You need to understand that the economy was performing well above sustainability for decades. Mhammerman proves that point when he states that 1 person is now doing the job of 2. If that 1 person can do the job, then the 2nd person never should have been hired in the first place.
Our economy was as good as it was because of debt spending. Without those extra dollars from debt, the unemployment rate would have been in the 7-9% all along. The excessive debt spending provided many frivilous and non-essential/necessary jobs.
And, Americans priced themselves out of work. Again, as mhammerman points out, people wont work unless they get vacation, 401k, health insurance, gas card, ect. He who asks for too much is most likely to get nothing.
As i've stated many times, the only way to "create" jobs will be to spend trillions on infrastructure, preferrably energy related. Anything short of that will mean unemployment at current rates until the population bubble evens out. Anybody up for investing 5 trillion?
The excessive debt spending also enabled the inflation bubble to grow without impediment. But this is a topic for another thread.
<< <i>You need to understand that the economy was performing well above sustainability for decades. Mhammerman proves that point when he states that 1 person is now doing the job of 2. If that 1 person can do the job, then the 2nd person never should have been hired in the first place. >>
I somewhat disagree. Where I work the staff is severely diminished but the output has not really changed. While the concept is correct, we are now in a terrible situation such that if someone leaves, there is no one else with the skills or experience to step in and replace him. Likewise, vacations can be killer because there is no replacement or backup for many of the positions or skills. So to imply that the "2nd worker" is unnecessary is probably too harsh or inacurate, but it is definitely possible to get by with just the one but it does leave the operation vulnerable and reliant on single points of failure. It's more like operating without insurance.
<< <i>Our economy was as good as it was because of debt spending. Without those extra dollars from debt, the unemployment rate would have been in the 7-9% all along. The excessive debt spending provided many frivilous and non-essential/necessary jobs. >>
I would also add that it was good as it was because of the creation of trillions of dollars through derivatives and other new and creative financial instruments as well, in addition to very low and friendly interest rates.
<< <i>And, Americans priced themselves out of work. Again, as mhammerman points out, people wont work unless they get vacation, 401k, health insurance, gas card, ect. He who asks for too much is most likely to get nothing. >>
I'm not sure you can say this overall, but the unions have definitely done this. But for everyone else, supply and demand has pushed the wages to what they are, to the extent that union wages haven't influenced non-union wages. I don't think too many of us have been in the position to demand a certain wage when applying for a job. When there's a shortage with your skill and you know the other applicants paled in comparison to you, sure. But most of the time companies know how much to offer to get the skill level that they are seeking, and that's what they offer.
Rebuilding our infrastructure will no create jobs for the long term. Bring back our manufacturing base. 55K factories closing was never good for our economy. Our country is very vunerable right now. We don't even build the majority of our transformers here. What happens when we get an EPM Blast. We are going to wait for Germany to rebuild our transformers.
creation of trillions of dollars through derivatives and other new and creative financial instruments
Yes, yes, yes!!!! Now you see what i've been trying to say for years. It isnt the FED that creates the dollars, but rather the banking system. And this is why I say the FED can print all it wants and still have a difficult time in creating inflation.
The destruction of the "banking dollars" ie DEBT, will have a negative drag on the economy and inflation for many years.
Australia is now beginning to tip the other way. Australia posted a month of deflation Just wait till the Aussie real estate bubble pops. Those juicy yields in Australia will soon be history, and with it, Aussie dollar strength.
As the Aussie dollar drops, so does the Cando Canada's economy shrank in the second quarter as they will not be raising rates anytime soon. The chocolate currency and Kroner (dead dinosaur currency) are just too darn small to keep up the fight in the currency basket. The EU is on the verge of collapse. The US dollar doesnt have to do much fighting when its competitors are in disarray.
The destruction of the "banking dollars" ie DEBT, will have a negative drag on the economy and inflation for many years.
Unless the Fed buys the debt and monetizes it along with the Treasuries that they are also monetizing. And the really bad news is that all this debt doesn't do jack for anyone except those that were bailed out. That's a fact.
Q: Are You Printing Money? Bernanke: Not Literally
<< <i>The destruction of the "banking dollars" ie DEBT, will have a negative drag on the economy and inflation for many years.
Unless the Fed buys the debt and monetizes it along with the Treasuries that they are also monetizing. And the really bad news is that all this debt doesn't do jack for anyone except those that were bailed out. That's a fact. >>
<< <i>The destruction of the "banking dollars" ie DEBT, will have a negative drag on the economy and inflation for many years.
Unless the Fed buys the debt and monetizes it along with the Treasuries that they are also monetizing. And the really bad news is that all this debt doesn't do jack for anyone except those that were bailed out. That's a fact. >>
Agreed. Issuing debt to pay debt is a fools folly.
Roadrunner often writes that there are $600 trillion worth of derivatives. If so, then it will be impossible to monetize. Thats 10x the worlds GDP and probably multiples of the entire worth of the planet.
"All that debt" was responsible for the economic boom we enjoyed for 30 years. Standards of living would have been much lower if not for this boom. But, everything reverts to its trend, and so will standards of living. The previous generation(s) borrowed from the future. Thats just the way it is and cannot be reversed. Its not the end of the world, just the end of excess.
Those who have debt as liabilities and those who have debt as assets will see it destoyed. This is why the rush to tangible assets.
