Financial topics

[Marc]

Additionally, I respectfully feel that the banks would find some way, if at all possible, to put the kibosh on hyperinflation, as hyperinflation (at least Zimbabwe-style hyperinflation) would likely destroy the banks. However, once the bad debt in the private sector is destroyed, I'm not sure what interventions the Fed and its world counterparts would or could use to avoid a potential hyperinflationary endgame outcome; maybe they could and would frenetically try to take loads of money out of the system at that juncture.

The problem is that the government is the one that makes and changes the laws, controls the police, and appoints the people that run the central bank. If the government is spending twice what it collects in taxes and nobody is buying their bonds then the government will get the central bank to buy their bonds one way or another. At least historically that is what always happens. If the central bank did not the government would be broke as it could only pay half its expenses.

The US government was able to influence the head of Al Gazera so that he would not publish bad things about the US. If the US government can control the head of the main Muslim/Arab news agency in another country, they can control the Federal Reserve Bank on US soil operating at the whim of US law.

http://news.cnet.com/8301-1023_3-201092 ... to-resign/

Again, historically the central banks always print whatever the government needs. I expect that this time as well.

Hi, Vince; I do agree that the central banks (especially the Fed) will at least try to print whatever is necessary, to the extent that they feel that that doing so can be managed and not create a financial Armageddon. This would largely fit in with John X.'s theory of "One, Two, Three...Infinity" of can-kicking and increasingly-amplified responses to our financial crisis. The need to do this is likely bolstered by the belief (as also felt by John) that since the same laissez-faire/amoral management and "quants" who "led the engineering" of the crisis are still largely in place in our corporate/financial organizations, that these managers/quants will keep on "doing their thing bigger and better" and cause even more egregious demands to be placed on the Fed/central banks.

The big challenge and question is if we can manage all this and avoid "The Great Depression with iPods" this time around. However, my personal feeling is that no matter how hard the challenges are, that the banks, who have, well, a wee bit of leverage on the Fed/central banks, will fight hard against any efforts that will massively harm them, and that they would rather have serious deflation as opposed to hyperinflation if forced into such a nasty choice. Thanks for sharing. —Best regards, Marc

[vincecate]

Hi, Vince; I do agree that the central banks (especially the Fed) will at least try to print whatever is necessary, to the extent that they feel that that doing so can be managed and not create a financial Armageddon. This would largely fit in with John X.'s theory of "One, Two, Three...Infinity" of can-kicking and increasingly-amplified responses to our financial crisis.

Ya, I think it is QE1, QE2, QE3, QE-Infinity.

Everyone knows QE1 and QE2 are done. Most people do not yet realize that QE3 is going on. The only way the Fed holds interest rates below 0.25% when inflation is 3.5% is by buying up lots of bonds. They have not slowed down in the printing of money. When the US bond panic comes, then we get QE-infinity as the Fed is the only buyer in a $15 trillion sea of sellers.

I don't see how they avoid hyperinflation, which is financial Armageddon.

There was some other hyperinflation I was reading about (maybe the French one) where they had a first and second finite size printing, then they could not stop printing but tried to hide it, then people realized it and all was lost. It was amazing how similar it seemed to the current situation. In some sense it takes 3 things to establish a pattern I guess. After that people can see it will not end.

The Fed and governments in general have supported economists who advocate printing money, so most of them do these days. They really think that printing money will fix a bad economy. So the worse things get the more they will print. It will not stop till after hyperinflation has destroyed things.

http://www.huffingtonpost.com/2009/09/0 ... 78805.html

[Higgenbotham]

If the following happens before mid year 2012:

1. Bernanke and team are still solidly on board.
2. The S&P crashes to 700 plus or minus 20% and the shorts get paid.
3. Gold drops back to around $1100 and silver to around $16.

and nothing else that is totally unexpected happens, then I am going to move to a 50% inflation, 50% deflation stance and stay there.

The reasoning is that, while I might think this or that will happen, if things move down that fast that soon I believe the system will at that point have the potential to become too chaotic to predict or control. That in my opinion will be time to get out of dodge and work full time on basic survival.

[aedens]

Vin, later, not now for hyper. The current path is swaps to stablize IMF and SDR obligations.
I truly feel the path forward will be as we noted parity that was provided in the forums to nominal terms of
current currency deflationary trends. The path forward to consider is not how, but when nominal gross
domestic product numbers we have followed pan out to date. Koo's work provided bears the lessons
and was lucid of the considerations going forward and he did mention demographics we
trend also to genearational dynamics which are fluid in nature but it will run its course.
What I wish to clearly observe, if policy, which inflates by design has yet run its course.
We have good dialog on how consumers have been unbraided by trends to afforded
goods and services many cannot afford guised by deleverging rhetoric in in nature.
The tale of caution has in my opinion only been conveyed as regulation Q on money sweeps
to avert lock up on payments and regulation T which curtails margin cost on
commodity pricing. I assume also on my part the cautionary tale is the FED
is acutley aware to this premise. Linked was also the current mindset to non proforming
assets from the CCC acount "tarp" that has and is being currently discerned in the market operation
to morgage backed security's with a premium payment going forward. Futher back we noted lockup fees were
remanded to dark pool participants who to be polite could not see the trees from the forrest
and were as noted pay the lockup fee which we actively captured here to the latter observation
of regulation q being amended which we noted as M2 activity. Also noted was others observation
such as Chris Martenson mention to the effect which confirmed out forums ad hoc discernment.
Also we caught the article from the washington post, the unwinding to tear ups to some international
acounts which I feel was derived when the PM from Austrailia has the conversation with washington
to settle the landscape to effects we have noted here. I will not dilute your observation to hyperinflation
and I for one cannnot see it. Jim Rickards also has some very good input to latency of effect of
policy shapers who from effect are indeed concerned namely about there job but the overall
disposition of affairs. A few more than me seen this financial repression tax being imposed
on the taxpayer and we are concerned more than watching this moral millstone around the neck
of governments resolve. How can they look there own children in the eye is beyond my capibility
to understand.
Just a few quick notes...

