Heck, $4 BILL from LTCM in 1998 and a few hundred $BILLION from Lehman in 2008 nearly took down the system. In fact they would have w/o interventions. The amounts we're talking today are a 100X bigger than those guys. Are derivative's in your wheelhouse now too?
You better f----n believe it.
Did the system go down in 1998? Nope. Did it go down in 2008? Nope.
The numbers are not 100x larger today and in 2018 (why not keep with the 8's), the system will not go down.
Gold and the stock market did not go to zero in 1998, or in 2008 and will not in 2018.
.Hunt mentions that "we have failed to reattain the economic performance of the 1950's"....his words, not mine.
I could have a long discussion with Lacy on this and I believe we would both understand and endorse each others' ideas.
I made $3.35 per hour building houses and digging ditches. I couldnt afford a McDonalds meal then either. Gasoline was 1/3rd my income. But we are not talking about minimum wage workers. Well. maybe you are, but im thinking more of the 45 year old guy with 2 kids.
Some will burn an hour's wages in gas just commuting to work and back, and that doesn't include a car payment or insurance. Cars, gas, and food are not new expenses. Same as it ever was. Cell phones and cable tv eat a huge % of a lower income workers salary. If they wanna move up to the next bracket, stop watching TV and taking selfies.
a gold standard doesn't solve everything but it does force a level of honesty and have other positive effects on government
LOL. Govt has never been honest.
And no, we did not get by without the wife working. Not even in the 1950's was that true.
Well, there we go. Life was just as tough then as it is now.
"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
The fed raising rates now, would NOT increase the yield on the 10yr..it would just flatten the yield curve and if they continued to raise it, would invert it.
The problem the FED has, is that raising rates right now, would hurt the global economy and cause the dollar to strengthen too much, which is already too high in some respects.
We either learn to live within the system, or we go down in flames each and every time. This is why I totally disagree with the people who claim gold is manipulated. They are fools who cannot see that the system is functioning as a weather. Three warming summers does not mean man has altered the entire weather system into Global Warming. The sheer arrogance of assuming such powers is to assume we are God. Mankind is simply way too corrupt to ever run anything according to plan.
"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
Did the system go down in 1998? Nope. Did it go down in 2008? Nope.
The numbers are not 100x larger today and in 2018 (why not keep with the 8's), the system will not go down.
Gold and the stock market did not go to zero in 1998, or in 2008 and will not in 2018.
Would the system have gone down in 1998 without strong interventions? Yup. Would it have crapped out and halted in 2008 without massive interventions? Yup.
Just proves that we haven't seen a BIG enough failure yet that we couldn't intervene the printing presses on (ie where banks and govts would still accept each other's paper). And note, there was no "ripping up the derivatives party" in either 1998 or 2008....lol. LTCM in 1998 and even Lehman/BSC in 2008 were somewhat tiny failures in the world of derivatives. The TBTJ banks of today dwarf those 2 entities. And yeah, the numbers are much larger today. In fact they are >1,000X higher than in 1989 when otc derivatives first breeched the $1 TRILL mark. At the end of 1998 they were $80 TRILL world wide. 14X larger since 1998 on only those otc derivs that are reported to BIS. We have no clue how many go unreported. One could say that vs. the LTCM set up the total derivs risk today is 14X larger. I'd consider that pretty substantial. It's the difference between a MLB hitter averaging 0.023 vs one at 0.325.
With $80 TRILL in otc derivatives in 1998, it's actually incredible that LTCM with "only" a $4 BILL loss on the table took the system that close to complete failure. I guess it shows how little real capital the banks carry to help cover leveraged losses. The big banks of that day had to suck it up and pay off the losses or risk an unending daisy chain of losses that would end up back with them. Now multiply that 1998 loss by 300X-500X ($10-$20 TRILL) to arrive at the 2008 losses. Again, if those paper contracts could have been ripped up without paying off the winners, why weren't they? So next time around we expect the big banks to just rip up all those contracts? Interest rate derivatives were not placed at high risk in 2008...they will certainly be part of the next crisis....and they are 8X the size of all the other otc derivatives combined. This is why the FED and CB's are staying with ZIRP or NIRP. They do not want to bring the interest rate contracts into default.
those without dollar insurance still have the cohodk/baley guarantee.
"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
<< <i>In the 80's J6P could earn a decent living with most menial jobs.
I consider my 1980's jobs menial. No they did not earn a decent living. And no, we did not get by without the wife working. Not even in the 1950's was that true. >>
Menial was probably a poor choice of words. I was referring to a semi-skilled job that anyone could be trained for, something you'd probably get about $15/hr for today.
But that was probably a poor example. As I believe is the "stuff" you have. Probably a better example an indicator of quality of life is the increasing percentage of 18-34 year old's still living at home: Census Bureau: 30.3% Millennials Still Living With Their Parents From 22.9% in 1980 to 30.3% is a 32.3% increase. I argue that you can't have a very good quality of life if a) you're young and you still have to live at home and b) you've got kids and they have no where to live but with you, despite this age group being more educated than ever.
Highlights from the Census.gov presentation. Young Adults Today Are More Likely to Have a College Degree, But More Also Live in Poverty (22% vs 20% in poverty) Young Adults Earn $2,000 Less Today Than Young Adults Did in 1980
Would the system have gone down in 1998 without strong interventions? Yup. Would it have crapped out and halted in 2008 without massive interventions? Yup
No it wouldnt have.....because we wouldnt have let it.
No matter what happens, we will always step in an prevent it from collapsing.
<< <i>Would the system have gone down in 1998 without strong interventions? Yup. Would it have crapped out and halted in 2008 without massive interventions? Yup
No it wouldnt have.....because we wouldnt have let it.
No matter what happens, we will always step in an prevent it from collapsing. >>
Really? Why didn't "we" or "they" "step in" an prevent economic collapse in Argentina, Zimbabwe, Turkey, Weimar, etc., etc.? Because our bankers are smarter?
<< <i>Would the system have gone down in 1998 without strong interventions? Yup. Would it have crapped out and halted in 2008 without massive interventions? Yup
No it wouldnt have.....because we wouldnt have let it.
No matter what happens, we will always step in an prevent it from collapsing. >>
Really? Why didn't "we" or "they" "step in" an prevent economic collapse in Argentina, Zimbabwe, Turkey, Weimar, etc., etc.? Because our bankers are smarter? >>
Could that be why they ended up with all the loot.
Couldn't be prevented in those countries because their helicopters weren't dropping world reserve currency notes that somebody paid for. Another benefit that will be sorely missed. The FED had the sense to make the taxpayer and working class pay the price. While it was funny money it at least had some sweat equity.
"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
It hasn't happened here yet because there hasn't been a big enough crisis (yet) that we couldn't print our way out of....one of the benefits of having the world's reserve currency. The Big Bang collapse that's come will probably not be able to be printed away. The sum of TBonds, otc derivatives, and other paper leverage will overwhelm the system. By creating over $1 Quad in otc derivatives the weapon to do this already exists. And it's not just the US that holds the bomb, it's also the Euro zone that has a larger bomb than we do....that's the scary part. The US banks don't have to blow up. The same outcome will occur with the TBTF banks in Europe. And at least 1/3 of their poker chips are denominated in dollars.
