Generational Dynamics Forum - New Site

I posted it on Wallstreet Bear at the close on Wednesday and have seen my opinion confirmed by Elliott wave theorist and a few others. Due to the fact the decline was so significant, the rally that followed would also be significant. If this proves to be the case, all gains in 2009 will be wiped out by the end of the year. One might remember the Dow as trading at 9000 during the first trading day of the year, so we have merely gained back a little over the last leg down. Many known big bears have capitulated the past week, with guys like Marc Faber saying we might run for 3 years. Clearly Faber doesn't understand credit bubbles, as the preceived printing is nothing more than who holds the bank loans. The assets and liabilities are all the same.

In Elliott wave principal, this wave will be more powerful than the one that got about 60% of the US market and wiped out 70% of the Chinese market. China is already in a new bear and they have used their stimulus money to expand more and speculate in the stock market. Talking about a big firecracker going off in ones hand. They are about to learn about speculative losses. If the US market has a bad loss in a week, we could see a panic in China, as there is so much hot money along with borrowed money in their market.

Higgenbotham wrote:Similar view to the dollar. In a deflationary environment, silver should not be trading close to a 20 year high. Nothing like this occurred during the post 1929 crash, so far as I am aware. Out of curiosity, I will dig up some charts of silver's behavior during the 1930's and take another look.

Higgie, it appears you answered your own question, but silver got killed in the depression. I have often wondered why they didn't coin a lot of silver, but I would suspect the bankers already had control of the system. Silver was already down significantly in 1929.

Higgenbotham wrote:I'm not an expert on banking, so someone please correct this if wrong, but it is unlikely that banks are purchasing 3 month t-bills at 0.09% to hold against deposits. Even if they paid 0% on those deposits, the 0.09% margin could not make those deposits profitable. The banks may be purchasing longer term treasury notes at 2-3% though. The only investors I can think of who would purchase short term t-bills at 0.09% are those who believe that the value of all other assets will decrease (including bank deposits that pay higher interest as well as stocks and silver).

As far as treasury bills go, I believe banks do hold them. They need something for liquidty. John brought up an interesting point, but I don't believe it has anything to do with Koo's analysis. In fact, I think Koo is off base, as what he indicated worked in Japan has only bankrupted the country to the point that it has no solution other than liqudation of its corporations and overtaxation of its people to reduce government debt and support programs. Though I don't like his socialism, Steve Keen of debtdeflation.com, an Australian economist, is on the right track to a solution, as the very infinitely inflatable currency cannot be inflated much more and it is time for a lot of bankruptcy or a Jubilee. I suspect the reason the yield on treasuries dropped is because the demand to borrow money for business dropped. Most people that know understand the Fed to be a follower of market rates, not a leader. The dip from .19%, where it was for some time, is a bearish sign in context of everything else that has been happening.

http://www.financialsense.com/Experts/2009/Dent.html

Awhile back, we discussed why Harry may have been wrong in his forecast for the stock market to go higher into 2008 or 2009 (instead of the actual peak that occurred in 2007 at lower levels than he forecast). He does a good job of addressing that at about the 50 minute point in the interview.

He covers a wide range of questions dealing with the reasons for a deflationary outcome and makes specific forecasts for the stock market and gold. His thought process is logical and easy for the lay person to understand.

(In one place, he mentions that he thought stocks would make a high between late July and mid September but that the market ought to be about done going up now, that it got a little overextended. Then he advises not to short futures in any event. That hit home given the fact that I had made a similar forecast, went short futures, and gave up on September 16 with a loss.)

He expects gold to rise to a new high around $1300 give or take in the next 6 months, then go down.

The only thing he said that I would seriously question is his recommendation to buy long term govenment bonds late next year on default concerns. I believe the risk of default is too high.

A great interview overall and highly recommended.

mannfm11 wrote:I suspect the reason the yield on treasuries dropped is because the demand to borrow money for business dropped. Most people that know understand the Fed to be a follower of market rates, not a leader. The dip from .19%, where it was for some time, is a bearish sign in context of everything else that has been happening.