If the derivatives market collapses, then it would probably wipe out most of the gains the last generation(s) enjoyed. Hey, the 50s werent a bad time to live , unless you were in the Soviet Bloc
Roadrunner often writes that there are $600 trillion worth of derivatives. If so, then it will be impossible to monetize. Thats 10x the worlds GDP and probably multiples of the entire worth of the planet. "All that debt" was responsible for the economic boom we enjoyed for 30 years. Standards of living would have been much lower if not for this boom. But, everything reverts to its trend, and so will standards of living. The previous generation(s) borrowed from the future. Thats just the way it is and cannot be reversed. Its not the end of the world, just the end of excess. Those who have debt as liabilities and those who have debt as assets will see it destoyed. This is why the rush to tangible assets.
If the derivatives market collapses, then it would probably wipe out most of the gains the last generation(s) enjoyed. Hey, the 50s werent a bad time to live , unless you were in the Soviet Bloc
$600 TRILL is the BIS's adjusted number when they realized it was very negative to say that $1.14 QUAD of otc financial instruments existed. So they chopped that number in half with accounting gimmicks. But it can be monetized, albeit slowly. During the 2007-2010 period the GAO said the FED liquified the world to the tune of $16-$17 TRILL. Obviously that money was created somehow outside of M0, M1, M2 and M3. And it went it somewhere as well, probably to help inflate various asset prices. While doing that the FED also increased its foreign custodial account by $1 TRILL and and absorbed illiquid assets totally between $1-$2 TRILL. So certainly they had some good tools to jack the prices of commodities and PM's over the past 3 yrs. If $50 TRILL in derivatives were unwound during that period (mainly CDS and MBS derivatives) it still leaves over 95% of the pile to wade through. Even if they only monetize a fraction of the remaining pile, additional tranches/bailouts/loans in the TRILLIONs will certainly continue to inflate "safe" assets where investors will be looking to park money as far away as they can from the current Ponzi financial system. While Congress was fighting over the scraps of TARP ($100's of BILLIONs), the bankers were in the process of flushing the system to many TRILLIONs which caused a nice round of tangible asset inflation. They can do that again and again as secretly as the first time. Maybe europe can perform the next liquidity pump into the system?
I've said for years that our growth in the 80's and 90's was really a mirage built on the backs of the cheap labor and services around the world. The only reason we didn't have obvious inflation was that the most of it was exported to other nations as we owned the world's reserve currency. But pay back always comes eventually. That exported inflation (whether stagflation or an all out inflationary bust throughout the economy) will return as the dollar's purchasing power declines in value.
"All that debt" was responsible for the economic boom we enjoyed for 30 years.
Debt is only useful when the agreement to pay it back is viable and the intent to pay it back is made good. I can borrow money to build a production facility, but if I don't pay back the debt, the facility goes away and the bank who lent the money is burned as well, rendering it less capable of lending money to anyone else. Hence, debt is definitely a two-edged sword. Debt didn't produce prosperity, people and companies did.
Aren't "derivatives" simply "bets"? and don't bets have two sides?
Yes.
won't the winning bets cancel out the losers (and others expire worthless, i.e, a draw?)
No. The winners may get their money, even if it has to be taken from the US taxpayers. But that only transfers the loss to the taxpayers, because the jerks who made the losing bets can't (or won't) pay up. So, it's not really a cancellation. It's a transfer payment where the winners shouldn't be paid unless they can extract it somehow from the assets of the losers. Frankly, it's a theft.
and aren't these bets spread out over time, so that some are constantly being "settled" as others are created?
please explain who is "buying", who is "selling", and who "owns" all these TRILLS of money?
Baley, you need to catch up on the financial news sometime. See my above comment.
Many of these losing derivative bets were sold by Fannie and Freddie to the Treasury via the Fed, who accumulated them from our buddies (BoA, Countrywide, WaMu, Indybank, Citi, GE Capital, Lehman, Wells Fargo - who am I forgetting? - that created tranches of mortgage security-backed derivatives that have now become worthless in the declining real estate market because deadbeats who couldn't afford the mortgages in the first place were allowed to go in over their heads and live in nice places that you or I wouldn't have gotten ourselves into.
The winners were guys who "retired" from those companies with golden parachutes just before their entites went belly up, the deadbeats who are now applying for government assistance with their mortgage payments, the mortgage closers who got commissions for signing up new mortgage contracts.........
The losers are.........................gee, I guess that would be anyone who didn't "get in on the action".
Q: Are You Printing Money? Bernanke: Not Literally
And this is why the Feds are suing the banks......But doubt they will get anywhere near what the taxpayer already forked over. Why this is not a financial crime? Why the CEOs of these banks are not going to jail? Just goes to show you how corrupt our government is. It is not a government for the people but only for the corporations-now backed up by the Supreme Court since now Corporations have the same voice as the people. We lost our voice as a people a very long time ago.
I can borrow money to build a production facility, but if I don't pay back the debt, the facility goes away and the bank who lent the money is burned as well
Nope, the facility is still standing waiting for another occupant. The bank lost depositor's money and you are protected by bankrupcty laws.
RE--Derivatives.. They are just contracts. Contracts are ripped up and voided all the time or settled for much less than obligated. Personally, derivatives are not really high on my worry list.
