled by normalizing interest rates simply don't understand inflation. Rates have only been higher for about 6-8 months. The first 200 basis points of increase are inconsequential.
Please define normal interest rates.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
To jmski's comment though. Those who think inflation would be controlled by normalizing interest rates simply don't understand inflation. Rates have only been higher for about 6-8 months. The first 200 basis points of increase are inconsequential.
Please define normal interest rates.
You frequently referred to rates as being abnormal......so the opposite of that.
To jmski's comment though. Those who think inflation would be controlled by normalizing interest rates simply don't understand inflation. Rates have only been higher for about 6-8 months. The first 200 basis points of increase are inconsequential.
Excuse me, where was I commenting on "normalizing interest rates" to control inflation? When you have the corrupt Fed pumping out billions to rescue banks that grossly mismanaged their own interest rate risk? To start controlling inflation, the first thing that they could do is to stop bailing out their friends in the banking industry with taxpayer money.
I wonder how many pension funds are going to have to be "rescued" with more taxpayer dollars because of these higher rates. They all got massacred by holding 10 year T-Bills, just like the banks.
If you think this is inflation, just check back in a few months. The spending never stops accelerating.
Q: Are You Printing Money? Bernanke: Not Literally
Pointing out things that are not right can possibly change how other people cast their votes.
.
And the problem would continue to persist. Complaining is not education. And education is not just pointing out a problem. The vote influences don't want to educate, lest they lose their ability to influence. Its up to "we the people" to effect change.
Anyone can identify a problem but very few can provide solutions. And until more can provide solutions, the problems will continue.
Nothing good will change with this kind of defeatist attitude.
Its up to "we the people" to effect change.
That is why I wrote about changing the way people think and how they vote.
But you seem to be an obstructionist to that.
To jmski's comment though. Those who think inflation would be controlled by normalizing interest rates simply don't understand inflation. Rates have only been higher for about 6-8 months. The first 200 basis points of increase are inconsequential.
Please define normal interest rates.
You frequently referred to rates as being abnormal......so the opposite of that.
guess you don't know the answer, yet you use it as if you know. LOL
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
To jmski's comment though. Those who think inflation would be controlled by normalizing interest rates simply don't understand inflation. Rates have only been higher for about 6-8 months. The first 200 basis points of increase are inconsequential.
Please define normal interest rates.
You frequently referred to rates as being abnormal......so the opposite of that.
guess you don't know the answer, yet you use it as if you know. LOL
Oh, I know, and you know I know. But you don't know, and I know you don't know.
What is a band 1 and 2 standard deviations around the 100 yr average 10 year T-bond rate?
You see...I know and I know you don't know. Just as it's always been.
I wonder how many pension funds are going to have to be "rescued" with more taxpayer dollars because of these higher rates. They all got massacred by holding 10 year T-Bills, just like the banks.
Actually the pensions benefit from the higher rates.
And it's 10 year T-bonds. Lol.
And no one is massacred. Or are thinking that those who bought PMs in 2011 got massacred?
Pointing out things that are not right can possibly change how other people cast their votes.
.
And the problem would continue to persist. Complaining is not education. And education is not just pointing out a problem. The vote influences don't want to educate, lest they lose their ability to influence. Its up to "we the people" to effect change.
Anyone can identify a problem but very few can provide solutions. And until more can provide solutions, the problems will continue.
Nothing good will change with this kind of defeatist attitude.
Its up to "we the people" to effect change.
That is why I wrote about changing the way people think and how they vote.
But you seem to be an obstructionist to that.
Folk don't change the way they vote. They either don't or go from one side of the boat to another. But they are always on the same boat.
Actually the pensions benefit from the higher rates.
And it's 10 year T-bonds. Lol.
When the pension funds are already heavily-vested in low-yielding bonds, including the 10 year T-bonds, please explain how rising rates don't massacre their existing holdings.
I sure hope that your clients take your advice with a huge grain of salt, or not at all.