I dug up another possible reason that t-bill rates headed lower. About a week ago, Geithner announced that the Fed was quitting the guarantees on money market funds, so there may have been some money shifted from money markets to t-bills.

http://www.bloomberg.com/apps/news?pid= ... NBhGuHCuTM

Higgenbotham wrote:

mannfm11 wrote:I suspect the reason the yield on treasuries dropped is because the demand to borrow money for business dropped. Most people that know understand the Fed to be a follower of market rates, not a leader. The dip from .19%, where it was for some time, is a bearish sign in context of everything else that has been happening.

I dug up another possible reason that t-bill rates headed lower. About a week ago, Geithner announced that the Fed was quitting the guarantees on money market funds, so there may have been some money shifted from money markets to t-bills.

http://www.bloomberg.com/apps/news?pid= ... NBhGuHCuTM

There are 2 kinds of Money Market funds and the FDIC is sorta running on fumes as we know.
If people move to T bill from the Non FDIC insured Money market funds I feel as many do it would benefit them dearly for risk aversion purposes. I think we can agree that fundamantals and technicals are Asymmetrical economical warfare from here on out. Your dealing with global governmental puts and junior traders will last 6 to 8 months max now since price channels are not there concern now. These next few quarters are the classical LEAN business models to performance as a art form to remove and mold the landscape. Ignore at your net worth.... Washington did nothing to protect the consumer but consume capital and stall.
Bail out part 2 soon, and the back wall approaches but it will happen. CDO never abated and the reform never happened. Taxpayer just a blood supply.
CDO Squared: CDO squared transactions are SCDOs that reference portfolios of single-tranche CDOs (inner CDOs). These are structured synthetically in the form of portfolio CDS. The master portfolio will reference inner CDO tranches and may, additionally, reference ABS. Inner tranches are each defined by their AP, which represents credit enhancement, and their DP, which determines each inner CDO’s tranche thickness. If total losses in one of the inner CDOs’ underlying reference portfolios exceed the AP for that CDO, the tranche notional will be written down (via the CDS), which will cause a credit event on the master CDO. The CDS of the inner tranches allow multiple credit events over the term of the CDO structure, and losses on each of the inner CDOs will be capped at the DP for that inner CDO. The CDO squared noteholders benefit from additional subordination at the master CDO level. If losses in the master CDO exceed the threshold for the CDO squared tranche, a cash settlement payment becomes due under the master CDO.
Until balance sheet repair trends reality demand will be that only based on reality, not animal spirits.

http://www.tehrantimes.com/index_View.asp?code=203592 Euro to replace dollar in Iran’s Forex Reserve Fund
Russian President Dmitry Medvedev, at his own news conference, urged Iran to cooperate, as did Chinese Vice Foreign Minister He Yafei. He, however, did not endorse penalties against Tehran. At a news conference in New York, Iranian President Mahmoud Ahmadinejad said his country had done nothing wrong and Obama would regret his actions.

Economic Calculation In The Socialist Commonwealth
“Die Wirtschaftsrechnung im sozialistischen
Gemeinwesen” in the Archiv für Sozialwissenschaften, vol. 47 (1920).
By Ludwig von Mises

