Central Banks Shift Reserves Away from U.S. Dollar

The problem with trying to specify why the U.S. dollar is currently having its worst collapse in two decades is that one would wear out their fingers on their keyboard before they ran out of reasons.

Let's start with economic fundamentals. The U.S. is hopelessly insolvent. It has over $57 trillion in current public/private debt (see “A Tale of Two Economies: U.S. versus China”). However, since none of the three levels of governments properly accounts for their future obligations, their largest liabilities are not even recorded on their balance sheets – with “unfunded liabilities” for the federal government (alone) somewhere around $70 trillion. With real GDP of roughly $11 trillion per year, this economy is simply much too small to even service those debts and liabilities. Given that there are no assets “backing” the U.S. dollar, then obviously the value of a currency of a totally insolvent economy is near-zero.

With mountains of debt far in excess of the rest of the world combined, allowing (or rather encouraging) the collapse of the U.S. dollar is the only way for the U.S. government to delay formal bankruptcy.

Most of the remaining arguments which guarantee a weak dollar in the future fall under the category of either “supply” or “demand”. On the supply-side, a recent article in The Telegraph puts one measurement of U.S. money-creation at over 100% for the previous year, with the even more insolvent financial system of the U.K. showing growth in the money supply of more than 160%, using the same measurement.

This is more than ten times higher than during the loose monetary policy which caused all these bubbles in financial markets. Like an alcoholic, who reaches for a 'bottle' first thing in the morning to relieve his hang-over, the U.S. and U.K. are doing much more of what caused their problems in the first place – and calling it a “fix” (again, much like an addict).

Meanwhile, a world already over-saturated with U.S. debt has been bombarded with trillions of dollars in new U.S. Treasuries. The “TIC reports” for this year show that instead of the usual $100+ billion per month in accumulation of U.S. debt by foreign entities that these same investors have dumped (on a net basis) hundreds of billions of dollars of U.S. “assets” this year (see “Foreign Investors FLEE From U.S. Debt”). In order to pretend that there is still demand for U.S. Treasuries, the U.S. has begun to “monetize” this debt – printing money to “buy” its own debts.

The Federal Reserve has engaged in massive chicanery to hide most of these purchases, aided by the Treasury Department, with its own reports on Treasuries auctions now so convoluted that traders with decades of experience in this market are totally unable to even decipher the descriptions of what is taking place in those auctions.

Ultimately, the key demonstration of demand for the U.S. dollar (or lack thereof) are the currency reserve ratios of foreign governments. Over the last several decades, the holdings of U.S. dollars have constituted well over 2/3rds of the holdings of foreign governments. However, in the 2nd quarter, foreign governments were only putting 1/3rd of their surpluses into U.S. dollars – literally only half of historical demand.

Exacerbating this trend, thanks to the Wall Street-engineered global recession, those surpluses are all much smaller than they were just two years ago. Thus, at a time when the U.S. has doubled its supply of U.S. dollars, demand has simultaneously been cut by more than half. Even those without a firm grasp of basic economics can understand what these parameters mean. And the recent collapse in the U.S. dollar would have even been worse, but several Asian central banks intervened in currency markets last week by buying up some dollars – perhaps the only thing preventing the dollar from a complete nose-dive.

As if these economic and supply/demand fundamentals weren't already bad enough, as many (including myself) have pointed out, the dollar has been selected by traders as the new “carry-trade” currency, inheriting the yen's dubious honour as the world's official “weakest currency”.

This new “role” for the dollar comes as the result of the combination of near-zero interest rates, along with an economy (and particularly, a financial sector) which is so weak that traders are convinced the U.S. government will be unable to raise interest rates at any time – again much like Japan, and its “lost generation” with the yen. The only way in which U.S. interest rates will rise is if higher rates are imposed on the U.S. by the global bond market. Since such a move would occur only based upon soaring U.S. inflation and/or a fear of imminent debt-default, even if rates were forced higher this would not cause increased demand (for the exact reasons why rates were forced up).