Q: Are You Printing Money? Bernanke: Not Literally
An increase in interest rates drops the value of their bond holdings. Makes them worth less and less liquid. Whatever liabilities the bank has, the bank is less able to cover or offset them with a declining asset base.
Name the bank liability that decreases when the interest rate increases. My head's only spinning at your crazy notions.
Q: Are You Printing Money? Bernanke: Not Literally
@jmski52 said:
An increase in interest rates drops the value of their bond holdings. Makes them worth less and less liquid. Whatever liabilities the bank has, the bank is less able to cover or offset them with a declining asset base.
Name the bank liability that decreases when the interest rate increases. My head's only spinning at your crazy >notions.
You are both right and both wrong.
I've managed pension funds, and depending on the duration of the bond holdings and the age/mortality assumptions of the plan participants, a rise in interest rates could help or hurt the pension fund. Generally, a rise in rates HELPS the funding ratio in a majority of plans. Most bond portfolios have a duration of 5 years whereas the duration of the liabilities can be 10-15 years.
But it depends on lots of moving parts, certainly.
@jmski52 said:
An increase in interest rates drops the value of their bond holdings. Makes them worth less and less liquid. Whatever liabilities the bank has, the bank is less able to cover or offset them with a declining asset base.
Name the bank liability that decreases when the interest rate increases. My head's only spinning at your crazy notions.
We're talking about pension funds. I'll give you the opportunity to reframe your comment.
But goldfinger mostly addressed it. Did you miss your finance class when they discussed time value of money and present and future values?
As usual, coho, you avoid answering a simple question. To be expected, I suppose. Instead of adding a little substance to the discussion, you don’t even give one specific in-context example.
Time value of money - that’s what I’m talking about, while you dodge a simple question and starting talking about salt. Not helpful, for anyone.
Q: Are You Printing Money? Bernanke: Not Literally
SVB had a bit of a funding problem, didn’t they? And the reason that they had that problem is because they didn’t bother to manage their interest rate risks, in the form of 10 year treasuries, and their big depositors ran for the hills.
Once again, poor management by a select group of insiders got bailed out. The banking industry is corrupt, all the way up the chain and into the Fed and Congress. Nobody is held accountable, period.
Yeah, gold finger is welcome to give an example that answers my simple question, if he’s so inclined.
Q: Are You Printing Money? Bernanke: Not Literally
@jmski52 said:
SVB had a bit of a funding problem, didn’t they? And the reason that they had that problem is because they didn’t bother to manage their interest rate risks, in the form of 10 year treasuries, and their big depositors ran for the hills.
Once again, poor management by a select group of insiders got bailed out. The banking industry is corrupt, all the way up the chain and into the Fed and Congress. Nobody is held accountable, period.
Yeah, gold finger is welcome to give an example that answers my simple question, if he’s so inclined.
SVB wasn't "bailed out" -- the equity was wiped out. If you want to see a bailout, check out the $36,000,000,000 given to the Teamsters Pension Fund with NO strings attached. Notice how it is kept from the American people by the media elite.
The banks were held accountable. Their equity is gone, the insiders lost billions. Not sure what you are whining about.
Accountable? What happened to that little punk and his dumpy girlfriend who were commingling accounts and spending a few $mil on themselves to party down? As far as I know, they aren’t being held accountable. All while they were funneling money to the DNC and scamming their own clientele, playing with depositor money gambling in bitcoin. Accountable in what solar system and by whose standards? Yours?
Q: Are You Printing Money? Bernanke: Not Literally
@jmski52 said:
Accountable? What happened to that little punk and his dumpy girlfriend who were commingling accounts and spending a few $mil on themselves to party down? As far as I know, they aren’t being held accountable. All while they were funneling money to the DNC and scamming their own clientele, playing with depositor money gambling in bitcoin. Accountable in what solar system and by whose standards? Yours?
You're talking about FTX ? It has been shut down. Arrests have been made. They gave lots of $$$ to one political party and courted the media elite, not the financial media.
@jmski52 said:
As usual, coho, you avoid answering a simple question. To be expected, I suppose. Instead of adding a little substance to the discussion, you don’t even give one specific in-context example.