Wouldn't be near as much risk out there if it were just dollars that were floating around. But the derivative's debt-money poker chips takes it to a level exponentially higher. Again, derivative's risk was laughed at around here from 2002-2007. And then they blew up in 2008. Fancy that. And the world's solution to that problem?.........Raising world sovereign debt levels by another $57 TRILLION.
<< <i>Would the system have gone down in 1998 without strong interventions? Yup. Would it have crapped out and halted in 2008 without massive interventions? Yup
No it wouldnt have.....because we wouldnt have let it.
No matter what happens, we will always step in an prevent it from collapsing. >>
Really? Why didn't "we" or "they" "step in" an prevent economic collapse in Argentina, Zimbabwe, Turkey, Weimar, etc., etc.? Because our bankers are smarter? >>
Because you obviously dont know the difference in the economies of the US, Argentina, Zimbabwe, Turkey, Weimar, ...I'll add Poland, Azerbajan...ect, ect. Hint--It has nothing to do with bankers or being smart.
<< <i>Would the system have gone down in 1998 without strong interventions? Yup. Would it have crapped out and halted in 2008 without massive interventions? Yup
No it wouldnt have.....because we wouldnt have let it.
No matter what happens, we will always step in an prevent it from collapsing. >>
Really? Why didn't "we" or "they" "step in" an prevent economic collapse in Argentina, Zimbabwe, Turkey, Weimar, etc., etc.? Because our bankers are smarter? >>
Could that be why they ended up with all the loot.
Couldn't be prevented in those countries because their helicopters weren't dropping world reserve currency notes that somebody paid for. Another benefit that will be sorely missed. The FED had the sense to make the taxpayer and working class pay the price. While it was funny money it at least had some sweat equity. >>
Germany misses having a reserve currency? Great Britain, Australia, Canada? Amazing how you place so much value on the thing you hate so much.
<< <i>Would the system have gone down in 1998 without strong interventions? Yup. Would it have crapped out and halted in 2008 without massive interventions? Yup
No it wouldnt have.....because we wouldnt have let it.
No matter what happens, we will always step in an prevent it from collapsing. >>
Really? Why didn't "we" or "they" "step in" an prevent economic collapse in Argentina, Zimbabwe, Turkey, Weimar, etc., etc.? Because our bankers are smarter? >>
Could that be why they ended up with all the loot.
Couldn't be prevented in those countries because their helicopters weren't dropping world reserve currency notes that somebody paid for. Another benefit that will be sorely missed. The FED had the sense to make the taxpayer and working class pay the price. While it was funny money it at least had some sweat equity. >>
Germany misses having a reserve currency? Great Britain, Australia, Canada? Amazing how you place so much value on the thing you hate so much. >>
Never said I hated it. I am on record for hating what has been done to it and the for the waste of sons and daughters defending and enforcing it. Not worth the price, especially since its days are numbered anyway.
<< <i>you obviously dont know the difference in the economies of the US, Argentina, Zimbabwe, Turkey, Weimar, ...I'll add Poland, Azerbajan...ect, ect. Hint--It has nothing to do with bankers or being smart. >>
The economy did not save the day. The taxpayers and dollar holders paid the price and saved the economy. . . but only for now. I'm afraid that was a one trick pony.
"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
I had a history teacher once who asked, "what would happen if everyone in the city (or state, or country) flushed their toilet at the same time?"
It was a rhetorical, thought-provoking question. The relevance in this discussion is what was in common in hyperinflation scenarios in the past? Many many people wanted to do the same thing, namely, get rid of their currency (spend it) as fast as possible. Same issue with runs on banks, manias (investment bubbles in stocks, metals, housing) crashes (bubbles popping in stocks, metals, housing) it's the herd that drives these phenomena
What doesn't happen is the value of stuff does not go to infinity or zero, because at some point, non-panicky money comes in and bets the other direction. Witness the housing recovery, the stock market recoveries, even the metal prices stabilize because at some point, the buyers come in. There's a punctuated equilibrium, where the trend gets perturbed, and then reestablishes itself.
Our consensus [obvious] answer to the toilet question was "Disaster!" but the nuanced answer was, "not much, because in reality, not everyone flushes at the same time, and if too many do flush at the same time, lots of people will then hold off on flushing because they will see the effects, or be warned by peers or the authorities, or their water pressure will decline, or their toilet will back up, and they will use caution.
What "saves the day" in the end is regression toward the mean and the related contrarians who enter a market. The US dollar will outlive all of us. I'll bet any number of them that it's true
I'd write more, but I need to go run around and warn everyone to prepare for when everyone flushes at the same time, and retail to them all the plungers, galoshes, and rubber gloves that I buy wholesale)
I'm not sure I understand your analogy or how it applies. If you live in an economy that is undergoing hyperinflation, no one holds any currency longer than necessary. You drain your bank accounts and convert that money into assets and any money you get you try to spend as soon as possible. There is no "holding off" on spending because you are losing purchasing power by the hour. Likewise, if you have assets to sell you probably aren't likely to convert them to the rapidly devaluing currency unless you really need to or have a plan to spend that money quickly. Barter becomes much more appealing because the asset you swap for should hold a steady value.
<< <i>What doesn't happen is the value of stuff does not go to infinity or zero, because at some point, non-panicky money comes in and bets the other direction. Witness the housing recovery, the stock market recoveries, even the metal prices stabilize because at some point, the buyers come in. There's a punctuated equilibrium, where the trend gets perturbed, and then reestablishes itself. >>
I don't think this happens during hyperinflation. During hyperinflation you stop accepting the local currency for trades. I highly doubt anyone was liquidating real estate and other goods (and taking advantage of the "high prices") in Zimbabwe when the trillion dollar notes were circulating and inflation exceeded 1 million percent. In fact, I would wager that no one would sell real estate or other durable assets for Zimbabwe dollars once inflation started exceeding 100%/year. There's no such thing as non-panicky money when it comes to local currency during hyperinflation.
And to pick apart the analogy, there would be no disaster if everyone flushed at the same time. The water demand would cause an decrease in the pressure of the system and a spike in demand for water so toilet tanks would refill slowly, but they would still refill. And most modern sewage systems can easily accept the few gallons of water each toilet would produce, and of course septic systems would be fine. Finally, there would be no way to see that everyone else is flushing and hold off if the event is truly simultaneous, which it would have to be since a toilet flush & refill takes less than a minute in a most cases.
<< <i>I'd write more, but I need to go run around and warn everyone to prepare for when everyone flushes at the same time, and retail to them all the plungers, galoshes, and rubber gloves that I buy wholesale. >>
Well, the sky isn't falling but the clouds are gathering, winds are picking up, and there's thunder in the distance. We have a few in this thread who insist that it will never rain here, but the smart people are saying, 'hey, looks like it might start to rain maybe I should prepare.'
Everyone needs an umbrella because it WILL rain. Whether that umbrella is made of metal or stocks or cash or chicken eggs, you need it when it starts to rain the certain type of rain you're trying to protect yourself against.
@ Elite CNC Routing & Woodworks on Facebook. Check out my work. Too many positive BST transactions with too many members to list.