<< <i>Aren't "derivatives" simply "bets"? and don't bets have two sides? So if there is, say one QUAD of bets, aren't half of them, or $500 TRILL, one way and the other half the other? won't the winning bets cancel out the losers (and others expire worthless, i.e, a draw?) and aren't these bets spread out over time, so that some are constantly being "settled" as others are created? please explain who is "buying", who is "selling", and who "owns" all these TRILLS of money? >>
Contracts can be cancelled out or offset if both entities on a particular bet still survive. When Bear Stearns was taken over by JPMorgan they assumed all their derivatives as well. There was no need to pay out winners and losers. But when Lehman was allowed to go bankrupt w/o a takeover, all their derivatives now had to be unwound and paid out. When it was all said and one, Lehman received 9c on the dollar for their "portfolio." Obviously this was no 50-50 game of chance. As jmski52 mentioned, the winners on those bets demanded to be paid, and paid out they were via AIG and whatever other back door means the FED/Treasury devised. Had the winners (ie banks) not been paid they would have applied pressure elsewhere to tank the system, whether in the stock market, bonds, or elsewhere. In other words they would have thrown a finanical temper tantrum until they got their way (ie paid).
Since our top 25 banks own 98% of the $300 TRILL in our notional derivatives (and the top 5 owning 95%) the bets are all interconnected among a small group of players. It's sort of a case of one goes down, they can all go down. I think they tried Lehman as a test case. And it was a huge failure, but it got rid of one major competitor in the end. I don't think they'll let another big bank do down w/o a prompt takeover so derivatives can be kicked down the road further. It's not a bid deal to you or I, but it's a big deal to the bankers that know they are sitting on ticking time bombs. The Lehman case showed that they lost 91% of their "bets." The other guys can't be too far off those numbers. 80% of all the remaining bets are interest rate contracts which are ultimately tied to USTBonds. On balance sheets you can bet that these contracts are listed at cost or a tidy profit. In reality they are probably closer to the performance Lehman experienced. As Cohdok says, these can all be canceled out tomorrow. The problem with that is all the entities (ie big banks) that are carrying these assets as profits. Once those supposed assets go poof, so do they. The leverage would wipe out their balance sheets clean. It would then be time to restart the entire banking system from scratch minus our 5 too-big-and-now-failed banks. 50-1 leverage in reverse works just as well as it does on the upside. It's a complicated subject and I know I don't fully understand it or even explain it well enough.
Nope, the facility is still standing waiting for another occupant
The building remains, and the equipment is sold for pennies on the dollar. The facility is only worth something as a production facility. Otherwise, it's just un-utilized stuff. A liquidation isn't the same thing as a merger or an acquisition.
Q: Are You Printing Money? Bernanke: Not Literally
Dave, what am I gonna do with you? We might get deflation if Bennie ever lets up on the throttle, but he ain't a'gonna do it! He promised!
And if a conservative guy replaces Bennie, the kind of deflation we get might not be so good, or pleasant. If that guy ever appears, I'm goin' into dollars, big.
Q: Are You Printing Money? Bernanke: Not Literally
Asset price deflation (durable goods, equipment, etc.) will continue to co-exist in this economy with assets experiencing price inflation (pm's, foods, etc.). The well off have to park their money somewhere to shield it from the ravages of the declining dollar and loss of confidence in our govt. They sure as heck aren't going to invest in solar panel companies or General Motors. In a perfect world, with no FED and a properly managed monetary system, all prices would be declining together during deflation, gold included.
Dave, what am I gonna do with you? We might get deflation if Bennie ever lets up on the throttle, but he ain't a'gonna do it! He promised!
And if a conservative guy replaces Bennie, the kind of deflation we get might not be so good, or pleasant. If that guy ever appears, I'm goin' into dollars, big. >>
The value of the worlds assets are less today than a year ago. Bennie can give everyone their own printing press and it wont change the inevitable.
I think the world could be 10% less valuable as early as next week.
<< <i>The well off have to park their money somewhere to shield it from the ravages of the declining dollar and loss of confidence in our govt.
Dudes like Randal J. Kirk, for example, don't "park" money and "shield" it. They put it to Work and Grow it. >>
You mean a dude like Warren Buffet? Warren has invested a lot in businesses over the past decade. BH stock prices are basically flat over the past 5-7 yrs. and with the dollar depreciation factored in, running at a loss. He'd have been better off staying in silver rather than selling it in 2006.
The beauty of "parking and shielding" money in PM's is that they've been advancing 10-15% per year, or better. If RJ Kirk has access to a HFT computer or the secret intentions of JPM and GS, then it would make sense to run with the banksters. Warren wised up and got to buy into Goldman Sachs in 2008, and now BoA in 2011. If this is what it takes to "grow" money then the majority of us are out of the money. We haven't paid for the luxury of knowing what number is coming up on the roulette wheel before its even spun.
We haven't paid for the luxury of knowing what number is coming up on the roulette wheel before its even spun.
No, but we can sometimes see, through public disclosures, where successful investors and their advisors are placing their bets, and possibly improve our own odds
<< <i> We haven't paid for the luxury of knowing what number is coming up on the roulette wheel before its even spun.
No, but we can sometimes see, through public disclosures, where successful investors and their advisors are placing their bets, and possibly improve our own odds >>
Maybe. But too often, once such public disclosures are made that's usually when the well-connected big-time investors are already moving on to other investments.
<< <i>The well off have to park their money somewhere to shield it from the ravages of the declining dollar and loss of confidence in our govt.
Dudes like Randal J. Kirk, for example, don't "park" money and "shield" it. They put it to Work and Grow it. >>
You mean a dude like Warren Buffet? Warren has invested a lot in businesses over the past decade. BH stock prices are basically flat over the past 5-7 yrs. and with the dollar depreciation factored in, running at a loss. He'd have been better off staying in silver rather than selling it in 2006.
