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Eric Sprott's Gold Analysis Deconstructed: What The Gold Bulls Still Don't Get
Mr. Williams, you're making an error.
The unfunded liabilities are always expressed as a Net Present Value (
) calculation which, by definition, sums all cash inflows and outflows, and all assets and liabilities across a specified time period.
The assets, of course, are already accounted for and should not be be deducted twice as you are attempting to do.
Nor can you sum the "cumulative GDP over 75 years" and compare that to liabilities because the NPV calculation has already done that once.
May 4 10:03 AM
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The Recovery Was Too Expensive
On Sep 18 01:21 AM bob adamson wrote:
> Mr. Martenson draws our attention to some interesting articles and
> budgetary information but his premises about the options facing governments
> last year when the crisis broke and now when it has been abated,
> albeit through the aegis of massif governmental fiscal and monetary
> stimulus, are flawed. The practical choice facing the central banks
> and national governments of the G8 from the late summer of 2009 to
> March of this year was to allow unimaginable collapse and chaos to
> ensue (i.e. allow first the banking system to implode occasioned
> by the realization that 20 trillion dollar or more of derivative
> related asset assumed value was substantially worthless and then
> watch first the general financial system and then the general global
> economy implode in an unprecedented deflationary black hole) or
> stabilize this 20 trillion dollar or more asset problem by massive
> governmental fiscal and monetary stimulus (i.e. give a governmental
> guarantee, backed by infusions of money and credit by government
> insofar as required, that this 20 trillion dollar or more void would
> not be allowed to collapse). There was no third thrifty option.
Thank you all for the excellent comments and discussions.
While I think there are a number of excellent points made in your response, I see your characterization of either the government did what it did or collapse would have resulted as a false dichotomy.
In truth there was a third (and fourth and fifth...) option.
The "thrifty" option, with a long-term benefit attached, would have been to make the bondholders of the banks eat the losses, not future taxpayers.
Perhaps then these bondholders, having been burned badly, would have been far more careful in their due diligence and/or fiduciary responsibilities in the future. This would have excellent long-term benefits for our financial markets and system.
No one has yet satisfactorily explained to me why the bondholders of Citi, standing north of $300 billion, were not made to suffer any losses while the Treasury signed off on a $300 billion asset guarantee. The "thrifty" option would have been to wipe out the bond holders, nationalize the remaining portions of bad assets, and then let a restructured Citi start over again.
Instead we now have larger banks than before, with more concentrated risk, and with a very nearly explicit guarantee from the government/Fed that they will backstop all future losses as well.
Moral hazard writ even larger, is how I see that. And since it was moral hazard that got us into this mess in the first place I completely reject any and all notions that the government took either the least costly or best course of action in the bailouts.
Switching slightly, in several comments above I see the *belief* that a global catastrophe would have resulted (without all the government actions) being presented as though it were fact. It's not a fact. We simply cannot know.
But I do know that the same rescues could have been performed in the same dollar amounts only with the responsible parties being dinged instead of everybody. I see it as something of a colossal failure that this was not done.
Thanks again. There's more discussion of this article back at my website as well.
Sep 18 10:07 AM
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The Fed's Shell Game Continues...
" Initially I thought the cenbanks lost confidence in treasuries after Geithner's Xmas eve support package for agencies."
Interesting connection...I had initially thought perhaps the opposite because that move represented the largest, unilateral, unelected official abuse of the US taxpayer that I know of. Since the Treasury put the US taxpayer on the hook for another ~$5 trillion of debt, it seemed to say "Our productive capacity is now fully assured as payments to the banking system in perpetuity." which are comforting words to the CB crowd.
Of course, I was especially tickled by Geithner's recent weasel-words where he tried (and failed) to split the difference on the subject by saying that GSE debt is "not sovereign" enough to be included in the official tally of debt-to-GDP but apparently sovereign enough to say that the US Treasury is fully committed to backing GSE debt "while they are under US control."
Crikey, that's some mighty fine hair splitting going on over there in Treasury-ville.
Regardless, the custody account has been flatish since the Christmas Eve taxpayer massacre so perhaps the CBs took it the other way - sort of an admission that the wheels are wobbling on the cart axles.
No worries though - yesterday's 10-year auction saw the highest bid-to-cover ratio in the recent series with indirect bidders taking down more than usual. So all is well.
Apr 8 08:23 AM
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