Madcow2

Top Ten Reasons Why the Yield Curve Will Flatten (Hint: This Is a Different Sort of Recession)

There is nothing quite so useless as a Federal Reserve incapable of generating positive inflation. Its like a diseased appendix that has burst. Now that the grand credit-generating-econ... experiment has proved a mirage, the Fed can only cause problems from here on out.

What's happening in this country would be hilarious if it wasn't all so horrific. Imagine a conversation between a pilot and a co-pilot - who have a plane full of passengers, and who have just run out of fuel. The pilot recommends they alert the passengers and the fire departments below that they're coming in for a crash landing. (There are a few corn fields ahead, so maybe they've got a shot). The co-pilot disagrees - and suggests that they first take a vote amongst the passengers to first build consensus on the appropriate course of action.

Somehow, the pilot listens to the co-pilot, who goes back to the cabin to explain the situation and to take a vote on the outcome. The passengers then vote to pass a law saying that "airplanes are heretofore forbidden to run out of fuels in transit." Both sides of the aisle take this opportunity to include riders like "free shrimp cocktails for passengers suffering future weather delays."

The co-pilot comes back to the cabin, pleased that he has solved the problem with a piece of paper outlawing fuel depletion. You can guess how the story ends.

The plane is out of gas. Incomes are disappearing throughout the economy. There's nothing the Feds can do to forestall the deflationary collapse. Well, there is one thing - they could disband, renounce central banking, and void out their debt covenants with the Treasury. That would at least pave the way for massive tax and debt relief - which will be necessary at some point in the face of a complete and total breakdown of supply chains that bring food to big cities on the coasts ...

Odd Signals from Financial Markets: Who's Wrong Here?

I don't think its confusing at all. You've got a global deflationary collapse underway, fought tooth and nail by coordinated global monetary policy. All "assets" (even gold) are more or less in the same boat. If the money supply falls to zero, so will everything else. If the money supply goes to infinity, so will everything else.

What's tricky is the timing. Seems to me that there's slow and inexorable deflation ... until there's not. All fiat (especially the FRN) will strengthen so long as the deflationary collapse persists. At some point in the deflationary contraction, vital supply chains will begin to shut down (think "poof, no more food at the Super-mart") - and governments will be forced to implement massive tax and debt relief programs to re-start economic engines across the globe.

That's when you could see a fiat crash. But not before. The central banks have painted their governments into a corner. To maintain value in fiat and to keep all the bond and debt covenants and future obligations in place, they're forced to slowly drain money out of the private sector. This will continue until levels of foreclosure, bankruptcy, lawsuits, food shortages, etc. become politically unacceptable in the West.

The idea that continued deflationary collapse (more taxes, higher interest, higher fees, etc) is fiat positive is true - but short sighted. Citizens in the West are coming around to the view their governments are running an enormous extortion racket on behalf of the banks and financial services industry. People tend to lose their enthusiasm for tax increases under such conditions - not to mention their ability to pay said taxes.

If you look at the entirety of the model, everything must collapse - economies, families, public and private finances ... even fiat. Maybe especially fiat. But I still have a hard time believing in gold. If the future is decades-long economic collapse, I'd rather own income producing stocks and high quality bonds and store supplies of goods more cheaply and readily available due to global supply chains before those supply chains collapse. We're on an airplane that has run out of fuel.

The Dollar Situation Is Getting Clearer

The dollar will continue to strengthen -

Demand is going up while supply is going down - its just that simple.

In a deflationary collapse, the senior currency STRENGTHENS

Gold Price Appreciation Likely on Eurozone Debt Concerns

Gold.

i just don't understand it. I reckon the price of gold depends on how much money there really is in the system.

If 100% of the financial fantasies hatched in New York and London and in the Cayman Islands, etc come true - and there are hundreds of Trillions of dollars worth of assets in the system - i suspect gold will rise to $20K or more in relatively short order.

if 0% of said fantasies come true - and the money supply is careening toward zero - then the price of gold will eventually fall toward zero as well.

What % of all that junk is really money? What % is worthless?

No Change for the Fed - Or Is There?

either all those newfangled assets (derivatives, cdos, swaps, etc) ARE money - and there are >$20T dollars out there -

or they are NOT money - and there are fewer than $2T dollars out there

the difference is $20K gold vs $2K gold. my hunch is that - once the dust settles - we'll come to understand there are really fewer than $1T out there - and gold will sink along with everything else in a decades long deflationary depression

Former Fed Governor Mishkin Slams 'Paul Bill': Are We in Wonderland?