Time value of money - that’s what I’m talking about, while you dodge a simple question and starting talking about salt. Not helpful, for anyone.
Oh jmksi, are you ok?
I'm not avoiding any questions. We were discussing pensions and I told you increases in rates benefit pensions due to time value of money. YOU, knowing I was right, decided to change the topic and talk about banks.
The picture of a salt block is in regards to your comment about taking things with a rain if salt. So I'm providing you with an entire block. Notice it is specially formulated for sheep. Enjoy.
What assets to pension funds mostly hold, coho? What happens to existing pension fund bond holdings when rates rise after more than a decade of artificially-suppressed rates?
In your typical non-answer fashion you said, Because an increase in interest rates decreases their liabilities
So, sure - I'll reframe my question to you - Name the pension fund liability that decreases when the interest rate increases.
You won't answer the question, will you?
Goldfinger says that pension funds are different, so I'd like him to explain how interest rate sensitive securities such as 10 year T-bonds are different for pension funds than they are for banks, and I'm not just talking about how they are regulated. I'm talking about how higher interest rates affect their bond holdings.
Q: Are You Printing Money? Bernanke: Not Literally
@jmski52 said:
So, sure - I'll reframe my question to you - Name the pension fund liability that decreases when the interest rate increases.
Goldfinger says that pension funds are different, so I'd like him to explain how interest rate sensitive securities such as 10 year T-bonds are different for pension funds than they are for banks, and I'm not just talking about how they are regulated. I'm talking about how higher interest rates affect their bond holdings.
I never said that the bond holdings aren't negatively affected by rising rates -- of course they are. And insurance companies and some pension funds have long-duration bonds which get killed by rising rates.
The LIABILITIES that get cheaper are fixed sums in the out years like payouts for mortality, disability/health, etc. If the pension fund or insurance company is ASSET SENSITIVE than it has money to invest at the new higher rates.
Actuarily, the higher discount rate reduces the PBO (Projected Benefit Obligation) or current net-present value of future liabilities.
Explain to me why the teamsters fund needed a bailout in the first place. If a rising rate automatically reduces the payout obligation, how did they end up in the hole?
I think you're splitting hairs. Sure, inflation reduces the value of the obligation, but you're talking about an internal discount rate that's applied by the fund managers, right? Since I'm not a pension fund manager, I can't speak to how they manage their interest rate risks so I'm not aware of how rising rates will affect the current net-present value of future liabilities, other than reducing the value of the eventual payout (but not the number of dollars required for the eventual payout). It's inflation that does that, not an interest rate, right?
How do rising rates reduce the number of dollars needed to meet the pension funds anticipated payouts? I don't see it. Is it in the pension fund's contract that fewer payout dollars are required when rates go up? If not, you are just splitting hairs over pension fund vocabulary.
Martin Armstrong talks about how Europe's pensions are in deep trouble after a decade & a half of suppressed and negative rates, while their promised payouts are based on an 8% yield and their holdings are worth nowhere near that. It's the same situation here, except not to that degree.
My question was initially directed at coho because he makes statements that he won't back up with data or even a basic explanation. That's his MO, so there's no need for you to jump to his rescue. We've seen it all before.
Q: Are You Printing Money? Bernanke: Not Literally
@jmski52 said:
Explain to me why the teamsters fund needed a bailout in the first place. If a rising rate automatically reduces the payout obligation, how did they end up in the hole?
No rise in interest rates -- short of a move to 25% !! -- was going to solve a ponzi scheme that was funded at 25-40%. If the fund was 80% funded, then a rise in rates MIGHT close the gap. You're not closing a 60-75 percentage point gap.
The Teamsters lied to their members and kept kicking the can down the road, not realizing the road eventually ended.
The Teamsters Central States Pension Fund deferred cash contributions in the 1980's and 1990's that today would be worth tens of billions. They did that to maintain their membership rolls and political clout.
