Fed Pushes On String As Velocity Of Money Dies [View article]
Tack, that's all true. With exception of one tiny little thing: Fed is not the only entity which, in theory, creates money. Any debt is money. The problem: since 2008 money multiplier (the relation between Fed-created money and full amount of new money in circulation) is around 0.8. In other words, for every dollar, created by Fed, only 80 cents are going into circulation. So, the problem remains. Yes, Fed is pushing on the string. And it's losing: last inflation reading is 1.1%, yoy.
Dr. Doom Has Gold Going Below $1,000: Why His Thesis Is Spot On [View article]
Doug,
I understand all problems related to debt-based money. My point is, that's the environment we live in, this is the economy we live in, and there is no way back (i.e. Ron Paul is a quack). How this debt is going to be managed? Who knows, so far it was managed. What about 2007-2008? And what about 1873-1878, 1929-1942? Those depressions passed, this one will pass as well. Debt based money is not invention of government, it happened gradually, driven by markets. Governments just followed the markets, and sometimes fought them (and I think Gold Standard was the last battle governments fought and lost).
I don't mind people hedging their savings with precious metals or with anything else. If you feel comfortable with gold, go for it. I am not, for a lot of reasons.
Dr. Doom Has Gold Going Below $1,000: Why His Thesis Is Spot On [View article]
> Not quite catching your point, but how do you have borrowers without lenders?
The talk was about making life better for lenders or borrowers. A lot of argument that rates should be higher so lenders can earn more on their money. My point is, rates should be lower, so borrowers can borrow more and produce more.
Dr. Doom Has Gold Going Below $1,000: Why His Thesis Is Spot On [View article]
> So the guy that pays too much for a house, takes out a HELOC, and goes on a spending spree with little hope of ever paying back the money is productive?
Not exactly. And in the total amount of debt, HELOC is what? Single percentage points? Fractures of that percentage point? But almost every company which produces something is a net borrower. And most of net lenders are banks, which produce what?
Dr. Doom Has Gold Going Below $1,000: Why His Thesis Is Spot On [View article]
> The point is Alex is DEBT is not good.
The only problem with this assertion is that current economy runs on debt. So much so that almost all money in circulation is actually debt. If debt is no good then current economy is no good either. And any attempt to return to precious metals as money can be done only if we return to the economy of the time when silver was the money, i.e. feudalism. I don't want to. I like it here.
Dr. Doom Has Gold Going Below $1,000: Why His Thesis Is Spot On [View article]
> So, you want more mess
Well, economic growth is always messy. And stagnation is usually orderly. The most quiet (and orderly) place is a cemetery. Do you want to live in one?
Dr. Doom Has Gold Going Below $1,000: Why His Thesis Is Spot On [View article]
> Negative real interest rates favor debtors over savers, which I think is morally unwise
Not exactly. Savers (actually lenders) don't produce, debtors do. If you want to increase production (restart economy), you need to favor debtors over lenders. Moral? Everybody has his/her own opinion and it's useless to discuss morals here.
Yes, it looks like that. On the other hand, Australia feels much better. Probably combination of weak commodities and negative outlook for emerging markets. With current trading environment, any trend can be overshot in any direction though.
Dr. Doom Has Gold Going Below $1,000: Why His Thesis Is Spot On [View article]
> Gold is a currency
No. There is no place where I can pay with gold for my purchases. Maybe somewhere in Emirates, but not sure. Currency, by definition, is a universal payment tool. On US dollar you see: "Legal tender for all debts, public and private". That's currency. Accepted (or freely exchanged) almost anywhere in the world, by the way.
Dr. Doom Has Gold Going Below $1,000: Why His Thesis Is Spot On [View article]
> The Fed could purchase say a fifty year bond at 0.5% from one of the states to replace a crumbling bridge
I don't know if by law or by internal reasons, but Fed doesn't buy assets on primary markets. Only on secondary ones. So first state needs to float bond on open market, and only after that Fed would buy it. So no 0.5%. Although I agree with you, that would make a lot of sense.
> When the Fed extends credit to a big bank, the collateral is typically nothing more than some sort of derivative
Wrong. Until 2010, only Treasuries have been accepted as collateral. Now they accept other bonds, but as far as I know, no derivatives.
Dr. Doom Has Gold Going Below $1,000: Why His Thesis Is Spot On [View article]
> What makes anyone believe that Federal insurance will be any different?
In Great Depression of 1929-194(put your own digit) more than 5000 banks went bust. Most of them before 1934 (before FDIC). More than 8 million people lost money on their accounts.
In Great Depression 2.0 (2008 - open end) so far less than 1000 banks went belly up. Customers with less than 100000 (250000 since end of 2008) did not lose money, in most cases they didn't even notice that bank changed hands. I consider this as a great success.
"Federal" does signify trust. 10 years Treasuries are still at around 2%: that's trust. Market based trust.