Partial:
“Every step that takes us away from private ownership of the means of production and from the use of money also takes us away from rational economics.” The never-ending growth of the bloated, rapacious, unjust, and unlovely American and other Western-style welfare states involves an ongoing series of such steps. Looking at it from another angle, the blessedly defunct planned economies of Eastern Europe, as noted above, were far from being genuinely socialist economies in the Misesian sense, because of their ability to trade in and observe the capital complementarities and prices of the world market. They were, and the Soviet Union, China, and others still are, gigantic monopoloid entities that suppress internal markets for capital goods yet maintain subjective and objective relationships with the world market order which enables them to crudely calculate their actions. As the parasitic welfare state expands its power of monetary inflation and of regulating and intervening into its host “mixed” economy, we can expect productive activities to become more chaotic and guided less and less by socially-determined market prices. In fact, long before a state of complete socialization is achieved, economy and society will begin to disintegrate amid failure of markets to clear, increasing barter, less efficient sizes and forms of business organizations, misallocation, and technical inefficiency of productive resources and disastrous declines of gross capital investment, labor productiv ity, and living standards. The dangers currently threatening to plunge sectors of the U.S. economy into calculational chaos can be illustrated with a few examples.
(2) Let us consider inflation. One of the most important factors operating to restrain governments of the United States and other mixed economies from reinstituting the inflationary monetary policies which brought us the double –digit rates of price increase of the 1970s is the coexistence of closely integrated global capital markets and independent national fiat currencies issued by central banks jealous of their prerogatives. Any nation that attempts a highly inflationary monetary policy courts the prospect of a rapidly depreciating exchange rate for its currency, a “flight” of investors from its domestic capital market, and a stratospheric climb in interest rates. In the current jargon, monetary authorities, even of large nations such as the United States, have “lost control of domestic interest rates.” Now, there is a much ballyhooed movement afoot to effect greater international “coordination” of monetary and fiscal policies or even to introduce a supranational central bank empowered to issue its own fiat currency. At bottom, such proposals seek to loosen the restraints on monetary inflation at the domestic level and allow politicians and bureaucrats and their allowed special interests to surreptitiously extract an expanding flow of lucre or “welfare” from the productive sectors of their economies. More importantly from our point of view, these international monetary arrangements greatly increase the threat of hyperinflation and the consequent disintegration of the world market economy. Moreover, even if it were reined in before hiving off into hyper-inflationary currency collapse, a bout of galloping inflation in an economy with a highly developed and complex capital structure would drastically falsify monetary calculation and cause capital consumption and a drastic plunge in living standards. (3) Another area in which we face the prospect of calculational chaos is health care. By wildly subsidizing and stimulating the demand for health care services of selected special interest groups beginning in the mid-1960s, the United States government precipitated a never ending and catastrophic upward-spiral of health care costs. In addition, the irrational and labyrinthine structure of regulations and prohibitions imposed by government on the industry has massively distorted resource allocation, restricted supply, and further driven up the costs of medical care. The tragic but predictable result of such intervention is that many of the unsubsidized members of society have been effectively priced out of the market for health care. The simple and humane solution to this tragedy is to quickly terminate these antisocial subsidies and dismantle the destructive regulatory structure, permitting the competitive price appraisement and resource allocation process to operate unimpeded. But, of course, the internal dynamic of the welfare state is never to retrench and risk disaffection of its pampered and powerful constituencies, for example, the American Medical Association, the American Association for Retired Persons, the entrenched bureaucracies of nonprofit hospitals, and so on. And so we face the prospect of “national health care insurance” which is a euphemism for the thoroughgoing socialization of the health care sector, with its resultant shortages, further suppression of competitive incentives, and deterioration of quality. But this is simply another example of the mad logic of the welfare state: since the government produces nothing that is valuable in terms of social appraisement, it can only supply welfare to some by siphoning off the resources and destroying the economic arrangements that support the welfare of others. In attempting to repair the politically unpopular destruction of its earlier policies, it is driven to further isolated acts of destruction until it arrives, with cruel and ultimate irony, at the policy for the systematic destruction of society and human welfare, that is, socialism.
(4) Finally, we have environmental policies, which are becoming progressively broader in scope and more draconian in enforcement. To the extent that such policies go beyond the protection of individual rights and property and they are now far, far beyond this point--they become antisocial and destructive of capital and living standards. In fact, in many if not in most cases, it is the obliteration of economic productivity per se which is intended and which constitutes the in-kind welfare subsidy to the well-heeled and well-organized minority of upper-middle class environmentalists. Its thesis will continue to be relevant as long as economists and policy-makers want to understand why even minor government economic interventions consistently fail to achieve socially beneficial results. http://mises.org/pdf/econcalc.pdf And who adjusted, and who is moving forward? We already know that trend.

http://www.financialsense.com/Market/wrapup.htm The second dimension in this example is the intermediate term.
http://www.thetrumpet.com/index.php?q=6602.13.0.0 Eurocrats show there true intent. Amicus verus est rara avis
http://www.telegraph.co.uk/news/worldne ... th-US.html Ad captandum vulgus
-the talking heads will continue to tell us that the economy is in recovery mode and that the worst is behind us. As a result, more and more people will be sucked back into the market or they will become complacent and will not understand what is taking place-
Geo Sample:
Chinese don't earn enough to buy the products they are producing. It needs a new growth model, which means ultimately adopting the Henry Ford principle that if you want a sustainable market for your products, you have to pay your workers enough to buy them.
Depressed it might be, but US consumption is still substantially bigger than that of all the surplus nations put together. All the same, that the dollar's reign as the world's dominant currency is drawing to a close is no longer in doubt.