I think you're splitting hairs. Sure, inflation reduces the value of the obligation, but you're talking about an internal discount rate that's applied by the fund managers, right? Since I'm not a pension fund manager, I can't speak to how they manage their interest rate risks so I'm not aware of how rising rates will affect the current net-present value of future liabilities, other than reducing the value of the eventual payout (but not the number of dollars required for the eventual payout). It's inflation that does that, not an interest rate, right?
Many of the costs are inflation-tied so inflation won't help. And pension payouts are often COLA-linked so that won't help there, either.
There are lots of moving parts but without a doubt: a rising rate environment HELPS pension funds. High inflation doesn't help EXCEPT to the extent it raises interest rates.
How do rising rates reduce the number of dollars needed to meet the pension funds anticipated payouts? I don't see it. Is it in the pension fund's contract that fewer payout dollars are required when rates go up? If not, you are just splitting hairs over pension fund vocabulary.
Future liabilities can be defeased with a smaller sum in the present. A 30-year liability funded by zero-coupon bonds in 2021 cost 48 cents on the dollar. The same liability funded a few years earlier cost 23 cents on the dollar, less than half.
Martin Armstrong talks about how Europe's pensions are in deep trouble after a decade & a half of suppressed and negative rates, while their promised payouts are based on an 8% yield and their holdings are worth nowhere near that. It's the same situation here, except not to that degree.
Lower birth rates also don't help. I'm not familiar with the European pension situation but yes, negative rates there were a major drag the last 5 years.
My question was initially directed at coho because he makes statements that he won't back up with data or even a basic explanation. That's his MO, so there's no need for you to jump to his rescue. We've seen it all before.
There are lots of moving parts but without a doubt: a rising rate environment HELPS pension funds. High inflation doesn't help EXCEPT to the extent it raises interest rates.
Future liabilities can be decreased with a smaller sum in the present. A 30-year liability funded by zero-coupon bonds in 2021 cost 48 cents on the dollar. The same liability funded a few years earlier cost 23 cents on the dollar, less than half.
What you appear to be saying is that the fund manager simply has to travel back in time in order to buy zero-coupon bonds in the past so that he can project those lower costs into the future to reduce the fund's future liabilities.
If I could do that, I'd go back to 1997 and buy more Pixar or Sprint PCS to reduce my current liablities. Or maybe buy more gold back in 2006.
Backdating a purchase that was never made - doesn't validate what you say about an increasing rate environment decreasing fund liabilities. Nice try, but it's a "no go".
Q: Are You Printing Money? Bernanke: Not Literally
Comments
I, I, I, I knew that.
SVB collapse will be a big deal to the uninsured if those deposits are not protected. And to think that the CEO was handing out bonuses and cashing his warrants a couple of days before Friday. The kicker is he sits on the SF FED board.
SMDH
First Republic Bank in SF will have an interesting week.
I'm glad I'm small potatos and just have a % in metals.
Before or after FDR it doesn't matter. Once the bankers started massively cheating on the gold standard, the promise to pay back in gold was broken.
Ever hear of the "Roaring Twenties" ?
Massive inflation of the money supply occurred throughout the 1920s. That is what happens when there is a 10 to 1 leverage of the gold reserves (even though a real gold standard would have mandated no leverage). So there really wasn't a Gold Standard that was adhered to after about 1914.
When it became apparent that the gold reserves would be depleted, the economy had to be reigned in, causing the Great Depression.
Had the Gold Standard not been cheated on from 1914 to 1933, economic growth in the 1920s would have been lower (but steadier) and there would have been no Great Depression of 1929-1933.
@streeter said: “SVB collapse will be a big deal to the uninsured if those deposits are not protected.”
It looks like that is settled now.
.
Knowledge is the enemy of fear
? All over with... or just beginning?
The saying "silver is not an investment, but is speculation" in my opinion is bull.
The saying should be tweaked a little though.
To be more accurate, I would say.....
"Silver (or any other PM) is not an investment, but is Financial Insurance"
I hope I need not explain.
"“Those who sacrifice liberty for security/safety deserve neither.“(Benjamin Franklin)
"I only golf on days that end in 'Y'" (DE59)
The actual market price -- in Europe -- was closer to $28/oz. Maybe even $30 in London.