<< <i>Well, the sky isn't falling but the clouds are gathering, winds are picking up, and there's thunder in the distance. We have a few in this thread who insist that it will never rain here, but the smart people are saying, 'hey, looks like it might start to rain maybe I should prepare.' >>
"Looks like it might start to rain" is a conspiracy theory.
"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
It's a precious metals forum..... we're all prepared for the rain. Some of us are also prepared for an extended drought, or high wind, or earthquakes, or mudslides, or wildfires, or whatever.
I've been repeatedly told that cycles don't exist in financial markets, especially the longer ones like 40, 60, 120 yrs. Here's a very good article on 40 year cycles. Good read for those with an open mind. Seems like a lot is going to be happening around here in 2015-2016 as many of us have been talking about (ie revisiting 2008/2009). The rule of year 5 in any decade has nearly guaranteed a good year for stocks going back many decades. So maybe the author's stock market correction won't begin before 2016....then again, there's always a first time...or that black swan that busts the norm.
Armstrong's 8.6 year cycle doesn't neatly fit into a 40 year cycle since it's 43 years. But his work is also based on money flows and confidence....not necessarily stock market peaks. The FED uses a 4/8 year business cycle model which also fits into the 40 yr model. I've mentioned that Armstrong's ECM and Real Estate models peak in Sept 2015. It's then 18 years down in RE confidence. First time I've read anything from this author. He looks to be no more than 41 which means he must have been trading markets when he was in elementary school.
Exclusive interviews with legends in the precious metal markets and confirmed also by web bot chatter in precious metal forums, the declaration that the inevitable collapse of the fiat money must and will happen, has been spewn as the mantra for ownership and investing in gold and silver at all costs... We interrupt this newscast for a special message...
This just in, it has been scientifically proven by the US government that all humans will die at some point in their lives, but most will not know exactly when... Now back to our original News Flash...
"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
the declaration that the inevitable collapse of the fiat money must and will happen, has been spewn as the mantra for ownership and investing in gold and silver at all costs...
That's what Martin Armstrong says. Then again, he doesn't sell gold or silver - he sells global economic conferences. One must always consider the source. lol, rawteam - this is one time I actually get your sense of humor.
I just read Lacey Hunt's interview posted on zerohedge. It sounds like Mr. Hunt's becoming disillusioned with the way things are. And again, consider the source. He's a 6 billion dollar bond manager. He worries about 1/10ths of 1%. He figures that the only way to go is to hide out in long term Treasuries. I worry about 30% & 50% moves. Other than that, Lacy and I mostly agree on just about everything else.
Q: Are You Printing Money? Bernanke: Not Literally
"Societe Generale's notoriously bearish strategist, Albert Edwards, has poured scorn on the belief that the U.S. economy is recovering and predicts "violent" reactions in asset markets during the second half of 2015."
You need to ask yourself, when was the last time he had a fairly accurate prediction. He's been predicting an imminent global meltdown since 2009. One of ZeroHedge's favorite sources of doom & gloom predictions.
"Bongo drive 1984 Lincoln that looks like old coin dug from ground."
<< <i>I've been repeatedly told that cycles don't exist in financial markets Who tells you this? >>
Baseball for one. We debated this topic and related ones for about 2 weeks. He had plenty of support from the fiat bug crowd. I know Cohodk believes in and makes his living using both charts and cycles.
<< <i>I agree and while I wholly endorse his rationale and approach, I am beginning to depart from his notions of perpetual deflation and discouragement. >>
And what is making you depart from this vision? Have you been watching too much CNBC? The way to end the talk of perpetual deflation and discouragement is to offer a feasible path that our leaders or economy has a realistic chance of turning this economy around. How can anyone look at the national budget debt projections, look at the debt levels and do the math on the effect of any interest rate increases, look at the federal reserves' balance sheet, and look at the hostile business environment, and look at world events and politics and come to any other conclusion?
<< <i>How can anyone look at the national budget debt projections, look at the debt levels and do the math on the effect of any interest rate increases, look at the federal reserves' balance sheet, and look at the hostile business environment, and look at world events and politics and come to any other conclusion? >>
Be blinded by charts and brainwashed by Keynesians.
"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
<< <i>I agree and while I wholly endorse his rationale and approach, I am beginning to depart from his notions of perpetual deflation and discouragement. >>
And what is making you depart from this vision? Have you been watching too much CNBC? The way to end the talk of perpetual deflation and discouragement is to offer a feasible path that our leaders or economy has a realistic chance of turning this economy around. How can anyone look at the national budget debt projections, look at the debt levels and do the math on the effect of any interest rate increases, look at the federal reserves' balance sheet, and look at the hostile business environment, and look at world events and politics and come to any other conclusion? >>
First of all you and I differ on how "bad" the economy is. This is a fundamental difference that no matter what I expressed would be dismissed by you (and others).
I am actually beginning to lean toward the inflation camp. Assets prices (sans PMs) are increasing, with the largest asset groups--equities and bonds--hitting all highs all around the globe. Humans hae already shown their propensity to dip into these assets to acquire "things". The velocity of money could soon be increasing.
How can anyone look at the national budget debt projections, look at the debt levels and do the math on the effect of any interest rate increases, look at the federal reserves' balance sheet, and look at the hostile business environment, and look at world events and politics and come to any other conclusion
You say a lot here. First is the word projections, which are just that. They are not cut in stone and are subject to an even bigger concept known as relativity. You look at these projections and compare to the current state. Yes, a $50 trillion debt load looks horrendous vs a $18 trillion economy. Problem is that when, yes I said when, the debt is $50 trillion, the economy will not still be at $18 trillion. The economy will rise relative to debt increases.
Debt levels must also be put into context. Yes, they are historically high, but not insurmountable and can be reconciled.
The Feds balance sheet--what about it? They own lots of US debt. The USA is not going bankrupt and these bonds will be paid off. There really is no problem here.
Hostile business environment. I own a business and agree the regulations can be onerous. But, in context, businesses have faced changes in regulations for centuries. This time is not different. Businesses always innovate and overcome onerous regulations.
World events and politics---the world has been in much greater conflict and chaos than present and has always overcome.
Interest rate increases---any increases in interest rates will be minimal. You assume rates would rise in a vacuum, that they will increase "just because". That wont happen. Any increases in rates will be accompanied by increases in economic growth. The net result would be a wash. Increases in debt payments would be met by increases in tax revenues. But even an increase in the 10 yr to 5%, without economic growth, could be easily absorbed. All that money that came out of bonds would go somewhere--real estate, stocks, PMs ect. Believe it or not, people did buy houses when mortgage rates were 15%. Dont worry, your business will not collapse if your clients have to pay 6% instead of the current 4%. In fact, it could be better than it was in 2003-2006, much better.
BTW--Id rather be blinded by charts than by ignorance or fear.
<< <i>BTW--Id rather be blinded by charts than by ignorance or fear. >>
Ignorant? That's a new low for you, but coming from you I'll wear it like a badge of courage.