Fed Pushes On String As Velocity Of Money Dies [View article]
So, the problem remains. Yes, Fed is pushing on the string. And it's losing: last inflation reading is 1.1%, yoy.
Dr. Doom Has Gold Going Below $1,000: Why His Thesis Is Spot On [View article]
How do you separate interest rates going into houses from those going into production?
Dr. Doom Has Gold Going Below $1,000: Why His Thesis Is Spot On [View article]
I understand all problems related to debt-based money. My point is, that's the environment we live in, this is the economy we live in, and there is no way back (i.e. Ron Paul is a quack). How this debt is going to be managed? Who knows, so far it was managed. What about 2007-2008? And what about 1873-1878, 1929-1942? Those depressions passed, this one will pass as well. Debt based money is not invention of government, it happened gradually, driven by markets. Governments just followed the markets, and sometimes fought them (and I think Gold Standard was the last battle governments fought and lost).
I don't mind people hedging their savings with precious metals or with anything else. If you feel comfortable with gold, go for it. I am not, for a lot of reasons.
Dr. Doom Has Gold Going Below $1,000: Why His Thesis Is Spot On [View article]
The talk was about making life better for lenders or borrowers. A lot of argument that rates should be higher so lenders can earn more on their money. My point is, rates should be lower, so borrowers can borrow more and produce more.
Dr. Doom Has Gold Going Below $1,000: Why His Thesis Is Spot On [View article]
Not exactly. And in the total amount of debt, HELOC is what? Single percentage points? Fractures of that percentage point? But almost every company which produces something is a net borrower. And most of net lenders are banks, which produce what?
Dr. Doom Has Gold Going Below $1,000: Why His Thesis Is Spot On [View article]
The only problem with this assertion is that current economy runs on debt. So much so that almost all money in circulation is actually debt. If debt is no good then current economy is no good either. And any attempt to return to precious metals as money can be done only if we return to the economy of the time when silver was the money, i.e. feudalism. I don't want to. I like it here.
Dr. Doom Has Gold Going Below $1,000: Why His Thesis Is Spot On [View article]
> Nonsense.
You want to say that lenders produce things and borrowers don't?
Dr. Doom Has Gold Going Below $1,000: Why His Thesis Is Spot On [View article]
Well, economic growth is always messy. And stagnation is usually orderly. The most quiet (and orderly) place is a cemetery. Do you want to live in one?
Dr. Doom Has Gold Going Below $1,000: Why His Thesis Is Spot On [View article]
Not exactly. Savers (actually lenders) don't produce, debtors do. If you want to increase production (restart economy), you need to favor debtors over lenders. Moral? Everybody has his/her own opinion and it's useless to discuss morals here.
Changing Trends, Continued [View instapost]
Dr. Doom Has Gold Going Below $1,000: Why His Thesis Is Spot On [View article]
No. There is no place where I can pay with gold for my purchases. Maybe somewhere in Emirates, but not sure. Currency, by definition, is a universal payment tool. On US dollar you see: "Legal tender for all debts, public and private". That's currency. Accepted (or freely exchanged) almost anywhere in the world, by the way.
Dr. Doom Has Gold Going Below $1,000: Why His Thesis Is Spot On [View article]
I don't know if by law or by internal reasons, but Fed doesn't buy assets on primary markets. Only on secondary ones. So first state needs to float bond on open market, and only after that Fed would buy it. So no 0.5%. Although I agree with you, that would make a lot of sense.
> When the Fed extends credit to a big bank, the collateral is typically nothing more than some sort of derivative
Wrong. Until 2010, only Treasuries have been accepted as collateral. Now they accept other bonds, but as far as I know, no derivatives.
Dr. Doom Has Gold Going Below $1,000: Why His Thesis Is Spot On [View article]
In Great Depression of 1929-194(put your own digit) more than 5000 banks went bust. Most of them before 1934 (before FDIC). More than 8 million people lost money on their accounts.
In Great Depression 2.0 (2008 - open end) so far less than 1000 banks went belly up. Customers with less than 100000 (250000 since end of 2008) did not lose money, in most cases they didn't even notice that bank changed hands. I consider this as a great success.
"Federal" does signify trust. 10 years Treasuries are still at around 2%: that's trust. Market based trust.
Dr. Doom Has Gold Going Below $1,000: Why His Thesis Is Spot On [View article]
By law, Fed can't do that. Unfortunately. As well as it can't really drop money from helicopters (and, initially it was Milton Friedman's idea).
Dr. Doom Has Gold Going Below $1,000: Why His Thesis Is Spot On [View article]
Really? I've never seen the law that you get a real return on money. Socialism for rich?
> As fot the possibility of bank runs, there should be higher levels of federal insurance on bank accounts
If you are against Fed and FDIC, who's going to provide federal insurance?