The beauty of "parking and shielding" money in PM's is that they've been advancing 10-15% per year, or better. If RJ Kirk has access to a HFT computer or the secret intentions of JPM and GS, then it would make sense to run with the banksters. Warren wised up and got to buy into Goldman Sachs in 2008, and now BoA in 2011. If this is what it takes to "grow" money then the majority of us are out of the money. We haven't paid for the luxury of knowing what number is coming up on the roulette wheel before its even spun. //// Investing at that level is prolly not investing but power distribution or a show of force. It's beyond my comprehension and ideology.
I'm nearly delerious with joy hearing that it costs "less" to operate our business and live this year than it did last year
Funny how the checkbook seems to be writing more checks. Must be delusional.
Our nut has doubled in the last 10 years ( NOT factoring the additional employees etc )
Meanwhile the premiums have been cut almost in half ( can't go no mo so stop waiting! ) Fortunately with the internet and the wonderful economics that have been applied ( only frank and others of similar ilk could like the direction ) and a sound idea of how to apply it to the business the amount of customers has increased significantly my business has broken records. That's pretty much my advice is despite the scumminess of the people in charge, or how much more competitive it's become, learn how to live well and prosper doing something you like, find someone to love who will love you back and screw the world
That's pretty much my advice is despite the scumminess of the people in charge, or how much more competitive it's become, learn how to live well and prosper doing something you like, find someone to love who will love you back and screw the world.
Bingo! We have a winner, folks!
Back to the issue of "investing".
we can sometimes see, through public disclosures, where successful investors and their advisors are placing their bets, and possibly improve our own odds
I can sometimes see, through public disclosure and public speeches where the politicians are taking us, and I am placing my bets that the successful investors and their advisors are too invested in the status quo to improve my odds at all. They "reform" the things that already work just fine, and they don't fix the real problems when it's not in their financial interest to fix them.
Q: Are You Printing Money? Bernanke: Not Literally
BofA to cut at least 40,000 jobs The layoffs reflect Bank of America's deepening woes and are likely to take a heavy toll on its California operations. Bank of America letting go of 40,000 employees!
<< <i>Asset price deflation (durable goods, equipment, etc.) will continue to co-exist in this economy with assets experiencing price inflation (pm's, foods, etc.). The well off have to park their money somewhere to shield it from the ravages of the declining dollar and loss of confidence in our govt. They sure as heck aren't going to invest in solar panel companies or General Motors. In a perfect world, with no FED and a properly managed monetary system, all prices would be declining together during deflation, gold included.
roadrunner >>
Just as inflation did not raise the prices of everything simultaneously over the last 80 years, deflation will not erode the value of all assets evenly over time.
Anyone can say anything and the verifiable facts will determine if they were right when they said it. Mileage and opinions may vary.
Mine is that categories will inflate and deflate with markets, and attempts to determine what "the economy" in the aggregate is doing are largely self-deluding
Saw a report on JSMineset where inflation adjusted median US family income is now at the same level as 1969. But on the inflationary side, CPI was up 0.4% month over month. Only slightly down from the 0.5% July level. Yoy core CPI (CPI-U less fuel and food) was up 2%, the largest gain in 3 yrs. Food prices up 0.5% month over month, largest increase since March. CPI-U for August 3.8%. But using the 1980 model that adjusts up to 11.4%. But why compare 1980 apples to 2011 apples when 1980 apples to 2011 oranges looks so much better on paper....and costs so much less in pension and benefit payments.
From JS today:
"In dairy products, the swings have been more dramatic over the past couple of years," said Clore, owner of Todd’s Unique Dining in Henderson. "We used to be in single-digit percentages, where it would go up 5 (percent) to 8 percent. Now, it’s swinging 15 (percent), 20 percent sometimes." Their statements are borne out by the University of Wisconsin, which reported that the national average price of a gallon of whole milk rose from $3.30 in January to $3.65 in July.
Here's your QE3 One world order. No such thing as a sovereign nation anymore. I guess now I can refinance my 30 year mortgage at 3.5% sooner than I thought.
<< <i>Here's your QE3 One world order. No such thing as a sovereign nation anymore. I guess now I can refinance my 30 year mortgage at 3.5% sooner than I thought. >>
No surprise and there's nothing to stop them either. The one guy who has fought for auditing the fed, even getting rid of the fed who wrote a book about it isn't even asked the question posed about the fed!
It is easy to make an argument for "No Cash Accepted" with all transactions being by plastic debit card only. Doubtful that it is very long before we are there. Advantages of no cash: No nasty germs everytime you handle one of the bills, instant transfer of money credits from one plastic account into a merchant account, no more "Can you spare a dollar for some food?" from the panhandlers, no more trouble with the bills wearing out and having to be replaced, no more having to look for TG bills so you can write "Tax Cheat" on them, no more need for ATM's, no more need for banks because all they would need is loan centers, no need for cash registers, no more cash thefts, no more hold ups (Don't wear jewelry), and the very best of all...every transaction is reported, data sold, IR S notified, HS A provided with a record of the transactions, your every purchase could be within easy grasp of the 2 mill or so folks with TS clearances now and they can verify the information by just checking your gps on your phone...it is all good so why aren't we there already?
May be from 2007 at Google but one of the best interviews ever and still relevant as heck as to why this man would be so good for the country and the economy.
Ok, I invested the time. The Google interview with Ron Paul was well worth the hour. Fabulous interview. Support your local US Constitution. It just makes so much sense.
There's little room for doubt in the true wisdom of our Founders, and Ron Paul is a good one to give clear illustrations of that. It's also very revealing (and hopeful) in that the group he is talking to, and who are being quite attentive - are some of the best and brightest.