"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
Those are soothing words for a Sunday morning in Tokyo and I substantially agree with them ... but:
With respect to the Fed balance, although I agree that the balance sheet itself is almost a non-issue, the reason of course why the Fed balance sheet (and that of the Bank of Japan and the Bank of England and soon the European Central Bank) is so "bloated" is because of QE. I believe that historians will view the timely provision of liquidity to the financial markets during the acute phase of the financial crisis as a remarkable demonstration of coordination of sound policy by the world's central bankers. Possibly the early rounds of QE made sense, but as time goes on, the distortion we are seeing in the financial markets is extraordinary. When economists debate about how easy it will be to "unwind" QE, they tend to think narrowly about reducing the size of central bank balance sheets. If QE has caused the capital allocation process to go haywire, the issue is more whether this can be unwound.
That is a bit of a ramble, but a key point is one you have raised many times: demographics. Almost certainly demographics rather than finance is the key driver of low growth in Japan and Europe (and to a lesser degree the US and even a factor in slowing growth in China) Although markets are never in a real equilibrium in a strict sense of that word, they persist for fairly long periods in states of near equilibrium. At some point, the markets will want to normalize, i.e., move towards some quasi-equilibrium that differs substantially from the one that has been maintained by QE for many years. This may or may not be ugly, but I believe there's a fairly strong scientific argument that would suggest that the longer QE persists, the more likely that this change in states will be ugly. The same science that might support such a statement would also say that the outcome of this ugliness is completely unpredictable.
I think that central bankers understand this to varying degrees, but they are so intoxicated by a belief in their own omnipotence that they probably don't think hard enough about it when establishing policy.
This may or may not be ugly, but I believe there's a fairly strong scientific argument that would suggest that the longer QE persists, the more likely that this change in states will be ugly. The same science that might support such a statement would also say that the outcome of this ugliness is completely unpredictable.
I think that central bankers understand this to varying degrees, but they are so intoxicated by a belief in their own omnipotence that they probably don't think hard enough about it when establishing policy.
Absolutely. The longer a population or society becomes accustomed to something the greater the pushback when it is taken away. And everything in excess is never good. Im not so sure the reaction is as unpredictable as the extent. And this extent is probably a function of time. Time, while constant, is ironically the most unpredictable. It can be our friend or enemy. Right now, I believe it is our friend as global populations continue to grow and the majority of those populations still have needs and wants. India and China represent about 38% of the global population and for the most part, need and desire everything. Growing populations have a way of curing mistakes when there is ever-present demand. The real test of this global monetary experiment will probably come in about 2 generations (perhaps a little less) when global population growth stops, or declines significantly. Without the safety net of greater demand from the people, mistakes will be magnified.
<< <i> The real test of this global monetary experiment will probably come in about 2 generations (perhaps a little less) when global population growth stops, or declines significantly. >>
Two decades tops, two years possibly.
No wonder you are so optimistic, you believe you'll be long gone. Explains it all.
"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
<< <i> The real test of this global monetary experiment will probably come in about 2 generations (perhaps a little less) when global population growth stops, or declines significantly. >>
Two decades tops, two years possibly.
No wonder you are so optimistic, you'll be long gone. Explains it all. >>
You'll be gone before me so why you so pessimistic?
You have to remember, that even if population growth stops, the majority of the population will still have the wants and needs.
This is an excellent website. Click on every country. Look at the population trends and keep in mind that the largest economic demands are from those age 30-50 (although this can vary by life expectancy in each country). Which countries will see increased demand. Which are past their peak? Which have unstable governments? What are the dominant religions in each? What is the geography of each and its neighbors'? Which have young populations and which old?
This is an excellent website. Click on every country. Look at the population trends and keep in mind that the largest economic demands are from those age 30-50 (although this can vary by life expectancy in each country). Which countries will see increased demand. Which are past their peak? Which have unstable governments? What are the dominant religions in each? What is the geography of each and its neighbors'? Which have young populations and which old?
That is an amazing website. It is evidence for a view that GDP may understate the value of advances in technology.
I wish I could look at global demographics and share your optimism. Your point is certainly valid and is not inconsistent with the data. But, I wonder if development over the next 20 - 30 years can happen peacefully unless the US and China decide to collaborate as global dual hegemons? Coming to some sort of meaningful collaboration (as opposed to trying to carve up the world) might be possible, if our leaders undertake a sober analysis of the consequences of not collaborating. But, is there a significant example from history where an emerging power and a declining power (in a relative sense) did not collide? That's not a rhetorical question--I don't know the answer.
population pyramid chart for the US confirms for me that demographics are not a current factor in US economy.
"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
<< <i>How can anyone look at the national budget debt projections, look at the debt levels and do the math on the effect of any interest rate increases, look at the federal reserves' balance sheet, and look at the hostile business environment, and look at world events and politics and come to any other conclusion
You say a lot here. First is the word projections, which are just that. They are not cut in stone and are subject to an even bigger concept known as relativity. You look at these projections and compare to the current state. Yes, a $50 trillion debt load looks horrendous vs a $18 trillion economy. Problem is that when, yes I said when, the debt is $50 trillion, the economy will not still be at $18 trillion. The economy will rise relative to debt increases. >>
Are you arguing that the CBOE deficit projections are too low, too high? We all know they will not be accurate, but that is typically going to be that they (debt projections) are too low than too high. Point taken that debt it relative, but it's clear to see that debt is increasing and appears to be increasing at an ever faster rate. I think it's quite easy to project that the rate of increase of debt is likely to continue to be faster than the rate of increase of GDP. I honestly don't see GDP increasing more than 1-3%/year as it has been doing consistently. Do you? And if so what would drive it? Do you foresee the rate of increase of debt to increase, decrease, or stay the same?
<< <i>Debt levels must also be put into context. Yes, they are historically high, but not insurmountable and can be reconciled. >>
I have asked this before and I don't recall seeing a direct answer. What are some *realistic* scenarios where US debt starts to decrease (relative to GDP)? I believe we agree that the political will to do what's necessary doesn't and probably will never exist, so that one's out.
<< <i>The Feds balance sheet--what about it? They own lots of US debt. The USA is not going bankrupt and these bonds will be paid off. There really is no problem here. >>
Umm, the US *is* bankrupt. When you have to print money to pay your debts, you are bankrupt even if they haven't filed the paperwork. Just like the person using a credit card to make payments on their credit card, they are broke.
<< <i>Hostile business environment. I own a business and agree the regulations can be onerous. But, in context, businesses have faced changes in regulations for centuries. This time is not different. Businesses always innovate and overcome onerous regulations. >>
I am not talking about regulations but that is part of it. The tax rates and policies, Obamacare, higher minimum wage levels, and other government policies have made it very difficult and have discouraged and will continue to discourage people from starting new businesses or expanding existing operations. Can they be overcome? Of course. But fewer people are going to be able to and fewer will try because they can't make the numbers work any longer or the risk is too great. This is a drag on the economy compared to an environment that encourages new businesses and domestic business investment and expansion.
<< <i>World events and politics---the world has been in much greater conflict and chaos than present and has always overcome. >>
True, but the potential for a worldwide life changing event - WWIII, nuke deployment, 9-11 level terrorist attack is probably higher than it has been in a long time.