This carry-trade status ensures that the dollar will be even weaker in the future than it would have been on fundamentals alone, because the mechanics of the carry-trade dictate that vast quantities of the carry-trade currency are continually being dumped onto global currency markets.

If it seems that dollar-bears are taking excessive “pot-shots” at the dollar, it's because there remains a huge contingent of inane dollar perma-bulls. These “experts” don't let a little thing like the U.S.'s insolvency stop them from boldly predicting that the dollar's current collapse is only a temporary, short-term trend. However, when it comes to “reasoning”, the dollar bulls are capable of nothing more than pointing to past periods of dollar weakness – and mindlessly concluding that those outdated patterns will repeat.

The problem is that in previous currency cycles, the U.S. wasn't sitting with $57 trillion in existing debts, and an additional $70 trillion in unfunded liabilities. In past cycles the U.S. didn't have interest rates frozen at their lowest level in history. In past cycles there was not a clear move away from the dollar by the entire global community. And (of course), in past cycles the U.S. dollar was not a carry-trade currency.

Yes, truly, it is “different this time.” However, don't bother trying to convince dollar-bulls of this. They would much prefer living in the past.

Comments

[Mono:]

jeff-

i am sorry but i haven't been able to keep up with your previous pieces. with the 57T in existing debt and 70+T in unfunded liabilities...where did you obtain this info. i am not questioning it- more like asking for a laundry list. i know asset purchase programs get expanded everyday, but would you have an inclusive piece on these numbers or maybe a suggested link to peruse.

if possible

Oct 14 02:34 PM

[Jeff Nielson:]

Hi Mono. No problem requesting sources. The $57 trillion is now somewhat of an OLD number (i.e. that figure has since risen). I got it from an excellent web-site for those wanting to obtain ACCURATE U.S. data (and analysis).

"Grandfather Economic Report" (mwhodges.home.att.net/)

As for the "unfunded liabilities" number, you will see NUMEROUS numbers bandied about here - all depending on the TIME HORIZON that estimate is based upon. Measuring "unfunded liabilities" for the next 5 years will result in a number exponentially lower than someone who estimates these liabilities over 50 years.

So, you will see numbers tossed around generally between $50 trillion and (over) $100 trillion - for those taking a 50-year span. I have taken a number somewhere in the middle, precisely to AVOID having to explain (within a commentary) how/why I came up with that number.

The other reason for using the $70 trillion number is that it covers roughly the next quarter century - or the life expectancy of the vast majority of the baby-boomer demographic (who CREATED most of these debt-problems).

To some extent, ALL of these numbers are moot - since the current near-$60 trillion in debt is ALREADY too much of a debt-burden to be supported by an economy of this size.

Hopefully all other readers who have that exact, same question in mind will also read my reply to you (lol)!

P.S. The other point to keep in mind is that these calculations require VAST numbers of OTHER statistics as inputs in the calculation. I'm unaware of anyone who has calculated THEIR OWN numbers for all of these inputs.

This means that at least part of these calculations are based upon U.S. government "statistics" - meaning that these "unfunded liabilities" estimates will generally be on the conservative side.

On Oct 14 02:34 PM Mono wrote:

> jeff-
>
> i am sorry but i haven't been able to keep up with your previous
> pieces. with the 57T in existing debt and 70+T in unfunded liabilities...where
> did you obtain this info. i am not questioning it- more like asking
> for a laundry list. i know asset purchase programs get expanded everyday,
> but would you have an inclusive piece on these numbers or maybe a
> suggested link to peruse.
>
> if possible

Oct 14 02:56 PM

[User 353732:]

What is the US dollar?
It is 4 things.
1.To the common American citizen it is a medium of exchange and part of the economic environment. It is, has been, always will be, goes the thought. It is also a metric of inflation. Beyond that, the ordinary American does not reflect on the dollar because it does not occur to him or her to do so.