No specific rules on banks' capital reserves were announced at this summit. No leverage caps were agreed. While preserving the system that allowed such excess. These paltry G20 measures will reassure yet another generation of financial denizens they can gamble recklessly, generating massive systemic risk and when it all blows up – as it always does – their government friends will bail them out. The moral hazard is simply enormous.
The danger comes if the "rope slips and burns" and, rather than deprecating gradually, the dollar tips into free fall. That would send US inflation soaring, while sparking a whole new wave of global panic.
Given the UK's unmatched money printing and horrifying debt service costs, the currency markets are smelling blood – with many now arguing the pound should be "cut loose".
Take a walk in your local city or town centre, lift your head and look above your normal eye level. You will see many to let signs for empty office space. The real pain is yet to come and the government has already used all it resources to save a few greedy bankers. England

Bundesbank chief Axel Weber sees no crunch now, yet fears a second pulse of the crisis this winter. "We are threatened by stress from our domestic credit industry through the rise in the insolvency of firms and households," he says." Germany

Conservative hardliners in the Communist Party have gained influence in the government and are trying to dismantle the market reforms he helped formulate. He complains that business tycoons and corrupt officials have hijacked the economy and manipulated it for their own ends, a system he calls crony capitalism. He has even called on Beijing to establish a British-style democracy, arguing that political reform is inevitable. Provocative statements have made him a kind of dissident economist here, and revealed the sharp debates behind the scenes, at the highest levels of the Communist Party, about the direction of China’s half-market, half-socialist economy.
http://www.nytimes.com/2009/09/27/busin ... zoyPVb4D3Q
His pro-market ideas have influenced a generation of younger economists who now hold senior government posts, including Zhou Xiaochuan, the leader of China’s central bank, and Lou Jiwei, chairman of the country’s huge sovereign wealth fund.

•Bernie Sanders, Sen. (I-Vt):
Who owns Congress? Over a year ago, we suffered the most significant financial collapse since the Great Depression, and the result of that is massive unemployment and underemployment. People lost their savings. People lost their homes. Now there is a massive effort to make sure that Congress does nothing about it. You know what? That might end up being the result.

How does it happen that Wall Street was able to convince Congress to deregulate their industry, to be in a position to bring the economy down? How does it happen that they are able to fend off serious efforts in Congress to try to re-regulate the financial institutions to protect the American people? Here’s the answer: In the last 10 years, Wall Street and big financial institutions have spent over $5 billion in campaign contributions and in lobbying activities. It doesn’t matter whether you are a Democrat or a Republican; if you have any influence they are going to go after you.

http://www.opensecrets.org/lobby/billsum.php?id=107281

Dean Baker, Co-director, Center for Economic and Policy Research:
One of the main reasons that the world is suffering the worst economic downturn in 70 years is that so few economists know arithmetic. If they did, they would have recognized the $8 trillion housing bubble in the United States and warned of the harm that it would cause when it finally burst.

From the accounts of the G-20 meeting, it seems that the economists being consulted still don't know arithmetic. According to the accounts, the G-20 pledged to redress the imbalances in the global economy.

The National Government will regard it as its first and foremost duty to revive in the nation the spirit of unity and cooperation. It will preserve and defend those basic principles on which our nation has been built. It regards Christianity as the foundation of our national morality, and the family as the basis of national life.»
– Adolph Hitler, My New World Order
Proclamation to the German Nation at Berlin, February 1, 1933