<< <i>Interest rate increases---any increases in interest rates will be minimal. You assume rates would rise in a vacuum, that they will increase "just because". That wont happen. Any increases in rates will be accompanied by increases in economic growth. >>
And you assume that the fed will always control interest rates. They may be able to do it now, but ultimately investors control interest rates. Just like when you sell your house the market - not you the seller - determine what it is worth. >>
"The finance ministry noted that creditors can be forced to contribute to the costs of winding down Heta - or "bailed in" - under new European legislation that Austria adopted this year so that taxpayers do not have to shoulder the entire burden."
Didn't the US just get similar "new legislation?"
"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
"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
Comments
You better f----n believe it.
Did the system go down in 1998? Nope. Did it go down in 2008? Nope.
The numbers are not 100x larger today and in 2018 (why not keep with the 8's), the system will not go down.
Gold and the stock market did not go to zero in 1998, or in 2008 and will not in 2018.
.Hunt mentions that "we have failed to reattain the economic performance of the 1950's"....his words, not mine.
I could have a long discussion with Lacy on this and I believe we would both understand and endorse each others' ideas.
I made $3.35 per hour building houses and digging ditches. I couldnt afford a McDonalds meal then either. Gasoline was 1/3rd my income. But we are not talking about minimum wage workers. Well. maybe you are, but im thinking more of the 45 year old guy with 2 kids.
Some will burn an hour's wages in gas just commuting to work and back, and that doesn't include a car payment or insurance. Cars, gas, and food are not new expenses. Same as it ever was. Cell phones and cable tv eat a huge % of a lower income workers salary. If they wanna move up to the next bracket, stop watching TV and taking selfies.
a gold standard doesn't solve everything but it does force a level of honesty and have other positive effects on government
LOL. Govt has never been honest.
And no, we did not get by without the wife working. Not even in the 1950's was that true.
Well, there we go. Life was just as tough then as it is now.
Knowledge is the enemy of fear
And a bonus for the New World Order shills.
"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
As we discussed, there is no way this Fed can raise rates without killing their own position!
The problem the FED has, is that raising rates right now, would hurt the global economy and cause the dollar to strengthen too much, which is already too high in some respects.
We either learn to live within the system, or we go down in flames each and every time. This is why I totally disagree with the people who claim gold is manipulated. They are fools who cannot see that the system is functioning as a weather. Three warming summers does not mean man has altered the entire weather system into Global Warming. The sheer arrogance of assuming such powers is to assume we are God. Mankind is simply way too corrupt to ever run anything according to plan.
"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
The numbers are not 100x larger today and in 2018 (why not keep with the 8's), the system will not go down.
Gold and the stock market did not go to zero in 1998, or in 2008 and will not in 2018.
Would the system have gone down in 1998 without strong interventions? Yup. Would it have crapped out and halted in 2008 without massive interventions? Yup.
Just proves that we haven't seen a BIG enough failure yet that we couldn't intervene the printing presses on (ie where banks and govts would still accept each other's paper). And note, there was no "ripping up the derivatives party" in either 1998 or 2008....lol. LTCM in 1998 and even Lehman/BSC in 2008 were somewhat tiny failures in the world of derivatives. The TBTJ banks of today dwarf those 2 entities. And yeah, the numbers are much larger today. In fact they are >1,000X higher than in 1989 when otc derivatives first breeched the $1 TRILL mark. At the end of 1998 they were $80 TRILL world wide. 14X larger since 1998 on only those otc derivs that are reported to BIS. We have no clue how many go unreported. One could say that vs. the LTCM set up the total derivs risk today is 14X larger. I'd consider that pretty substantial. It's the difference between a MLB hitter averaging 0.023 vs one at 0.325.
With $80 TRILL in otc derivatives in 1998, it's actually incredible that LTCM with "only" a $4 BILL loss on the table took the system that close to complete failure. I guess it shows how little real capital the banks carry to help cover leveraged losses. The big banks of that day had to suck it up and pay off the losses or risk an unending daisy chain of losses that would end up back with them. Now multiply that 1998 loss by 300X-500X ($10-$20 TRILL) to arrive at the 2008 losses. Again, if those paper contracts could have been ripped up without paying off the winners, why weren't they? So next time around we expect the big banks to just rip up all those contracts? Interest rate derivatives were not placed at high risk in 2008...they will certainly be part of the next crisis....and they are 8X the size of all the other otc derivatives combined. This is why the FED and CB's are staying with ZIRP or NIRP. They do not want to bring the interest rate contracts into default.
I knew it would happen.
Don't worry, could never happen here.
those without dollar insurance still have the cohodk/baley guarantee.
"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
<< <i>In the 80's J6P could earn a decent living with most menial jobs.
I consider my 1980's jobs menial. No they did not earn a decent living. And no, we did not get by without the wife working. Not even in the 1950's was that true. >>
Menial was probably a poor choice of words. I was referring to a semi-skilled job that anyone could be trained for, something you'd probably get about $15/hr for today.
But that was probably a poor example. As I believe is the "stuff" you have. Probably a better example an indicator of quality of life is the increasing percentage of 18-34 year old's still living at home:
Census Bureau: 30.3% Millennials Still Living With Their Parents
From 22.9% in 1980 to 30.3% is a 32.3% increase. I argue that you can't have a very good quality of life if a) you're young and you still have to live at home and b) you've got kids and they have no where to live but with you, despite this age group being more educated than ever.
Highlights from the Census.gov presentation.
Young Adults Today Are More Likely to Have a College Degree, But More Also Live in Poverty (22% vs 20% in poverty)
Young Adults Earn $2,000 Less Today Than Young Adults Did in 1980
Anyone could be trained for each and every job someone on this board holds/held.
I think you mean a job a monkey could be trained for?
Knowledge is the enemy of fear
No it wouldnt have.....because we wouldnt have let it.
No matter what happens, we will always step in an prevent it from collapsing.
Knowledge is the enemy of fear
<< <i>Just a little Ukrainian hyperinflation problem.
Don't worry, could never happen here.
those without dollar insurance still have the cohodk/baley guarantee. >>
What this country needs is a good civil war. That will show those level headed, rational and pragmatic schmucks.
1/3 of your money wiped out in a heart beat.
http://www.reuters.com/article/2015/02/21/azerbaijan-currency-devaluation-idUSL5N0VV0C920150221
Knowledge is the enemy of fear
<< <i>Would the system have gone down in 1998 without strong interventions? Yup. Would it have crapped out and halted in 2008 without massive interventions? Yup
No it wouldnt have.....because we wouldnt have let it.
No matter what happens, we will always step in an prevent it from collapsing. >>
Really? Why didn't "we" or "they" "step in" an prevent economic collapse in Argentina, Zimbabwe, Turkey, Weimar, etc., etc.? Because our bankers are smarter?
<< <i>
<< <i>Would the system have gone down in 1998 without strong interventions? Yup. Would it have crapped out and halted in 2008 without massive interventions? Yup
No it wouldnt have.....because we wouldnt have let it.
No matter what happens, we will always step in an prevent it from collapsing. >>
Really? Why didn't "we" or "they" "step in" an prevent economic collapse in Argentina, Zimbabwe, Turkey, Weimar, etc., etc.? Because our bankers are smarter? >>
Could that be why they ended up with all the loot.