2. To the Regime, it is an instrument, supremely, of power: the power to control the economy of the US and in their diseased imagination, the world, the power to misallocate resources, to aggrandize, to marginalize the Constitution, to bribe, to self perpetuate

3. To foreign governments and to many global companies with surplus liquidity it has been a store of value with no risk of wealth loss and to scores of millions of upper middle class and upper class households worldwide it has been an asset haven
4. To the people of the world, it is or has been until 2009, a symbol of America as hyperpower and the as the greatest spring of liberty and engine of wealth creation the world has known in the past thousand years, at least

As the moral and intellectual bankruptcy of the Regime destroys America the free, the bountiful and the globally powerful so the dollar falls as a symbol and loses "emotional equity". Rising contempt for the US becomes rising disdain for the dollar.

As the Reserve Dollar becomes the Fiat dollar it loses its function as riskless store of value and safe haven. It loses "ethical equity". Proto- currencies emerge (energy, metals, ores, precious metals, agricultural land, even nuclear technology and bandwidth) to demote the dollar and eventually replace it in the financial affairs of the world.

As the Regime makes fiat resource allocation and issuing fake money its central economic and political strategy, so inflation of goods and services that the ordinary American considers important or essential will become manifest even as incomes and Middle Class home equity stagnates. The dollar will buy less and less and become, for most of the Middle class and perhaps for a significant fraction of the Lower class a metric of fear, anxiety and humiliation. Pride in the dollar will erode and evaporate until it becomes a symbol not of liberty and prosperity but of oppression and deprivation loses "transactional equity".

That leaves the Fiat dollar as the instrument of Regime power. Once the fiat dollar is rejected by the world it will become the Fake dollar which finances nothing but American retreat and decay until ,at some unanticipated day, there is a collapse; the Regime is purged or radically reformed and there is a moral, intellectual, economic and political rebirth. There will be a new, honest, currency. It may not be called the dollar.

Oct 14 03:00 PM

[CautiousInv...:]

In Mauldin’s Saturday commentary entitled “Killing the Golden Goose” takes on the subject of the dollar and the stresses being placed upon it. Before mining Mauldin’s commentary, though, it is interesting to note that a Belgian-American economist by the name of Triffen made a case that a global monetary system based on the dollar had a flaw: the increased liquidity the world sought would require current account deficits in the US. And, sooner or later, the overhang of monetary liabilities would undermine confidence in the key currency. This view – known as the “Triffin dilemma” – proved prescient: the Bretton Woods system fell in 1971 and we are now facing a possible crisis with the system of floating rates that eventually replaced Bretton Woods.

To place recent turmoil in perspective, Mauldin draws upon the work of an academic and his owns thoughts as to what constitutes the maximum amount of debt the US can issue in relationship to GDP. In his most recent book, Monetary Regimes and Inflation: History, Economic and Political Relationships, Peter Bernholz analyzes the 12 largest episodes of hyperinflations - all of which were caused by financing huge public budget deficits through money creation. His conclusion: the tipping point for hyperinflation occurs when the government's deficit exceed 40% of its expenditures. By the accounts of the OMB, we will be there this FY and next FY.

Mauldin also observed there is every likelihood our debt will exceed 100% of GDP by 2015 or sooner. This is a critical threshold at which interest payments and ongoing borrowing needs becomes so burdensome that the process become unsustainable unless taking place within a country with a high savings rate. Clearly, this does not apply to the US.

Despite these precarious imbalances, the dollar could be saved: the Fed could start mopping up liquidity and raise interest rates; and congress and Treasury could redefine themselves and begin acting responsibly by imposing a measure of discipline in our fiscal policies, namely spending and borrowing less. We all know this is too much to ask of elected officials who buy votes through the budgeting process; and we also know that the Fed, who is desperately trying to reflate the economy and grind out a modicum of growth, is unlikely to change policies until the middle of next year, at the earliest. Knowing this and that the Fed could easily expand some of its debt monetization policies and extend them through the first quarter of next year, the international community has been punishing the dollar and, as the author suggests, central banks have been diversifying out of the dollar and expanding its holdings of other currencies.