Much like the humans and the pigs in Animal Farm - the Fed, JPM, Goldman Sachs, and the US Treasury have all morphed together into one type of animal, indistinguishable from each other. Just an observation. The players are ALL interchangeable.
I knew it would happen.
Gotta love that VIX buy signal
Always hold your gold. RGDS!
The whole worlds off its rocker, buy Gold™.
All PM's -- including silver -- are highly volatile and subject to non-economic forces. They do not pay dividends or interest and they do NOT hold value at a predictable range relative to stocks or bonds.
I agree they can be considered "Disaster Insurance" or the like.
Apply an appropriate haircut to your PM holdings.....or don't count on them for ANY value....and then you can consider their sale a windfall whenvere you have to unload them (or your heirs or estate does).
It is the stocks and bonds that are the volatile side of the comparison.
Gold, as an asset over 5,000 years, has been more stable over the long run than anything else.
The problem with a gold standard is that the largest economy -- which is usually the reserve currency -- has to run a trade deficit mandated by economic tautology. That means more printing of money to meet demand...higher toleration of inflation....and willingness to run a capital account surplus.
Britain did this in the 19th Century....the U.S. did in the 20th Century. But not all countries are willing to do it despite the benefits.
Gold certainly is not gutter. Finally, we agree. LOL
The whole worlds off its rocker, buy Gold™.
I blame YOU (cohodk).
You are always the first one to try and trivialize and dismiss any concerns or flaws in the system that people point out here.
Hey blitzdude, please stop mis-quoting me. THKS!
I knew it would happen.
What good is pointing out a concern or flaw if you cant provide an answer? Better to just whine, right?
If we all stopped buying so much Chinese made crap, we would have more money, less debt, less dependence on hostile countries, greater control of the supply chain, less entitlement spending and a stronger currency. Yes, its thats friggin simple. Keep yer dang credit card in yer wallet!!!!
Or dont. We all prepared, right?
Knowledge is the enemy of fear
.
Pointing out things that are not right can possibly change how other people cast their votes.
.
And the problem would continue to persist. Complaining is not education. And education is not just pointing out a problem. The vote influences don't want to educate, lest they lose their ability to influence. Its up to "we the people" to effect change.
Anyone can identify a problem but very few can provide solutions. And until more can provide solutions, the problems will continue.
Knowledge is the enemy of fear
Please define normal interest rates.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
You frequently referred to rates as being abnormal......so the opposite of that.
Knowledge is the enemy of fear
@cohodk said:
To jmski's comment though. Those who think inflation would be controlled by normalizing interest rates simply don't understand inflation. Rates have only been higher for about 6-8 months. The first 200 basis points of increase are inconsequential.
Excuse me, where was I commenting on "normalizing interest rates" to control inflation? When you have the corrupt Fed pumping out billions to rescue banks that grossly mismanaged their own interest rate risk? To start controlling inflation, the first thing that they could do is to stop bailing out their friends in the banking industry with taxpayer money.
I wonder how many pension funds are going to have to be "rescued" with more taxpayer dollars because of these higher rates. They all got massacred by holding 10 year T-Bills, just like the banks.
If you think this is inflation, just check back in a few months. The spending never stops accelerating.
I knew it would happen.
Nothing good will change with this kind of defeatist attitude.
That is why I wrote about changing the way people think and how they vote.
But you seem to be an obstructionist to that.
guess you don't know the answer, yet you use it as if you know. LOL
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
Oh, I know, and you know I know. But you don't know, and I know you don't know.
What is a band 1 and 2 standard deviations around the 100 yr average 10 year T-bond rate?
You see...I know and I know you don't know. Just as it's always been.
Knowledge is the enemy of fear
Actually the pensions benefit from the higher rates.
And it's 10 year T-bonds. Lol.
And no one is massacred. Or are thinking that those who bought PMs in 2011 got massacred?
Knowledge is the enemy of fear
Folk don't change the way they vote. They either don't or go from one side of the boat to another. But they are always on the same boat.