"Its better if you people don't realize the full extent of the fraud, corruption, and deceit in play here"

That's supposed to restore confidence??

Why Worry About a Dollar Rebound?

What is the conventional wisdom - ?

if "everybody knows the dollar is due for a relief rally" then shouldn't the opposite happen.

Tim Geithner is basically saying "we're just warming up this TARP scam - you ain't seen nothin' yet." So that is dollar negative.

But the Obama administration is promising tax increases - which is deflationary - and therefore dollar positive.

"Everybody knows" the dollar is going down long term. But if the Obama people are serious about intensifying the deflationary depression, then the opposite will occur.

A chart from the Congressional Oversight Panel report points one direction: more banks failing and getting taken over by the big four - and 35% of the banking system (and counting) drenched in moral hazard.

If you could use public policy to steal money from your customers, front-run macro trading opportunities long and short, and then eliminate your competitors, would you?

Can the Fed Defeat Dollar Carry Trade?

They're doing whatever they can to prevent the money supply from vaporizing entirely.

If that means that money is created to speculate in futures and commodities markets, so be it. Better than "poof - no more money anywhere for anyone"

The Fed realizes that - if the money supply vaporizes, so will the availability of groceries. That's something many deflationists aren't factoring in. Yes - cash becomes more valuable. But there won't be anything to buy.

What Does Bloomberg Have Against Gold?

The financial establishment is trying to direct attention away from the deflationary vortex they have unwittingly created.

They can only make money under "normal conditions" of economic stability and mild inflation. (yes, they can trade against the collapse and make billions - but eventually, the public won't stand for it).

Gold is not saying "inflation." Gold is telegraphing a deflationary depression. Personally, I'd rather have food and toilet paper.

Richard Russell: Downturn Will Be 'Vicious'

Understand the logic of "peak credit."

The "capitalist" (as opposed the "free market") system - which is driven by central banking and compound interest, etc - can only work if the credit pie is expanding. Once it stops growing, the system collapses. "Inflation" is merely evidence of the banks efficacy. That's what central banks do. That is their job.

Most people still do not understand that it is game-over for this system. Clearly, deflation of the pyramid scheme has taken hold - and there's nothing the bankers can do to stop it. The bankers and political leaders need to step aside and let asset prices correct back to 1980 levels. The more they try to prevent the laws of physics from re-asserting themselves, the worse the eventual outcome will be.

Higher taxes will intensify deflation. Higher rates to support currencies will intensify deflation. Intensifying levels of bankruptcy and foreclosure due to salary decreases and job loss will intensify deflation. A century of inflation is coming unwound in a decade.

Hold cash and go short. Better yet, give your money to Goldman Sachs and let them do it for you. They know where the bodies are buried and will make a killing speculating on how the system unravels and implodes. For them (and other privileged institutions with an inside track and an ability to dictate public policy decision), its not really speculation - but merely consulting their own architectural plans and trading against the weakest links in the daisy chain.

The Market's Love Affair with Bernanke

Ben Bernanke's job is to appear calm and divert attention away from the vaporizing money supply.

Debt is money. More accurately, debt WAS money.

Any home, person, business or municipality dependent upon "credit" goes to zero in short order.

Financial Conditions Almost Back to Normal

Its all back to normal - except for the fact that the US economy has been completely destroyed as the money supply is vaporizing.

With that small exception, yes - back to business as usual

Three Strikes on Ben Bernanke: AIG, Goldman Sachs and BoA / TARP

We've always tolerated the Fed because we believed (a delusion) that the Fed was actually in control of both interest rates and unemployment (the twin pillars of their "dual mandate").

Soon, it will be clear enough to all that the Fed can control neither. Even with an "expert on the Great Depression" at the helm

As the Dollar Rises and Gold Falls, Should We Get Ready for Fed Rate Hikes?

imagine an obese, diabetic, alcoholic 50 year old woman ...

yes - 20 years ago, a lecture about prudence and a strict vegan diet and yoga regime might have done some good.

but now, we all reckon we should throw her in the English channel and she should swim across under her own power.

well, it would make for great tele -