Generational Dynamics Forum - New Site

mannfm11 wrote:John, you might try reading some of the writings of Von Mises on the mises.org site where you got that Bubble that broke the world book. Mises actually goes into what follows a period of unusually cheap money, in that the players begin to think they can do anything. I don't believe the Austrians really cared what was called money and only favored gold in the sense that it enforced dicipline. I have yet to read any Austrian stuff that waged war against paper in the sense that every paper currency went to zero. They believed in the business cycle and they believed it to be a credit phenomenon.

jordana wrote: > Thank you very much for your great insights and posts; i would
> appreciate your views on whether, contemperaneous with the "big
> event", gold/silver would experience, at least a temporary, flight
> to safety upsurge?

Friedrich Nietzsche wrote:
"Insanity in individuals is something rare - but in groups,
parties, nations and epochs, it is the rule."

Ilargi: Wherever I look this morning, Asia, Europe, Wall Street, I see journalists and analysts claim that bargain hunters are causing the rising stock prices. They're not. There is something different going on.

Prices these days fall when and because large investors need to sell assets in order to get cash. Prices rise when large investors need to cover their shorts.

The investors involved in both cases are largely identical, though not entirely. It's important to understand that while, obviously, price drops cause loss of capital, price rises are now the result of the same. Everybody still tries to hide their losses, but it’s getting much harder. That's what happens in casino's: there comes a point where you have to show your hand. And when things get bad, sometimes you have to show both.

After Porsche said it wanted 75% of Volkswagen, VW went up 150% yesterday, and 93% more today (that’s an almost 500% increase!), to become the biggest company in the world. Not because it's doing great; in fact, it's rumored to be drowning. Which is why parties like Morgan Stanley, Goldman Sachs and major hedge funds were shorting the stock. Porsche's announcement forced them to cover their shorts and buy VW like mad men. And so you get to be the global no.1 because gamblers are paying off their losses.

The Bank of England reports today that the total cost of taxpayer funded bail-outs has surpassed $7 trillion. As insane as that is, it's just the start. Now even Roubini wants to add another $500 billion plan in the US. That’s his second whopping no-no in a week. His first was a claim that the worst in the credit markets was over, and the real problems would from now on in be in the real economy.

Yes, Libor and other spreads are down a bit, and yes, the real economy now hits the real trouble. But the credit markets are still getiing worse by the minute. That is because the underlying reason for the crash, the casino toilet paper, is still being hidden, protected and even bailed out. A plan like Roubini’s, half a trillion dollars more for 'infrastructure', is a dead in the water duck -or worse- as long as the horse race tickets are kept away from daylight. And Roubini should know that.

Turns out, the banks that got the bail-out billions are not using it to lend out, and they don’t give a hoot about Congress threatening to give them a grillling. They’ll use the taxpayers’ cash to buy other banks. Small fish gets eaten by bigger fish gets eaten by biggest fish, with Hank Paulson deciding who gets to be big.

And even that's just a humble beginning. The IMF is running out of money to put thumbscrews on the world's poor. But that won't deter the fund, it can simply start issuing AAA rated bonds, which are rated by the .... IMF, and in real life are simply more casino bathroom paper. And if you don't like that one, they’ll move to the most perverted financial instrument in centuries, the Special Drawing Rights, also called paper gold, introduced in 1969, in anticipation of Nixon’s 1971 decision to not honor US gold liabilities.

Who do you think determines the value of an SDR? Yup, you’re right, it’s the IMF. They can buy the world. That may seem far-fetched, but don't forget that for a few billion dollars in loans that have to be paid back at high interest, they’ve bought themselves financial control of the likes of Hungary, Iceland, the Ukraine and soon Pakistan, Serbia, Croatia, Latvia and Turkey. And their eye is on Russia.

I was wondering last night how much money it would have taken me to drive up oil prices to $147 a barrel, go short oil all out, drive prices back down to $40, make a killer of a profit, and kill off OPEC control, Putin and Venezuela in the process. I concluded that $1 trillion would have been enough, when carefully utilized.

I've long since realized that it's no use to fear for the future of mankind, since there's nothing kind about man. But I still am surprised at how little people focus on the symbiosis of crisis and opportunity. There are people out there busy bankrupting the entire planet, and buying it back for pennies. Just like in the 1930's US rust and dust belt, but this time on a global scale.

John wrote: Once these new earnings estimates settle in, you can assume that this
rally will dissolve quickly.

John wrote:That's fine, but I also believe it's important for people to
understand that Bernanke's plan is going to fail. I would not want
someone reading this to think that my silence on this question means
that I think it might work.