Back draft fuel has never been removed since name what is different? http://www.zerohedge.com/article/money- ... suspenders
Prepare now since they are holding the taxpayer in a death grip. If you cannot discern the syndicalism and corporativism in the market condition there is no hope to convince you anyway. Economic history is a long road of government policies that failed because they were designed with a disregards for the laws of economics. I see the FDIC wants 3 years in advance for premiums. The Godfather wants you to do this favor since we sucked the life out the other's and burned it to the ground for our pleasure - er - ''profit to our Club"
That is like pissing in the ocean calling it federal green cool aid. The underlying issue has not been resolved and they do not
care since the plebs only serve there bent of mind and there not even blushed about it anymore. And how did the Japanese and the German's
just vote. You better play attention if you like it or not.
==========================================================================
http://hussmanfunds.com/wmc/wmc090928.htm In response to a “trigger” event, which could include action by the FDIC, a decline in the bank's stock price to a level some amount below tangible book value for say, 30 days or more, or other possible triggers, those bonds would automatically convert to equity. Yes, the holders of those convertible securities could suffer potential losses, particularly in the event that the bank did not recover. But it would avoid default on the senior bonds or the need for regulatory receivership of the institution.
==========================================================================
As we are: http://www.chrismartenson.com/blog/fede ... 2009/28343
But this is simply another example of the welfare state: since the government produces nothing that is valuable in terms of social appraisement, it can only supply welfare to some by siphoning off the resources and destroying the economic arrangements that support the welfare of others. In attempting to repair the politically unpopular destruction of its earlier policies, it is driven to further isolated acts of destruction until it arrives, with cruel and ultimate irony, at the policy for the systematic destruction of society and human welfare, that is, socialism.

MAY-JUNE, 1984 Libertarian Forum http://mises.org/journals/lf/1984/1984_05-06.pdf
The Democrat Party seems to have a veritable genius for self-destruction, at least on the Presidential level. Either that, or the fix is indeed in. Man for man, and dollar for dollar, they rival the Crane Machine for blithering ineptitude. And all of it done to the tune and the guidance of the Establishment Media.

CNBC posits the bears are all mistaken for September. We only stated "conveyed" in the bear pit a matter of weeks in difference and to be sure they countered well the earnings releases will be there next bear roar. Like I said "observed for some time" October's fuse was pulled since QE and BIS SCDO issue http://www.bloomberg.com/apps/news?pid= ... C6ARW_tSW0 where halfed for what ever pressure point conveyed from either camp. The forums conveyed timing of our data in september "in august", no more no less. As higgy and me conversed it is still about net working capital and timing. The current back handed bear comments are typical in a Political Economy since they cannot compete in a free market which many segments have never seen and the predation of the state has pressured more global citizens to assert fiscal sanity and maybe -
http://generationaldynamics.com/forum/v ... scdo#p3798
just maybe there are enough to produce since you can see what Government can produce. It's not that government has lacked information needed to fix the problem. It is institutionally incapable of bringing about the desired result, since the principles of profit and loss, private property and contract, enterprise and entrepreneurship, do not exist in government. Government operates with an eye to its own short-term survival, and those of its connected interest groups, and nothing else. Globalising capitalism is opposed by two major groups - the cultural nationalists in the third world, who fear the westernisation it may bring and the New Dirigistes, http://www.international.ucla.edu/artic ... ntid=63092 proponents of the “third way’” in the West who bear the ancient hatred of capitalism on their sleeves. The main issue is since when do you trust a bank or not hold them in down right contempt anyway in any era? I feel fundamental change may have started and the beast will fight back with all its tacit and media spewing tenacity. They can only assist as gatekeepes and fulfill law and contract subject to reason. Maybe the voters can for a change think for themselves and vote for sanity and not party since they seem to dimly understand how close the edge really is. Many will say the Republic is already lost. I think it is lost in a GD context to date given the insanity and current course to total fiscal failures repeated. Look around maybe a few years only left since we are still being looted are we not? American economists consider themselves to be following Keynes' recommendations when they try to stimulate an economy with stimulus packages, but they studiously ignore the fact that Keynes' had different advice for trade-surplus countries and trade-deficit countries. Mr. Obama mentioned this again after the G20 so they better get to work on parity issues. I think he may turn out yet to be a attribute if he can tear down state insurance barriers and facilitate brokers for health care services. Ask a Canadian or any one else for that matter when is it more than crucial when time is the issue and you need a system unfettered by borders.
Bad news travels faster than good so let the market free itself and prosper.
As for me "Depletion Theory" http://www.chrismartenson.com/blog/curr ... ield/28224 i see it all the time.

[quote="JLak I'm not an economist, but I did study global energy balance radiometry at MIT. Global warming may be a problem, but a small increase in CO2 has almost no effect on heat capture (infrared transmission). The focus on "carbon emissions" is total BS.