And it's opportunist, not defeatist.
Knowledge is the enemy of fear
Actually the pensions benefit from the higher rates.
And it's 10 year T-bonds. Lol.
When the pension funds are already heavily-vested in low-yielding bonds, including the 10 year T-bonds, please explain how rising rates don't massacre their existing holdings.
I sure hope that your clients take your advice with a huge grain of salt, or not at all.
I knew it would happen.
Because an increase in interest rates decreases their liabilities.
Oh boy, I can see your head spinning now. Lol
Knowledge is the enemy of fear
An increase in interest rates drops the value of their bond holdings. Makes them worth less and less liquid. Whatever liabilities the bank has, the bank is less able to cover or offset them with a declining asset base.
Name the bank liability that decreases when the interest rate increases. My head's only spinning at your crazy notions.
I knew it would happen.
You are both right and both wrong.
I've managed pension funds, and depending on the duration of the bond holdings and the age/mortality assumptions of the plan participants, a rise in interest rates could help or hurt the pension fund. Generally, a rise in rates HELPS the funding ratio in a majority of plans. Most bond portfolios have a duration of 5 years whereas the duration of the liabilities can be 10-15 years.
But it depends on lots of moving parts, certainly.
Name the bank liability that decreases when the interest rate increases.
I knew it would happen.
Physical silver in hand is a good idea my friend.
If there is a will, there is a way.
Welcome Kentuckyguy!
I knew it would happen.
We're talking about pension funds. I'll give you the opportunity to reframe your comment.
But goldfinger mostly addressed it. Did you miss your finance class when they discussed time value of money and present and future values?
Maybe you need some salt?
Knowledge is the enemy of fear
As usual, coho, you avoid answering a simple question. To be expected, I suppose. Instead of adding a little substance to the discussion, you don’t even give one specific in-context example.
Time value of money - that’s what I’m talking about, while you dodge a simple question and starting talking about salt. Not helpful, for anyone.
I knew it would happen.
SVB had a bit of a funding problem, didn’t they? And the reason that they had that problem is because they didn’t bother to manage their interest rate risks, in the form of 10 year treasuries, and their big depositors ran for the hills.
Once again, poor management by a select group of insiders got bailed out. The banking industry is corrupt, all the way up the chain and into the Fed and Congress. Nobody is held accountable, period.
Yeah, gold finger is welcome to give an example that answers my simple question, if he’s so inclined.
I knew it would happen.
Bank liability ? I can't think of any. If the bank is "asset sensitive" then the bank benefits but no liabilities would decrease to my mind.
Pension funds are different.
SVB wasn't "bailed out" -- the equity was wiped out. If you want to see a bailout, check out the $36,000,000,000 given to the Teamsters Pension Fund with NO strings attached. Notice how it is kept from the American people by the media elite.
The banks were held accountable. Their equity is gone, the insiders lost billions. Not sure what you are whining about.
Accountable? What happened to that little punk and his dumpy girlfriend who were commingling accounts and spending a few $mil on themselves to party down? As far as I know, they aren’t being held accountable. All while they were funneling money to the DNC and scamming their own clientele, playing with depositor money gambling in bitcoin. Accountable in what solar system and by whose standards? Yours?
I knew it would happen.
You're talking about FTX ? It has been shut down. Arrests have been made. They gave lots of $$$ to one political party and courted the media elite, not the financial media.
Oh jmksi, are you ok?
I'm not avoiding any questions. We were discussing pensions and I told you increases in rates benefit pensions due to time value of money. YOU, knowing I was right, decided to change the topic and talk about banks.
The picture of a salt block is in regards to your comment about taking things with a rain if salt. So I'm providing you with an entire block. Notice it is specially formulated for sheep. Enjoy.
Knowledge is the enemy of fear
What assets to pension funds mostly hold, coho? What happens to existing pension fund bond holdings when rates rise after more than a decade of artificially-suppressed rates?
In your typical non-answer fashion you said, Because an increase in interest rates decreases their liabilities
So, sure - I'll reframe my question to you - Name the pension fund liability that decreases when the interest rate increases.