The interview really draws some stark differences between what we have now and what we were given then. And it's nevertheless still a hopeful type of interview. Good Stuff!
Q: Are You Printing Money? Bernanke: Not Literally
Is deflation (ie no inflation).....the new definition for a depression? If that's the case then essentially the US 19th century was one long depression as average prices declined from 1800 to 1907
No. As you just mentioned, deflation is possible in a growing economy such as the 1800's. Deflation with negative growth can be quite worrisome though.
Comments
Our economy was as good as it was because of debt spending. Without those extra dollars from debt, the unemployment rate would have been in the 7-9% all along. The excessive debt spending provided many frivilous and non-essential/necessary jobs.
And, Americans priced themselves out of work. Again, as mhammerman points out, people wont work unless they get vacation, 401k, health insurance, gas card, ect. He who asks for too much is most likely to get nothing.
As i've stated many times, the only way to "create" jobs will be to spend trillions on infrastructure, preferrably energy related. Anything short of that will mean unemployment at current rates until the population bubble evens out. Anybody up for investing 5 trillion?
The excessive debt spending also enabled the inflation bubble to grow without impediment. But this is a topic for another thread.
Knowledge is the enemy of fear
<< <i>You need to understand that the economy was performing well above sustainability for decades. Mhammerman proves that point when he states that 1 person is now doing the job of 2. If that 1 person can do the job, then the 2nd person never should have been hired in the first place. >>
I somewhat disagree. Where I work the staff is severely diminished but the output has not really changed. While the concept is correct, we are now in a terrible situation such that if someone leaves, there is no one else with the skills or experience to step in and replace him. Likewise, vacations can be killer because there is no replacement or backup for many of the positions or skills. So to imply that the "2nd worker" is unnecessary is probably too harsh or inacurate, but it is definitely possible to get by with just the one but it does leave the operation vulnerable and reliant on single points of failure. It's more like operating without insurance.
<< <i>Our economy was as good as it was because of debt spending. Without those extra dollars from debt, the unemployment rate would have been in the 7-9% all along. The excessive debt spending provided many frivilous and non-essential/necessary jobs. >>
I would also add that it was good as it was because of the creation of trillions of dollars through derivatives and other new and creative financial instruments as well, in addition to very low and friendly interest rates.
<< <i>And, Americans priced themselves out of work. Again, as mhammerman points out, people wont work unless they get vacation, 401k, health insurance, gas card, ect. He who asks for too much is most likely to get nothing. >>
I'm not sure you can say this overall, but the unions have definitely done this. But for everyone else, supply and demand has pushed the wages to what they are, to the extent that union wages haven't influenced non-union wages. I don't think too many of us have been in the position to demand a certain wage when applying for a job. When there's a shortage with your skill and you know the other applicants paled in comparison to you, sure. But most of the time companies know how much to offer to get the skill level that they are seeking, and that's what they offer.
Box of 20
Yes, yes, yes!!!! Now you see what i've been trying to say for years. It isnt the FED that creates the dollars, but rather the banking system. And this is why I say the FED can print all it wants and still have a difficult time in creating inflation.
The destruction of the "banking dollars" ie DEBT, will have a negative drag on the economy and inflation for many years.
Australia is now beginning to tip the other way. Australia posted a month of deflation Just wait till the Aussie real estate bubble pops. Those juicy yields in Australia will soon be history, and with it, Aussie dollar strength.
As the Aussie dollar drops, so does the Cando Canada's economy shrank in the second quarter as they will not be raising rates anytime soon. The chocolate currency and Kroner (dead dinosaur currency) are just too darn small to keep up the fight in the currency basket. The EU is on the verge of collapse. The US dollar doesnt have to do much fighting when its competitors are in disarray.
Knowledge is the enemy of fear
Unless the Fed buys the debt and monetizes it along with the Treasuries that they are also monetizing. And the really bad news is that all this debt doesn't do jack for anyone except those that were bailed out. That's a fact.
I knew it would happen.
<< <i>The destruction of the "banking dollars" ie DEBT, will have a negative drag on the economy and inflation for many years.
Unless the Fed buys the debt and monetizes it along with the Treasuries that they are also monetizing. And the really bad news is that all this debt doesn't do jack for anyone except those that were bailed out. That's a fact. >>
<< <i>The destruction of the "banking dollars" ie DEBT, will have a negative drag on the economy and inflation for many years.
Unless the Fed buys the debt and monetizes it along with the Treasuries that they are also monetizing. And the really bad news is that all this debt doesn't do jack for anyone except those that were bailed out. That's a fact. >>
Agreed. Issuing debt to pay debt is a fools folly.
Roadrunner often writes that there are $600 trillion worth of derivatives. If so, then it will be impossible to monetize. Thats 10x the worlds GDP and probably multiples of the entire worth of the planet.
"All that debt" was responsible for the economic boom we enjoyed for 30 years. Standards of living would have been much lower if not for this boom. But, everything reverts to its trend, and so will standards of living. The previous generation(s) borrowed from the future. Thats just the way it is and cannot be reversed. Its not the end of the world, just the end of excess.
Those who have debt as liabilities and those who have debt as assets will see it destoyed. This is why the rush to tangible assets.