From Bloomberg:

"Policy makers boosted foreign currency holdings by $413 billion last quarter, the most since at least 2003, to $7.3 trillion, according to data compiled by Bloomberg. Nations reporting currency breakdowns put 63 percent of the new cash into euros and yen in April, May and June, the latest Barclays Capital data show. That’s the highest percentage in any quarter with more than an $80 billion increase.

The dollar’s 37 percent share of new reserves fell from about a 63 percent average since 1999. Englander concluded in a report that the trend “accelerated” in the third quarter. He said in an interview that “for the next couple of months, the forces are still in place” for continued diversification.

That helped reduce the dollar’s weight at central banks that report currency holdings to 62.8 percent as of June 30, the lowest on record, the latest International Monetary Fund data show. The quarter’s 2.2 percentage point decline was the biggest since falling 2.5 percentage points to 69.1 percent in the period ended June 30, 2002. "

Oct 14 03:04 PM

[Mayascribe:]

Jeff: Another good site for all sorts of real time debt is:

usdebtclock.org

Sooner or later I have to update my Instablog I wrote about this clock titled "The Scariest Financial Site On The Web." There's a part one and part two.

I did that blog so that myself and we SAers could track the many forms of debt. I froze the numbers in time, and can now measure the differences, and calculate out toward the future what the debts will be. I'm almost afraid to go back and do part three of the series!

Oct 14 03:13 PM

[The Geoffster:]

"With mountains of debt far in excess of the rest of the world combined, allowing (or rather encouraging) the collapse of the U.S. dollar is the only way for the U.S. government to delay formal bankruptcy."
A most dangerous game of chicken.

Oct 14 03:31 PM

[Albertarocks:]

>The U.S. is hopelessly insolvent. It has over $57 trillion in current public/private debt (see “A Tale of Two Economies: U.S. versus China”). <

Jeff, this just screams of the Icelandic disaster.

The government of Iceland in it's wisdom, turned it's entire banking system over to the local "oligarchs". In a country with a population of 380,000 or so, I'm not sure how big those "oligarchs" were, but that's beside the point. The more important issue is that the "oligarchs" quickly (almost overnight), with the use of derivatives and all manner of fanciness, transformed their 'empire" to what became 6 times the size of the entire government. And when the SHTF, they had a government that was such a pipsqueak that they had no recourse but to face destruction.

In the USA, the same thing has happened but at a much more devastating pace. It's estimated that the exposure to derivatives that JPM, GS and BAC have on their books is over $600 trillion. How many times the size of the entire United States is that? I don't know but I can tell you this fact with absolute certainty:

At $1,000 an ounce for gold, and at today's rate of production of every single gold mine on the planet, it would take mankind 7400 years to produce that amount of gold. That's not an exaggeration or some number I pulled out of my backside. That's a fact. I'd think that after one or two thousand years, it might start to get a little difficult to find any more gold?

The insanity is right out of science fiction, is it not? I wonder if anybody other than myself is beginning to feel like life is becoming a real bad cartoon, or should I say "nightmare"?

Oct 14 03:44 PM

[Johnny Oxygen:]

User.

I've thought a lot about this too. But I wonder once everything implodes if it will be replaced by something noble or even better. The very corrupt, and most likely, wealthy will still be in a position to move into the new or emerging 'system' and take on their new rolls under a new facade. Maybe this is how its always been I don't know, but I question whether this time around the next thing will be a good thing. Maybe we will move into a new feudalism that provides people with TV's and ipods and they will be satisfied. After all who really cares about the Constitution anyway.