You won't answer the question, will you?
Goldfinger says that pension funds are different, so I'd like him to explain how interest rate sensitive securities such as 10 year T-bonds are different for pension funds than they are for banks, and I'm not just talking about how they are regulated. I'm talking about how higher interest rates affect their bond holdings.
I knew it would happen.
I never said that the bond holdings aren't negatively affected by rising rates -- of course they are. And insurance companies and some pension funds have long-duration bonds which get killed by rising rates.
The LIABILITIES that get cheaper are fixed sums in the out years like payouts for mortality, disability/health, etc. If the pension fund or insurance company is ASSET SENSITIVE than it has money to invest at the new higher rates.
Actuarily, the higher discount rate reduces the PBO (Projected Benefit Obligation) or current net-present value of future liabilities.
Explain to me why the teamsters fund needed a bailout in the first place. If a rising rate automatically reduces the payout obligation, how did they end up in the hole?
I think you're splitting hairs. Sure, inflation reduces the value of the obligation, but you're talking about an internal discount rate that's applied by the fund managers, right? Since I'm not a pension fund manager, I can't speak to how they manage their interest rate risks so I'm not aware of how rising rates will affect the current net-present value of future liabilities, other than reducing the value of the eventual payout (but not the number of dollars required for the eventual payout). It's inflation that does that, not an interest rate, right?
How do rising rates reduce the number of dollars needed to meet the pension funds anticipated payouts? I don't see it. Is it in the pension fund's contract that fewer payout dollars are required when rates go up? If not, you are just splitting hairs over pension fund vocabulary.
Martin Armstrong talks about how Europe's pensions are in deep trouble after a decade & a half of suppressed and negative rates, while their promised payouts are based on an 8% yield and their holdings are worth nowhere near that. It's the same situation here, except not to that degree.
My question was initially directed at coho because he makes statements that he won't back up with data or even a basic explanation. That's his MO, so there's no need for you to jump to his rescue. We've seen it all before.
I knew it would happen.
No rise in interest rates -- short of a move to 25% !!
-- was going to solve a ponzi scheme that was funded at 25-40%. If the fund was 80% funded, then a rise in rates MIGHT close the gap. You're not closing a 60-75 percentage point gap.
The Teamsters lied to their members and kept kicking the can down the road, not realizing the road eventually ended.
The Teamsters Central States Pension Fund deferred cash contributions in the 1980's and 1990's that today would be worth tens of billions. They did that to maintain their membership rolls and political clout.
Many of the costs are inflation-tied so inflation won't help. And pension payouts are often COLA-linked so that won't help there, either.
There are lots of moving parts but without a doubt: a rising rate environment HELPS pension funds. High inflation doesn't help EXCEPT to the extent it raises interest rates.
Future liabilities can be defeased with a smaller sum in the present. A 30-year liability funded by zero-coupon bonds in 2021 cost 48 cents on the dollar. The same liability funded a few years earlier cost 23 cents on the dollar, less than half.
Lower birth rates also don't help. I'm not familiar with the European pension situation but yes, negative rates there were a major drag the last 5 years.
Just trying to contribute where I can, Jmski !!
There are lots of moving parts but without a doubt: a rising rate environment HELPS pension funds. High inflation doesn't help EXCEPT to the extent it raises interest rates.
Future liabilities can be decreased with a smaller sum in the present. A 30-year liability funded by zero-coupon bonds in 2021 cost 48 cents on the dollar. The same liability funded a few years earlier cost 23 cents on the dollar, less than half.
What you appear to be saying is that the fund manager simply has to travel back in time in order to buy zero-coupon bonds in the past so that he can project those lower costs into the future to reduce the fund's future liabilities.
If I could do that, I'd go back to 1997 and buy more Pixar or Sprint PCS to reduce my current liablities. Or maybe buy more gold back in 2006.
Backdating a purchase that was never made - doesn't validate what you say about an increasing rate environment decreasing fund liabilities. Nice try, but it's a "no go".
I knew it would happen.