If the derivatives market collapses, then it would probably wipe out most of the gains the last generation(s) enjoyed. Hey, the 50s werent a bad time to live
Knowledge is the enemy of fear
If the derivatives market collapses, then it would probably wipe out most of the gains the last generation(s) enjoyed. Hey, the 50s werent a bad time to live , unless you were in the Soviet Bloc
$600 TRILL is the BIS's adjusted number when they realized it was very negative to say that $1.14 QUAD of otc financial instruments existed. So they chopped that number in half with
accounting gimmicks. But it can be monetized, albeit slowly. During the 2007-2010 period the GAO said the FED liquified the world to the tune of $16-$17 TRILL. Obviously that
money was created somehow outside of M0, M1, M2 and M3. And it went it somewhere as well, probably to help inflate various asset prices. While doing that the FED also increased
its foreign custodial account by $1 TRILL and and absorbed illiquid assets totally between $1-$2 TRILL. So certainly they had some good tools to jack the prices of commodities and
PM's over the past 3 yrs. If $50 TRILL in derivatives were unwound during that period (mainly CDS and MBS derivatives) it still leaves over 95% of the pile to wade through. Even
if they only monetize a fraction of the remaining pile, additional tranches/bailouts/loans in the TRILLIONs will certainly continue to inflate "safe" assets where investors will be looking
to park money as far away as they can from the current Ponzi financial system. While Congress was fighting over the scraps of TARP ($100's of BILLIONs), the bankers were in the
process of flushing the system to many TRILLIONs which caused a nice round of tangible asset inflation. They can do that again and again as secretly as the first time. Maybe europe
can perform the next liquidity pump into the system?
I've said for years that our growth in the 80's and 90's was really a mirage built on the backs of the cheap labor and services around the world. The only reason we didn't have obvious
inflation was that the most of it was exported to other nations as we owned the world's reserve currency. But pay back always comes eventually. That exported inflation (whether
stagflation or an all out inflationary bust throughout the economy) will return as the dollar's purchasing power declines in value.
roadrunner
So if there is, say one QUAD of bets, aren't half of them, or $500 TRILL, one way and the other half the other?
won't the winning bets cancel out the losers (and others expire worthless, i.e, a draw?)
and aren't these bets spread out over time, so that some are constantly being "settled" as others are created?
please explain who is "buying", who is "selling", and who "owns" all these TRILLS of money?
Liberty: Parent of Science & Industry
Debt is only useful when the agreement to pay it back is viable and the intent to pay it back is made good. I can borrow money to build a production facility, but if I don't pay back the debt, the facility goes away and the bank who lent the money is burned as well, rendering it less capable of lending money to anyone else. Hence, debt is definitely a two-edged sword. Debt didn't produce prosperity, people and companies did.
Aren't "derivatives" simply "bets"? and don't bets have two sides?
Yes.
won't the winning bets cancel out the losers (and others expire worthless, i.e, a draw?)
No. The winners may get their money, even if it has to be taken from the US taxpayers. But that only transfers the loss to the taxpayers, because the jerks who made the losing bets can't (or won't) pay up. So, it's not really a cancellation. It's a transfer payment where the winners shouldn't be paid unless they can extract it somehow from the assets of the losers. Frankly, it's a theft.
and aren't these bets spread out over time, so that some are constantly being "settled" as others are created?
please explain who is "buying", who is "selling", and who "owns" all these TRILLS of money?
Baley, you need to catch up on the financial news sometime. See my above comment.
Many of these losing derivative bets were sold by Fannie and Freddie to the Treasury via the Fed, who accumulated them from our buddies (BoA, Countrywide, WaMu, Indybank, Citi, GE Capital, Lehman, Wells Fargo - who am I forgetting? - that created tranches of mortgage security-backed derivatives that have now become worthless in the declining real estate market because deadbeats who couldn't afford the mortgages in the first place were allowed to go in over their heads and live in nice places that you or I wouldn't have gotten ourselves into.
The winners were guys who "retired" from those companies with golden parachutes just before their entites went belly up, the deadbeats who are now applying for government assistance with their mortgage payments, the mortgage closers who got commissions for signing up new mortgage contracts.........
The losers are.........................gee, I guess that would be anyone who didn't "get in on the action".
I knew it would happen.
Box of 20
Nope, the facility is still standing waiting for another occupant. The bank lost depositor's money and you are protected by bankrupcty laws.
RE--Derivatives.. They are just contracts. Contracts are ripped up and voided all the time or settled for much less than obligated. Personally, derivatives are not really high on my worry list.
Knowledge is the enemy of fear
<< <i>Aren't "derivatives" simply "bets"? and don't bets have two sides?
So if there is, say one QUAD of bets, aren't half of them, or $500 TRILL, one way and the other half the other?
won't the winning bets cancel out the losers (and others expire worthless, i.e, a draw?)
and aren't these bets spread out over time, so that some are constantly being "settled" as others are created?
please explain who is "buying", who is "selling", and who "owns" all these TRILLS of money? >>
Contracts can be cancelled out or offset if both entities on a particular bet still survive. When Bear Stearns was taken over by JPMorgan they assumed all their derivatives as well. There
was no need to pay out winners and losers. But when Lehman was allowed to go bankrupt w/o a takeover, all their derivatives now had to be unwound and paid out. When it was all
said and one, Lehman received 9c on the dollar for their "portfolio." Obviously this was no 50-50 game of chance. As jmski52 mentioned, the winners on those bets demanded to be
paid, and paid out they were via AIG and whatever other back door means the FED/Treasury devised. Had the winners (ie banks) not been paid they would have applied pressure elsewhere to tank the system, whether in the stock market, bonds, or elsewhere. In other words they would have thrown a finanical temper tantrum until they got their way (ie paid).