Couldn't be prevented in those countries because their helicopters weren't dropping world reserve currency notes that somebody paid for. Another benefit that will be sorely missed. The FED had the sense to make the taxpayer and working class pay the price. While it was funny money it at least had some sweat equity.
"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
Wouldn't be near as much risk out there if it were just dollars that were floating around. But the derivative's debt-money poker chips takes it to a level exponentially higher. Again, derivative's risk was laughed at around here from 2002-2007. And then they blew up in 2008. Fancy that. And the world's solution to that problem?.........Raising world sovereign debt levels by another $57 TRILLION.
<< <i>
<< <i>Would the system have gone down in 1998 without strong interventions? Yup. Would it have crapped out and halted in 2008 without massive interventions? Yup
No it wouldnt have.....because we wouldnt have let it.
No matter what happens, we will always step in an prevent it from collapsing. >>
Really? Why didn't "we" or "they" "step in" an prevent economic collapse in Argentina, Zimbabwe, Turkey, Weimar, etc., etc.? Because our bankers are smarter? >>
Because you obviously dont know the difference in the economies of the US, Argentina, Zimbabwe, Turkey, Weimar, ...I'll add Poland, Azerbajan...ect, ect. Hint--It has nothing to do with bankers or being smart.
Knowledge is the enemy of fear
<< <i>
<< <i>
<< <i>Would the system have gone down in 1998 without strong interventions? Yup. Would it have crapped out and halted in 2008 without massive interventions? Yup
No it wouldnt have.....because we wouldnt have let it.
No matter what happens, we will always step in an prevent it from collapsing. >>
Really? Why didn't "we" or "they" "step in" an prevent economic collapse in Argentina, Zimbabwe, Turkey, Weimar, etc., etc.? Because our bankers are smarter? >>
Could that be why they ended up with all the loot.
Couldn't be prevented in those countries because their helicopters weren't dropping world reserve currency notes that somebody paid for. Another benefit that will be sorely missed. The FED had the sense to make the taxpayer and working class pay the price. While it was funny money it at least had some sweat equity. >>
Germany misses having a reserve currency? Great Britain, Australia, Canada? Amazing how you place so much value on the thing you hate so much.
Knowledge is the enemy of fear
<< <i>
<< <i>
<< <i>
<< <i>Would the system have gone down in 1998 without strong interventions? Yup. Would it have crapped out and halted in 2008 without massive interventions? Yup
No it wouldnt have.....because we wouldnt have let it.
No matter what happens, we will always step in an prevent it from collapsing. >>
Really? Why didn't "we" or "they" "step in" an prevent economic collapse in Argentina, Zimbabwe, Turkey, Weimar, etc., etc.? Because our bankers are smarter? >>
Could that be why they ended up with all the loot.
Couldn't be prevented in those countries because their helicopters weren't dropping world reserve currency notes that somebody paid for. Another benefit that will be sorely missed. The FED had the sense to make the taxpayer and working class pay the price. While it was funny money it at least had some sweat equity. >>
Germany misses having a reserve currency? Great Britain, Australia, Canada? Amazing how you place so much value on the thing you hate so much. >>
Never said I hated it. I am on record for hating what has been done to it and the for the waste of sons and daughters defending and enforcing it. Not worth the price, especially since its days are numbered anyway.
<< <i>you obviously dont know the difference in the economies of the US, Argentina, Zimbabwe, Turkey, Weimar, ...I'll add Poland, Azerbajan...ect, ect. Hint--It has nothing to do with bankers or being smart. >>
The economy did not save the day. The taxpayers and dollar holders paid the price and saved the economy. . . but only for now. I'm afraid that was a one trick pony.
"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
It was a rhetorical, thought-provoking question. The relevance in this discussion is what was in common in hyperinflation scenarios in the past? Many many people wanted to do the same thing, namely, get rid of their currency (spend it) as fast as possible. Same issue with runs on banks, manias (investment bubbles in stocks, metals, housing) crashes (bubbles popping in stocks, metals, housing) it's the herd that drives these phenomena
What doesn't happen is the value of stuff does not go to infinity or zero, because at some point, non-panicky money comes in and bets the other direction. Witness the housing recovery, the stock market recoveries, even the metal prices stabilize because at some point, the buyers come in. There's a punctuated equilibrium, where the trend gets perturbed, and then reestablishes itself.
Our consensus [obvious] answer to the toilet question was "Disaster!" but the nuanced answer was, "not much, because in reality, not everyone flushes at the same time, and if too many do flush at the same time, lots of people will then hold off on flushing because they will see the effects, or be warned by peers or the authorities, or their water pressure will decline, or their toilet will back up, and they will use caution.
What "saves the day" in the end is regression toward the mean and the related contrarians who enter a market. The US dollar will outlive all of us. I'll bet any number of them that it's true
I'd write more, but I need to go run around and warn everyone to prepare for when everyone flushes at the same time, and retail to them all the plungers, galoshes, and rubber gloves that I buy wholesale)
Boo!
Liberty: Parent of Science & Industry
<< <i>What doesn't happen is the value of stuff does not go to infinity or zero, because at some point, non-panicky money comes in and bets the other direction. Witness the housing recovery, the stock market recoveries, even the metal prices stabilize because at some point, the buyers come in. There's a punctuated equilibrium, where the trend gets perturbed, and then reestablishes itself. >>
I don't think this happens during hyperinflation. During hyperinflation you stop accepting the local currency for trades. I highly doubt anyone was liquidating real estate and other goods (and taking advantage of the "high prices") in Zimbabwe when the trillion dollar notes were circulating and inflation exceeded 1 million percent. In fact, I would wager that no one would sell real estate or other durable assets for Zimbabwe dollars once inflation started exceeding 100%/year. There's no such thing as non-panicky money when it comes to local currency during hyperinflation.
And to pick apart the analogy, there would be no disaster if everyone flushed at the same time. The water demand would cause an decrease in the pressure of the system and a spike in demand for water so toilet tanks would refill slowly, but they would still refill. And most modern sewage systems can easily accept the few gallons of water each toilet would produce, and of course septic systems would be fine. Finally, there would be no way to see that everyone else is flushing and hold off if the event is truly simultaneous, which it would have to be since a toilet flush & refill takes less than a minute in a most cases.
<< <i>I'd write more, but I need to go run around and warn everyone to prepare for when everyone flushes at the same time, and retail to them all the plungers, galoshes, and rubber gloves that I buy wholesale. >>
Well, the sky isn't falling but the clouds are gathering, winds are picking up, and there's thunder in the distance. We have a few in this thread who insist that it will never rain here, but the smart people are saying, 'hey, looks like it might start to rain maybe I should prepare.'
Too many positive BST transactions with too many members to list.
<< <i>Well, the sky isn't falling but the clouds are gathering, winds are picking up, and there's thunder in the distance. We have a few in this thread who insist that it will never rain here, but the smart people are saying, 'hey, looks like it might start to rain maybe I should prepare.' >>
"Looks like it might start to rain" is a conspiracy theory.
"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
Others prefer to just prepare for the rain.