On Oct 14 03:00 PM User 353732 wrote:

> What is the US dollar?
> It is 4 things.
> 1.To the common American citizen it is a medium of exchange and part
> of the economic environment. It is, has been, always will be, goes
> the thought. It is also a metric of inflation. Beyond that, the ordinary
> American does not reflect on the dollar because it does not occur
> to him or her to do so.
>
> 2. To the Regime, it is an instrument, supremely, of power: the power
> to control the economy of the US and in their diseased imagination,
> the world, the power to misallocate resources, to aggrandize, to
> marginalize the Constitution, to bribe, to self perpetuate
>
> 3. To foreign governments and to many global companies with surplus
> liquidity it has been a store of value with no risk of wealth loss
> and to scores of millions of upper middle class and upper class households
> worldwide it has been an asset haven
> 4. To the people of the world, it is or has been until 2009, a symbol
> of America as hyperpower and the as the greatest spring of liberty
> and engine of wealth creation the world has known in the past thousand
> years, at least
>
> As the moral and intellectual bankruptcy of the Regime destroys America
> the free, the bountiful and the globally powerful so the dollar falls
> as a symbol and loses "emotional equity". Rising contempt for the
> US becomes rising disdain for the dollar.
>
> As the Reserve Dollar becomes the Fiat dollar it loses its function
> as riskless store of value and safe haven. It loses "ethical equity".
> Proto- currencies emerge (energy, metals, ores, precious metals,
> agricultural land, even nuclear technology and bandwidth) to demote
> the dollar and eventually replace it in the financial affairs of
> the world.
>
> As the Regime makes fiat resource allocation and issuing fake money
> its central economic and political strategy, so inflation of goods
> and services that the ordinary American considers important or essential
> will become manifest even as incomes and Middle Class home equity
> stagnates. The dollar will buy less and less and become, for most
> of the Middle class and perhaps for a significant fraction of the
> Lower class a metric of fear, anxiety and humiliation. Pride in the
> dollar will erode and evaporate until it becomes a symbol not of
> liberty and prosperity but of oppression and deprivation loses "transactional
> equity".
>
> That leaves the Fiat dollar as the instrument of Regime power. Once
> the fiat dollar is rejected by the world it will become the Fake
> dollar which finances nothing but American retreat and decay until
> ,at some unanticipated day, there is a collapse; the Regime is purged
> or radically reformed and there is a moral, intellectual, economic
> and political rebirth. There will be a new, honest, currency. It
> may not be called the dollar.

Oct 14 04:06 PM

[Donald Ingram:]

Not only central banks are shifting wealth - not only from the USD but the United States itself. There is a growing lack of confidence in the country and in this countries currency and governance.

The price of gold is going higher because of this growing lack of confidence. One year ago this was exactly opposite. Wealth flowed into the USD because of it's reputation as a safe haven. Not any more. The USD is being shunned as a safe haven and will not be seen as such again. It's reputation has been destroyed by the very people that are in charge of it's well being. What a shame.

Oct 14 05:44 PM

[Albertarocks:]

On Oct 14 05:44 PM Donald Ingram wrote:

> Not only central banks are shifting wealth - not only from the USD
> but the United States itself. There is a growing lack of confidence
> in the country and in this countries currency and governance.
>
> The price of gold is going higher because of this growing lack of
> confidence. One year ago this was exactly opposite. Wealth flowed
> into the USD because of it's reputation as a safe haven. Not any
> more. The USD is being shunned as a safe haven and will not be seen
> as such again. It's reputation has been destroyed by the very people
> that are in charge of it's well being. What a shame.<

That's it in a nutshell! With only 100 words, Mr. Ingram accurately described the cause of what is undoubtedly going to become the greatest calamity in the history of the world.

>What a shame.<

What a crime!

Oct 14 06:01 PM

[Jeff Nielson:]

Lots of thoughtful comments. I can't reply to everyone, so Cautious Investor gets the nod.

Yes, minus a gold standard, where the bankers are free to debauch the system at will, a single reserve currency is not sustainable over the long-term.

Of course, this also presupposed that we haven't yet reached the level of sophistication necessary for SUSTAINABLE growth. Instead, the combination of greed and bankers has inevitably led (throughout history) to UNSUSTAINABLE economic models.

To add to the extreme and excessive levels of debt in MANY economies, we are being 'led' by a bunch of morally and intellectually bankrupt government - who are allowing the SEVERE structural unemployment throughout the Western world to get totally out of control - because they lack the courage and intelligence to restructure our labour markets by shortening the work week.