Since our top 25 banks own 98% of the $300 TRILL in our notional derivatives (and the top 5 owning 95%) the bets are all interconnected among a small group of players. It's sort of a case of one goes down, they can all go down. I think they tried Lehman as a test case. And it was a huge failure, but it got rid of one major competitor in the end. I don't think they'll let another big bank do down w/o a prompt takeover so derivatives can be kicked down the road further. It's not a bid deal to you or I, but it's a big deal to the bankers that know they are sitting on ticking time bombs. The Lehman case showed that they lost 91% of their "bets." The other guys can't be too far off those numbers. 80% of all the remaining bets are interest rate contracts which are ultimately tied to USTBonds. On balance sheets you can bet that these contracts are listed at cost or a tidy profit. In reality they are probably closer to the performance Lehman experienced. As Cohdok says, these can all be canceled out tomorrow. The problem with that is all the entities (ie big banks) that are carrying these assets as profits. Once those supposed assets go poof, so do they. The leverage would wipe out their balance sheets clean. It would then be time to restart the entire banking system from scratch minus our 5 too-big-and-now-failed banks. 50-1 leverage in reverse works just as well as it does on the upside. It's a complicated subject and I know I don't fully understand it or even explain it well enough.
roadrunner
The building remains, and the equipment is sold for pennies on the dollar. The facility is only worth something as a production facility. Otherwise, it's just un-utilized stuff. A liquidation isn't the same thing as a merger or an acquisition.
I knew it would happen.
Deflation. Aint it great!!!
Knowledge is the enemy of fear
Dave, what am I gonna do with you? We might get deflation if Bennie ever lets up on the throttle, but he ain't a'gonna do it! He promised!
And if a conservative guy replaces Bennie, the kind of deflation we get might not be so good, or pleasant. If that guy ever appears, I'm goin' into dollars, big.
I knew it would happen.
have to park their money somewhere to shield it from the ravages of the declining dollar and loss of confidence in our govt. They sure as heck aren't going to invest in
solar panel companies or General Motors. In a perfect world, with no FED and a properly managed monetary system, all prices would be declining together during deflation,
gold included.
roadrunner
Dudes like Randal J. Kirk, for example, don't "park" money and "shield" it. They put it to Work and Grow it.
Liberty: Parent of Science & Industry
<< <i>Deflation. Aint it great!!!
Dave, what am I gonna do with you? We might get deflation if Bennie ever lets up on the throttle, but he ain't a'gonna do it! He promised!
And if a conservative guy replaces Bennie, the kind of deflation we get might not be so good, or pleasant. If that guy ever appears, I'm goin' into dollars, big. >>
The value of the worlds assets are less today than a year ago. Bennie can give everyone their own printing press and it wont change the inevitable.
I think the world could be 10% less valuable as early as next week.
Knowledge is the enemy of fear
<< <i>The well off have to park their money somewhere to shield it from the ravages of the declining dollar and loss of confidence in our govt.
Dudes like Randal J. Kirk, for example, don't "park" money and "shield" it. They put it to Work and Grow it.
You mean a dude like Warren Buffet? Warren has invested a lot in businesses over the past decade. BH stock prices are basically flat over the past 5-7 yrs. and with
the dollar depreciation factored in, running at a loss. He'd have been better off staying in silver rather than selling it in 2006.
The beauty of "parking and shielding" money in PM's is that they've been advancing 10-15% per year, or better.
If RJ Kirk has access to a HFT computer or the secret intentions of JPM and GS, then it would make sense to run with the banksters. Warren wised up and got to buy into
Goldman Sachs in 2008, and now BoA in 2011. If this is what it takes to "grow" money then the majority of us are out of the money. We haven't paid for the luxury of
knowing what number is coming up on the roulette wheel before its even spun.
roadrunner
No, but we can sometimes see, through public disclosures, where successful investors and their advisors are placing their bets, and possibly improve our own odds
Liberty: Parent of Science & Industry
<< <i> We haven't paid for the luxury of knowing what number is coming up on the roulette wheel before its even spun.
No, but we can sometimes see, through public disclosures, where successful investors and their advisors are placing their bets, and possibly improve our own odds >>
Maybe. But too often, once such public disclosures are made that's usually when the well-connected big-time investors are already moving on to other investments.
roadrunner
<< <i>
<< <i>The well off have to park their money somewhere to shield it from the ravages of the declining dollar and loss of confidence in our govt.
Dudes like Randal J. Kirk, for example, don't "park" money and "shield" it. They put it to Work and Grow it.
You mean a dude like Warren Buffet? Warren has invested a lot in businesses over the past decade. BH stock prices are basically flat over the past 5-7 yrs. and with
the dollar depreciation factored in, running at a loss. He'd have been better off staying in silver rather than selling it in 2006.
The beauty of "parking and shielding" money in PM's is that they've been advancing 10-15% per year, or better.
If RJ Kirk has access to a HFT computer or the secret intentions of JPM and GS, then it would make sense to run with the banksters. Warren wised up and got to buy into
Goldman Sachs in 2008, and now BoA in 2011. If this is what it takes to "grow" money then the majority of us are out of the money. We haven't paid for the luxury of
knowing what number is coming up on the roulette wheel before its even spun.
////
Investing at that level is prolly not investing but power distribution or a show of force. It's beyond my comprehension and ideology.
roadrunner >>
Funny how the checkbook seems to be writing more checks. Must be delusional.