http://oversight.house.gov/images/stori ... timony.pdf

[vincecate]

Vin, later, not now for hyper.

I agree. I do not know how much later but I think of it as over a 50% chance in the next 2 years that we start US dollar hyperinflation. By start I mean 5% inflation in one month.

How much later would you guess?

[aedens]

My basis is local only Vin. 100 percent is already here. Reg T has consumed all.

[OLD1953]

MFGlobal has created a huge mess for the CME. Such messes take about six months to hit the markets, approximately and usually. The EURO experiment is failing for obvious structural reasons and China has a collapsing real estate market worse than the market in the US when we started to hit the skids. If any two of those happen to hit the markets in about the same time period (May - August 2012) the result would be devastating. If all three hit in that time frame, it will be unimaginable. The amount of money/loans that will vanish from the system will be enormous, as many loans (dividend in lieu, for example) are made WITHOUT the lender actually intending or knowing they are lending anything. (and ppl wonder why I don't trust 401K)

Should this happen, then deflation will be very rapid, derivative values of any sort will be regarded as near worthless, and only physical possession of values (cash, metal, land, food, fuel, timber) will be considered to have any meaning. This would very likely leave the US in place as world leader, as the US has a huge amount of physical gold in reserve. Moreover, the US is worlds third largest producer of conventional oil and leader in coal and soon in natural gas, and a major producer of timber and food stuffs, plus a major producer of high tech items and heavy equipment. It's going to be really hard to beat that combination, China is the only country that has any real chance of doing so.

I hope they manage to kick the can down the road a few more times, but I'm afraid the end of the road is in sight.

[jdcpapa]

What that means to me is that in the broadest sense the debt will be eliminated whether it be by paying it down, forgiveness, default or any other “magically” contrived way.

That I would agree with. Koo's statement that "There will be plenty of time to pay down the accumulated public debt" reads to me like a statement of belief that millions of new entrepreneuers will appear out of thin air to support his theory if we could only believe hard enough that he is right, regardless of obvious things like population declines in Japan and so on. A recent interview with Kyle Bass that's posted on financialsense.com gives the realistic no nonsense view.

http://www.financialsense.com/contribut ... -the-world

I cannot contrast your interpretation of Koo vs Bass. Because I do not follow either one. What I do know is that the real estate bubble could have been predicted by anyone seasoned in financial matters. Bass took it to them and played it and won. This does not make him a no nonsense guru. His ability to process and act on the obvious goes to the essence of this site. Knowledge. The only question that remains is the play.

[Higgenbotham]

The only reason I'm posting this is because I know Vince wil enjoy this. Mr. Wayne is the third founder of Apple Computer.

http://www.engadget.com/2011/12/19/two- ... d%3D121470

All roads lead to a single conclusion for Wayne: the necessity of investing in precious metals. It's a lesson he's actively attempting to impart on me and one he shared with a young Steve Jobs, who promptly sold his investment, once the value went up. "I'm not sure he entirely understood what I was trying to tell him," Wayne explains. Gold and silver aren't an investment for Wayne – they're security, a protection from a time in the future when the uselessness of non-metal-backed paper money becomes too apparent to ignore; when China does something to address the US' massive debt.

I wonder how many of us would have accepted the gift of life, if we'd first taken the trouble to read the fine print.These are subjects tackled by Insolence of Office, a 260-page treatise on shielding oneself from the impending economic and societal collapse, featuring chapters with titles like, "The End of the Republic," "Morality and Sexual Preference" and "Illegal Destruction of Fixed Currencies in the United States." The book opens with a rhetorical question: "I wonder how many of us would have accepted the gift of life, if we'd first taken the trouble to read the fine print." It's a question that could apply to Wayne's own rollercoaster-like existence.

[Higgenbotham]

MFGlobal has created a huge mess for the CME. Such messes take about six months to hit the markets, approximately and usually. The EURO experiment is failing for obvious structural reasons and China has a collapsing real estate market worse than the market in the US when we started to hit the skids. If any two of those happen to hit the markets in about the same time period (May - August 2012) the result would be devastating. If all three hit in that time frame, it will be unimaginable.

There is also the Japanese earthquake and power plant meltdown. I don't believe the worst effects of this disaster have hit the economy yet - normally it takes 1-2 years in the case of a major natural disaster.