While the U.S. economy is in the worst shape, ALL Western economies are moving steadily toward their own 'Armageddons'.


On Oct 14 03:04 PM CautiousInvestor wrote:

> In Mauldin’s Saturday commentary entitled “Killing the Golden Goose”
> takes on the subject of the dollar and the stresses being placed
> upon it. Before mining Mauldin’s commentary, though, it is interesting
> to note that a Belgian-American economist by the name of Triffen
> made a case that a global monetary system based on the dollar had
> a flaw: the increased liquidity the world sought would require current
> account deficits in the US. And, sooner or later, the overhang of
> monetary liabilities would undermine confidence in the key currency.
> This view – known as the “Triffin dilemma” – proved prescient: the
> Bretton Woods system fell in 1971 and we are now facing a possible
> crisis with the system of floating rates that eventually replaced
> Bretton Woods.
>
> To place recent turmoil in perspective, Mauldin draws upon the work
> of an academic and his owns thoughts as to what constitutes the maximum
> amount of debt the US can issue in relationship to GDP. In his most
> recent book, Monetary Regimes and Inflation: History, Economic and
> Political Relationships, Peter Bernholz analyzes the 12 largest episodes
> of hyperinflations - all of which were caused by financing huge public
> budget deficits through money creation. His conclusion: the tipping
> point for hyperinflation occurs when the government's deficit exceed
> 40% of its expenditures. By the accounts of the OMB, we will be there
> this FY and next FY.
>
> Mauldin also observed there is every likelihood our debt will exceed
> 100% of GDP by 2015 or sooner. This is a critical threshold at which
> interest payments and ongoing borrowing needs becomes so burdensome
> that the process become unsustainable unless taking place within
> a country with a high savings rate. Clearly, this does not apply
> to the US.
>
> Despite these precarious imbalances, the dollar could be saved: the
> Fed could start mopping up liquidity and raise interest rates; and
> congress and Treasury could redefine themselves and begin acting
> responsibly by imposing a measure of discipline in our fiscal policies,
> namely spending and borrowing less. We all know this is too much
> to ask of elected officials who buy votes through the budgeting process;
> and we also know that the Fed, who is desperately trying to reflate
> the economy and grind out a modicum of growth, is unlikely to change
> policies until the middle of next year, at the earliest. Knowing
> this and that the Fed could easily expand some of its debt monetization
> policies and extend them through the first quarter of next year,
> the international community has been punishing the dollar and, as
> the author suggests, central banks have been diversifying out of
> the dollar and expanding its holdings of other currencies.
>
> From Bloomberg:
>
> "Policy makers boosted foreign currency holdings by $413 billion
> last quarter, the most since at least 2003, to $7.3 trillion, according
> to data compiled by Bloomberg. Nations reporting currency breakdowns
> put 63 percent of the new cash into euros and yen in April, May and
> June, the latest Barclays Capital data show. That’s the highest percentage
> in any quarter with more than an $80 billion increase.
>
> The dollar’s 37 percent share of new reserves fell from about a 63
> percent average since 1999. Englander concluded in a report that
> the trend “accelerated” in the third quarter. He said in an interview
> that “for the next couple of months, the forces are still in place”
> for continued diversification.
>
> That helped reduce the dollar’s weight at central banks that report
> currency holdings to 62.8 percent as of June 30, the lowest on record,
> the latest International Monetary Fund data show. The quarter’s 2.2
> percentage point decline was the biggest since falling 2.5 percentage
> points to 69.1 percent in the period ended June 30, 2002. "

Oct 14 08:03 PM

[Moon Kil Woong:]

The fact that foreign investors are not buying bonds is a big issue. Even though the Federal Reserve tries to cover up the failure of its bond auctions by buying them itself and mixing domestic buyers with foreigners in its reporting, as jeff Neilson points out, some are not fooled at all. They can merely look at foreign growth in us debt holdings which are slowing down right as the US ramps up more borrowing.