Liberty: Parent of Science & Industry
Armstrong's 8.6 year cycle doesn't neatly fit into a 40 year cycle since it's 43 years. But his work is also based on money flows and confidence....not necessarily stock market peaks. The FED uses a 4/8 year business cycle model which also fits into the 40 yr model. I've mentioned that Armstrong's ECM and Real Estate models peak in Sept 2015. It's then 18 years down in RE confidence. First time I've read anything from this author. He looks to be no more than 41 which means he must have been trading markets when he was in elementary school.
This guy has many similarities with Armstrong's various cycle models
If the link doesn't work for you past this in........https://www.linkedin.com/pulse/cycles-markets-interview-eric-hadik-erico-matias-tavares
Who tells you this?
Knowledge is the enemy of fear
Exclusive interviews with legends in the precious metal markets and confirmed also by web bot chatter in precious metal forums,
the declaration that the inevitable collapse of the fiat money must and will happen, has been spewn as the mantra for ownership and investing in gold and silver at all costs... We interrupt this newscast for a special message...
This just in, it has been scientifically proven by the US government that all humans will die at some point in their lives, but most will not know exactly when... Now back to our original News Flash...
"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
That's what Martin Armstrong says. Then again, he doesn't sell gold or silver - he sells global economic conferences. One must always consider the source. lol, rawteam - this is one time I actually get your sense of humor.
I just read Lacey Hunt's interview posted on zerohedge. It sounds like Mr. Hunt's becoming disillusioned with the way things are. And again, consider the source. He's a 6 billion dollar bond manager. He worries about 1/10ths of 1%. He figures that the only way to go is to hide out in long term Treasuries. I worry about 30% & 50% moves. Other than that, Lacy and I mostly agree on just about everything else.
I knew it would happen.
<< <i>Wow! Conspiracy theory on CNBC? >>
Tabloid headline? What conspiracy...
"Societe Generale's notoriously bearish strategist, Albert Edwards, has poured scorn on the belief that the U.S. economy is recovering and predicts "violent" reactions in asset markets during the second half of 2015."
You need to ask yourself, when was the last time he had a fairly accurate prediction. He's been predicting an imminent global meltdown since 2009. One of ZeroHedge's favorite sources of doom & gloom predictions.
<< <i>I've been repeatedly told that cycles don't exist in financial markets
Who tells you this? >>
Baseball for one. We debated this topic and related ones for about 2 weeks. He had plenty of support from the fiat bug crowd. I know Cohodk believes in and makes his living using both charts and cycles.
I agree and while I wholly endorse his rationale and approach, I am beginning to depart from his notions of perpetual deflation and discouragement.
We have seen the pain disillusionment can bring on these very message boards.
Knowledge is the enemy of fear
<< <i>I agree and while I wholly endorse his rationale and approach, I am beginning to depart from his notions of perpetual deflation and discouragement. >>
And what is making you depart from this vision? Have you been watching too much CNBC?
The way to end the talk of perpetual deflation and discouragement is to offer a feasible path that our leaders or economy has a realistic chance of turning this economy around.
How can anyone look at the national budget debt projections, look at the debt levels and do the math on the effect of any interest rate increases, look at the federal reserves' balance sheet, and look at the hostile business environment, and look at world events and politics and come to any other conclusion?
<< <i>How can anyone look at the national budget debt projections, look at the debt levels and do the math on the effect of any interest rate increases, look at the federal reserves' balance sheet, and look at the hostile business environment, and look at world events and politics and come to any other conclusion? >>
Be blinded by charts and brainwashed by Keynesians.
"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
<< <i>
<< <i>I agree and while I wholly endorse his rationale and approach, I am beginning to depart from his notions of perpetual deflation and discouragement. >>
And what is making you depart from this vision? Have you been watching too much CNBC?
The way to end the talk of perpetual deflation and discouragement is to offer a feasible path that our leaders or economy has a realistic chance of turning this economy around.
How can anyone look at the national budget debt projections, look at the debt levels and do the math on the effect of any interest rate increases, look at the federal reserves' balance sheet, and look at the hostile business environment, and look at world events and politics and come to any other conclusion? >>
First of all you and I differ on how "bad" the economy is. This is a fundamental difference that no matter what I expressed would be dismissed by you (and others).
I am actually beginning to lean toward the inflation camp. Assets prices (sans PMs) are increasing, with the largest asset groups--equities and bonds--hitting all highs all around the globe. Humans hae already shown their propensity to dip into these assets to acquire "things". The velocity of money could soon be increasing.
How can anyone look at the national budget debt projections, look at the debt levels and do the math on the effect of any interest rate increases, look at the federal reserves' balance sheet, and look at the hostile business environment, and look at world events and politics and come to any other conclusion
You say a lot here. First is the word projections, which are just that. They are not cut in stone and are subject to an even bigger concept known as relativity. You look at these projections and compare to the current state. Yes, a $50 trillion debt load looks horrendous vs a $18 trillion economy. Problem is that when, yes I said when, the debt is $50 trillion, the economy will not still be at $18 trillion. The economy will rise relative to debt increases.
Debt levels must also be put into context. Yes, they are historically high, but not insurmountable and can be reconciled.
The Feds balance sheet--what about it? They own lots of US debt. The USA is not going bankrupt and these bonds will be paid off. There really is no problem here.
Hostile business environment. I own a business and agree the regulations can be onerous. But, in context, businesses have faced changes in regulations for centuries. This time is not different. Businesses always innovate and overcome onerous regulations.
World events and politics---the world has been in much greater conflict and chaos than present and has always overcome.
Interest rate increases---any increases in interest rates will be minimal. You assume rates would rise in a vacuum, that they will increase "just because". That wont happen. Any increases in rates will be accompanied by increases in economic growth. The net result would be a wash. Increases in debt payments would be met by increases in tax revenues. But even an increase in the 10 yr to 5%, without economic growth, could be easily absorbed. All that money that came out of bonds would go somewhere--real estate, stocks, PMs ect. Believe it or not, people did buy houses when mortgage rates were 15%. Dont worry, your business will not collapse if your clients have to pay 6% instead of the current 4%. In fact, it could be better than it was in 2003-2006, much better.
BTW--Id rather be blinded by charts than by ignorance or fear.
Knowledge is the enemy of fear
<< <i>BTW--Id rather be blinded by charts than by ignorance or fear.
Ignorant? That's a new low for you, but coming from you I'll wear it like a badge of courage.
"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
Those are soothing words for a Sunday morning in Tokyo and I substantially agree with them ... but:
With respect to the Fed balance, although I agree that the balance sheet itself is almost a non-issue, the reason of course why the Fed balance sheet (and that of the Bank of Japan and the Bank of England and soon the European Central Bank) is so "bloated" is because of QE. I believe that historians will view the timely provision of liquidity to the financial markets during the acute phase of the financial crisis as a remarkable demonstration of coordination of sound policy by the world's central bankers. Possibly the early rounds of QE made sense, but as time goes on, the distortion we are seeing in the financial markets is extraordinary. When economists debate about how easy it will be to "unwind" QE, they tend to think narrowly about reducing the size of central bank balance sheets. If QE has caused the capital allocation process to go haywire, the issue is more whether this can be unwound.