Our nut has doubled in the last 10 years ( NOT factoring the additional employees etc )
Meanwhile the premiums have been cut almost in half ( can't go no mo so stop waiting! ) Fortunately with the internet and the wonderful economics that have been applied ( only frank and others of similar ilk could like the direction ) and a sound idea of how to apply it to the business the amount of customers has increased significantly my business has broken records. That's pretty much my advice is despite the scumminess of the people in charge, or how much more competitive it's become, learn how to live well and prosper doing something you like, find someone to love who will love you back and screw the world
Coin's for sale/trade.
Tom Pilitowski
US Rare Coin Investments
800-624-1870
Bingo! We have a winner, folks!
Back to the issue of "investing".
we can sometimes see, through public disclosures, where successful investors and their advisors are placing their bets, and possibly improve our own odds
I can sometimes see, through public disclosure and public speeches where the politicians are taking us, and I am placing my bets that the successful investors and their advisors are too invested in the status quo to improve my odds at all. They "reform" the things that already work just fine, and they don't fix the real problems when it's not in their financial interest to fix them.
I knew it would happen.
Coin's for sale/trade.
Tom Pilitowski
US Rare Coin Investments
800-624-1870
The layoffs reflect Bank of America's deepening woes and are likely to take a heavy toll on its California operations.
Bank of America letting go of 40,000 employees!
Coin's for sale/trade.
Tom Pilitowski
US Rare Coin Investments
800-624-1870
<< <i>Asset price deflation (durable goods, equipment, etc.) will continue to co-exist in this economy with assets experiencing price inflation (pm's, foods, etc.). The well off
have to park their money somewhere to shield it from the ravages of the declining dollar and loss of confidence in our govt. They sure as heck aren't going to invest in
solar panel companies or General Motors. In a perfect world, with no FED and a properly managed monetary system, all prices would be declining together during deflation,
gold included.
roadrunner >>
Just as inflation did not raise the prices of everything simultaneously over the last 80 years, deflation will not erode the value of all assets evenly over time.
Local Governments Admit Being Deep in a Hole
Bet you thought that was gonna be an article about local G's in the USA.
Knowledge is the enemy of fear
I take it to mean that there is truly no stopper in the race to devalue. Buy gold. Simplistic, but effective.
I knew it would happen.
Shanghai, China, Bicycle Traffic
6,000 years and we gots a bike. Evolution? How about DEvolution?
Coin's for sale/trade.
Tom Pilitowski
US Rare Coin Investments
800-624-1870
Ron Paul on money in the 1970's
Coin's for sale/trade.
Tom Pilitowski
US Rare Coin Investments
800-624-1870
Household Income Falls, Poverty Rate Rises
Knowledge is the enemy of fear
<< <i>Nothing inflationary in this report.
Household Income Falls, Poverty Rate Rises >>
And Warren Buffet said the threat of deflation had come to an end
Mine is that categories will inflate and deflate with markets, and attempts to determine what "the economy" in the aggregate is doing are largely self-deluding
Liberty: Parent of Science & Industry
<< <i>Nothing inflationary in this report.
Household Income Falls, Poverty Rate Rises >>
Saw a report on JSMineset where inflation adjusted median US family income is now at the same level as 1969. But on the inflationary side, CPI was up 0.4% month over month.
Only slightly down from the 0.5% July level. Yoy core CPI (CPI-U less fuel and food) was up 2%, the largest gain in 3 yrs. Food prices up 0.5% month over month, largest increase
since March. CPI-U for August 3.8%. But using the 1980 model that adjusts up to 11.4%. But why compare 1980 apples to 2011 apples when 1980 apples to 2011 oranges looks so
much better on paper....and costs so much less in pension and benefit payments.
From JS today:
"In dairy products, the swings have been more dramatic over the past couple of years," said Clore, owner of Todd’s Unique Dining in Henderson. "We used to be in single-digit percentages, where it would go up 5 (percent) to 8 percent. Now, it’s swinging 15 (percent), 20 percent sometimes."
Their statements are borne out by the University of Wisconsin, which reported that the national average price of a gallon of whole milk rose from $3.30 in January to $3.65 in July.
Thoughtful letter from Peter Grandich on retirements - history and viability
roadrunner
Box of 20
<< <i>Here's your QE3 One world order. No such thing as a sovereign nation anymore. I guess now I can refinance my 30 year mortgage at 3.5% sooner than I thought. >>
No surprise and there's nothing to stop them either. The one guy who has fought for auditing the fed, even getting rid of the fed who wrote a book about it isn't even asked the question posed about the fed!
It's so gone it isn't funny.
Coin's for sale/trade.
Tom Pilitowski
US Rare Coin Investments
800-624-1870
Flow of Funds Stats
Knowledge is the enemy of fear
Got EBT?
Coin's for sale/trade.
Tom Pilitowski
US Rare Coin Investments
800-624-1870
<< <i>They are starting to tell American jokes over in Poland >>
Man what goes around comes around
No matter where you go........there the heck you are.
Google interviews Congressman Ron Paul
Coin's for sale/trade.
Tom Pilitowski
US Rare Coin Investments
800-624-1870
There's little room for doubt in the true wisdom of our Founders, and Ron Paul is a good one to give clear illustrations of that. It's also very revealing (and hopeful) in that the group he is talking to, and who are being quite attentive - are some of the best and brightest.
The interview really draws some stark differences between what we have now and what we were given then. And it's nevertheless still a hopeful type of interview. Good Stuff!
I knew it would happen.
Franc Demand Pushes Swiss to Deflation Brink
Knowledge is the enemy of fear
to 1907
roadrunner
Do you think we are going into a depression?
Knowledge is the enemy of fear