This is even worse in context that foreigners are all but shunning long term US Treasuries forcing the US to offer more and more short term us Treasuries to make up the difference. As long as the Federal Reserve can keep things at zirp it work for them the same way an insolvent homebuyer can get a ARM loan for a house. However, they loose it all when rates rise.

Thus the hesitance for the Federal Reserve to raise rates is two fold. 1) it will break the US budget which will make the administration and Treasury very unhappy and 2) It will make it recognize losses when it bought its own long term treasuries at such low rates (which is why no one wants them) 3) It will force the economy to face reality and certain banks realize their recent profits were once again short term accounting trick.

Even so, with a collapsing dollar it is even getting unpalatable for foreign countries to buy short term US Treasuries at such low interest rates. What's the use of getting 2% returns when the dollar drops over 10% in less than a year? Is this reasonable reward for your risk? I think not.

Bernake will have a very fun next term in the Federal Reserve. He might actually have to fact the consequences of his Greenspanish policies before he retires to a life of defensive book writing.

Oct 15 02:35 AM

[Michael Clark:]

seekingalpha.com/insta...

It will be replaced by civil war. It might be noble in the end, depending who wins. In the banks win, then it will be feudalism, which is what it is becoming today. Feudalism will not be noble, unless you are one of those on top of the feudal garbage heap. Of course you will have to live in a castle, because your family will be marked for death, if not from the peasants living around your castle, then from the other nobles who are greedy to OWN EVERYTHING.


On Oct 14 04:06 PM Johnny Oxygen wrote:

> User.
>
> I've thought a lot about this too. But I wonder once everything implodes
> if it will be replaced by something noble or even better. The very
> corrupt, and most likely, wealthy will still be in a position to
> move into the new or emerging 'system' and take on their new rolls
> under a new facade. Maybe this is how its always been I don't know,
> but I question whether this time around the next thing will be a
> good thing. Maybe we will move into a new feudalism that provides
> people with TV's and ipods and they will be satisfied. After all
> who really cares about the Constitution anyway.

Oct 15 05:04 AM

[Johnny Oxygen:]

Hi Michael.

Well maybe not a castle but a gated community. Should be easier to breach especially when you take into account the shoddy construction.


On Oct 15 05:04 AM Michael Clark wrote:

> seekingalpha.com/insta...
>
>
> It will be replaced by civil war. It might be noble in the end, depending
> who wins. In the banks win, then it will be feudalism, which is what
> it is becoming today. Feudalism will not be noble, unless you are
> one of those on top of the feudal garbage heap. Of course you will
> have to live in a castle, because your family will be marked for
> death, if not from the peasants living around your castle, then from
> the other nobles who are greedy to OWN EVERYTHING.

Oct 15 09:45 AM

[Jade Queen:]

In the U.S., when a government passes a crazy confiscation plan, the 20% move across a border, either a state border, or out of the country altogether.

Upscale supermarkets are now testing independently the products they buy to protect themselves from poisoning issues.

The government agencies paid to do this don't do it, either because it's impractical or because they are corrupt, hard to tell.

When I went recently to a deliberately up-and-downscale eatery, I asked the waiter where the oysters came from. When he asked in the kitchen and found they came from a bay I know to be tainted, I passed on a dish containing them.

My friend, whose gumbo addiction was not to be deterred, ordered gumbo anyway.

Oysters disappear when they are poisoned, though it takes a while. The poisoning hurts the young more than the mature.

Some mini-ecosystem will figure this pattern out and will prevail until or unless the poisoned place gets it and cleans up.

The things we buy with dollars have not disappeared all the way.

When aristocracy cannot buy oysters with dollars because dollars are so obviously blood money, we will get change.

Optimist that I am, I still believe there is a possibility change could be incremental.

It is happening in some countries and mini-environments where there is adoption of deliberate and careful transparency.

If the major media decides to discover this, it will be as if it is something new, amazing, and dramatic.

Some of the oligarchs will get busted under a new culture, and some will morph to go along with new conditions.

Oct 15 11:24 AM