That is a bit of a ramble, but a key point is one you have raised many times: demographics. Almost certainly demographics rather than finance is the key driver of low growth in Japan and Europe (and to a lesser degree the US and even a factor in slowing growth in China) Although markets are never in a real equilibrium in a strict sense of that word, they persist for fairly long periods in states of near equilibrium. At some point, the markets will want to normalize, i.e., move towards some quasi-equilibrium that differs substantially from the one that has been maintained by QE for many years. This may or may not be ugly, but I believe there's a fairly strong scientific argument that would suggest that the longer QE persists, the more likely that this change in states will be ugly. The same science that might support such a statement would also say that the outcome of this ugliness is completely unpredictable.
I think that central bankers understand this to varying degrees, but they are so intoxicated by a belief in their own omnipotence that they probably don't think hard enough about it when establishing policy.
<< <i>
<< <i>BTW--Id rather be blinded by charts than by ignorance or fear.
Ignorant? That's a new low for you, but coming from you I'll wear it like a badge of courage. >>
Soon i'll be at your level. LOL
Knowledge is the enemy of fear
I think that central bankers understand this to varying degrees, but they are so intoxicated by a belief in their own omnipotence that they probably don't think hard enough about it when establishing policy.
Absolutely. The longer a population or society becomes accustomed to something the greater the pushback when it is taken away. And everything in excess is never good. Im not so sure the reaction is as unpredictable as the extent. And this extent is probably a function of time. Time, while constant, is ironically the most unpredictable. It can be our friend or enemy. Right now, I believe it is our friend as global populations continue to grow and the majority of those populations still have needs and wants. India and China represent about 38% of the global population and for the most part, need and desire everything. Growing populations have a way of curing mistakes when there is ever-present demand. The real test of this global monetary experiment will probably come in about 2 generations (perhaps a little less) when global population growth stops, or declines significantly. Without the safety net of greater demand from the people, mistakes will be magnified.
Knowledge is the enemy of fear
<< <i> The real test of this global monetary experiment will probably come in about 2 generations (perhaps a little less) when global population growth stops, or declines significantly. >>
Two decades tops, two years possibly.
No wonder you are so optimistic, you believe you'll be long gone. Explains it all.
"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
<< <i>
<< <i> The real test of this global monetary experiment will probably come in about 2 generations (perhaps a little less) when global population growth stops, or declines significantly. >>
Two decades tops, two years possibly.
No wonder you are so optimistic, you'll be long gone. Explains it all. >>
You'll be gone before me so why you so pessimistic?
You have to remember, that even if population growth stops, the majority of the population will still have the wants and needs.
This is an excellent website. Click on every country. Look at the population trends and keep in mind that the largest economic demands are from those age 30-50 (although this can vary by life expectancy in each country). Which countries will see increased demand. Which are past their peak? Which have unstable governments? What are the dominant religions in each? What is the geography of each and its neighbors'? Which have young populations and which old?
Population Pyramid
Knowledge is the enemy of fear
Linked
That is an amazing website. It is evidence for a view that GDP may understate the value of advances in technology.
I wish I could look at global demographics and share your optimism. Your point is certainly valid and is not inconsistent with the data. But, I wonder if development over the next 20 - 30 years can happen peacefully unless the US and China decide to collaborate as global dual hegemons? Coming to some sort of meaningful collaboration (as opposed to trying to carve up the world) might be possible, if our leaders undertake a sober analysis of the consequences of not collaborating. But, is there a significant example from history where an emerging power and a declining power (in a relative sense) did not collide? That's not a rhetorical question--I don't know the answer.
"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
<< <i>How can anyone look at the national budget debt projections, look at the debt levels and do the math on the effect of any interest rate increases, look at the federal reserves' balance sheet, and look at the hostile business environment, and look at world events and politics and come to any other conclusion
You say a lot here. First is the word projections, which are just that. They are not cut in stone and are subject to an even bigger concept known as relativity. You look at these projections and compare to the current state. Yes, a $50 trillion debt load looks horrendous vs a $18 trillion economy. Problem is that when, yes I said when, the debt is $50 trillion, the economy will not still be at $18 trillion. The economy will rise relative to debt increases. >>
Are you arguing that the CBOE deficit projections are too low, too high? We all know they will not be accurate, but that is typically going to be that they (debt projections) are too low than too high.
Point taken that debt it relative, but it's clear to see that debt is increasing and appears to be increasing at an ever faster rate. I think it's quite easy to project that the rate of increase of debt is likely to continue to be faster than the rate of increase of GDP. I honestly don't see GDP increasing more than 1-3%/year as it has been doing consistently. Do you? And if so what would drive it? Do you foresee the rate of increase of debt to increase, decrease, or stay the same?
<< <i>Debt levels must also be put into context. Yes, they are historically high, but not insurmountable and can be reconciled. >>
I have asked this before and I don't recall seeing a direct answer. What are some *realistic* scenarios where US debt starts to decrease (relative to GDP)? I believe we agree that the political will to do what's necessary doesn't and probably will never exist, so that one's out.
<< <i>The Feds balance sheet--what about it? They own lots of US debt. The USA is not going bankrupt and these bonds will be paid off. There really is no problem here. >>
Umm, the US *is* bankrupt. When you have to print money to pay your debts, you are bankrupt even if they haven't filed the paperwork. Just like the person using a credit card to make payments on their credit card, they are broke.
<< <i>Hostile business environment. I own a business and agree the regulations can be onerous. But, in context, businesses have faced changes in regulations for centuries. This time is not different. Businesses always innovate and overcome onerous regulations. >>
I am not talking about regulations but that is part of it. The tax rates and policies, Obamacare, higher minimum wage levels, and other government policies have made it very difficult and have discouraged and will continue to discourage people from starting new businesses or expanding existing operations. Can they be overcome? Of course. But fewer people are going to be able to and fewer will try because they can't make the numbers work any longer or the risk is too great. This is a drag on the economy compared to an environment that encourages new businesses and domestic business investment and expansion.
<< <i>World events and politics---the world has been in much greater conflict and chaos than present and has always overcome. >>
True, but the potential for a worldwide life changing event - WWIII, nuke deployment, 9-11 level terrorist attack is probably higher than it has been in a long time.
<< <i>Interest rate increases---any increases in interest rates will be minimal. You assume rates would rise in a vacuum, that they will increase "just because". That wont happen. Any increases in rates will be accompanied by increases in economic growth. >>
And you assume that the fed will always control interest rates. They may be able to do it now, but ultimately investors control interest rates. Just like when you sell your house the market - not you the seller - determine what it is worth. >>
"The finance ministry noted that creditors can be forced to contribute to the costs of winding down Heta - or "bailed in" - under new European legislation that Austria adopted this year so that taxpayers do not have to shoulder the entire burden."
Didn't the US just get similar "new legislation?"
"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
"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
Deflation is dead.....unless you have to buy something other than oil/gas/some commodities. Coffee and sugar hitting lows again in 2015.
<< <i>This guy's CPI/price experience for 2014 is similar to mine
Deflation is dead.....unless you have to buy something other than oil/gas/some commodities. Coffee and sugar hitting lows again in 2015. >>
Well, we can't all live in Cohodk-ville.