Some of you newer investors look at the market and wonder why it’s going lower, so dramatically. The answer is very simple: monetary policy is wrong, especially in Europe. At the present, nominal GDP in Europe is contracting, as well as employment, asset prices and sentiment. There is capital destruction on a historical scale, yet the ECB feels it is appropriate to keep rates at 1%.
Europe is heading towards depression, brought on by massive deflation.
When deflation hits, prices drop, bonds and safe haven currencies soar. Look around you. How’s everything but oil? What is TLT, UUP and German bunds doing? Last I checked, German 2 yr yielded 0.0%, yet demand is at an all-time high.
If the Fed and the ECB allow the deflationary vortex to take hold, you will see a frightening economy. It will be full retard to the downside trading action. I am talking about 300-500 points at a clip, until we settle at around Dow 5,000. Many of you are still fighting inflation. You’ve been so brainwashed by people like Peter Schiff and others that you sincerely believe the dollar is going to zero and we are heading down the path of Zimbabwe.
You’re delusional.
All of the money that has been printed has been absorbed into the system and is being destroyed. Money supply is falling and we need more stimulus. We have no choice but to ease, quantitatively, until asset prices cause a ripple effect towards a path to economic prosperity.
What is the alternative? Would you rather take a dog-brained approach to this and get austere, like Europe, cutting spending into the fucking ground? Look at what is going on there! They are cutting spending as GDP falls. Then GDP falls some more, leading to even more cuts. It’s a never-ending loop to oblivion.
This is fact: Germany needs to be removed from the European Union. The EU doesn’t need those fucking barbarians. Without Germany they can issue Euro-bonds and save the fucking continent. With German austerity, bank runs, riots, soaring unemployment, global crisis and depression will be the end result.
Once Germany is removed from the EU, the mark will explode, fucking German exports, leading to a win for the allied powers, yet again.
Fuck Germany.
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FB up Pre-Market 3%.
after a 30% drop off its highs I’ll throw the 2 of you a party
Once again they are doing “The Hugh” on the streets of Paris.
Get your treasuries boys, it’s game on.
the alternative is to reboot the system
That is a very, very painful option.
And, dare I say, NOT the only path.
Wouldn’t a reboot enable a quicker albeit painful recovery? The way things are going this looks to be a long term visit with Hospice on a morphine drip until the inevitable is realized.
this always sounds good in theory. In reality I don’t want to fight off hordes of unemployed and starving from my front yard. The Road was fun to watch, not so much fun to live through.
A hard reboot would be painful. Gradual reform of the system itself might be a slower, less painful way.
Are you going to loan them money to make this an option?
Why just the other day I purchased Euro’s, then sold them for a small profit. Call it a short term loan. 😉
With the Governments exposure to home mortgages via Fannie Mae and student loans via Sallie Mae there is absolutely zero chance the federal reserve chooses deflation. They will print currency and print some more. They cannot let the assets they hold deflate in price.
There is zero chance of this.
Old gov can implode and a new gov in place in 1 day its just paper that goes worthless look at grexit paperwork is already approved, printed, in binders and boxed to be delivered amy day now. Pluss the money printers have the bills already designed and valued against euro.
You are wrong sir, more qeasing is just kicking the can. What we really need is to get this fucking economy to real levels and that is wayyyy down from here. People cant take the pain and postpone yet the pain will be worse so suck it up if you got money put it into something usefull not fucking yelp and ride it out.
I love you people who just want to “get it over with already.”
90% of men will get prostate cancer, if they live long enough. I’d much prefer to get it when I am 80 than now, thank you very much.
I can go either way if they kick the can ill keep working and doing what i do knowing that what we have can implode any day, if we go the other way now those are interesting times indeuud lets get it poppin!
A more apt analogy would be getting prostate cancer now, or giving it to your kids, when they are 30.
Stop it already with that ridiculous “passing it down to the kids” analogy.
It’s such a blue collared path to ignorance.
My collar is bleach white. Not sure what you mean. It’s true.
Look at the incredible waste government is (bozo clown parties, bridge to nowhere, $500 toilet seats, …) Government is not the answer and never will be. We are hear now because of Fannie & Freddie and countless other boondoggles. We’ve printed trillions and still sinking. Stop regulations, stop the waste, reduce government, put in term limits, return to personal responsibility. Its the only way. As painful as it may seem at first, its the only way.
…or our unborn grandchildren…
Hey Grandpa tell us the story again about the selfish, fat people that decided to kick the can down the road again and why we live in hell now.
You “can kickers” have no idea what your talking about. What you’re basically saying is a voluntary depression. “Oh lets just get this little depression out of the way and then things will be peachy! Hell we can start another world war with China then our industry would really take off!”
Ask Grandpa about his little depression and world war. I’m sure he would have avoided it if possible. And it is possible.
The global panic bus is almost at full capacity. EURUSD is bouncing from, testing, and retesting the 1.2650 area. People should start to get comfortable with the idea that if Greece leaves, Bundesbank blows up, same with the ECB, and that chain of events spells the end of the world…
Hence, it cannot be allowed to happen.
Lots of tough talk right now because Greece actually has leverage now that they have a crazy young dickhead politician that’s not afraid to play hardball with the people his country stole money from, and Germany doesn’t want to lose the upper hand. But they will have to bend on the austerity line. They know this. They just don’t want to lose credibility.
So we could go lower, sure, but the world will not be allowed to end. If I wasn’t already 100% locked into commodities at a slight loss, I’d be buying more, simply because QE1/2/Twist/LTRO1/2/ESM/EFSF/etc has not been for naught.
Central Banks are eager for deteriorating economic data to justify massive globally coordinated printing.
So funny, Cramer mentioned this exact same thing this morning,…totally agree, sometimes, removing the bully from the school yard can be the most efficient fix,…no more group discussions.
Let the deflation happen. It is the NATURAL course. Fuck the too big to fail banks, they are failures! Let the winners win and the losers die. This world is filled with losers who deserve to die. J. Dimon is their loser king.
You are INSANE. Just because deflation has happened before, doesn’t mean it is a good thing.
QUIT LISTENING TO IDIOTS.
For those that have “wealth”, deflation is great. I only wish I had been alive at the depth of the great depression and had stored enough wealth to “buy everything” at discount prices. Now I am hoping history repeats.
The people with money will be able to buy everything on sale if deflation hits hard. Fuck those with debt, they are the real idiots.
Joe, have you heard of the whole 99% vs. 1% thing? Can you imagine how that would be if deflation took place? Riots and pure chaos. Everything would be uncivilized and the economy would absolutely fall apart. You are a moron.
Fall apart just like in the 1930’s – oh wait, the country survived just fine. Maybe this time will be different…… fear not the 99% have NO BALLS.
You are a moron. So you want to live in a great depression style era for the next 10 years? It would suck regardless of how much money you have. Money and no brains is never a good combo, quiet down now Joseph.
Big money ALWAYS WINS
I agree, but what you are not acknowledging is how your lifestyle would be. An economy in depression is not fun, regardless of how much money you have. If you are so excited about a dead economy, why not go live in a 3rd world country? You could certainly “buy up” everything in a 3rd world country couldn’t you? I am not talking about money, I am talking quality of life. There is a difference.
“oh wait, the country survived just fine.”
LMFAO… If you define “survived just fine” as 25% unemploymnet, massive amounts of people living on apples and soup, sure.
Everyone can’t have a big house and eat prime rib all the time. Some of the unwashed masses deserve to live on apples and soup.
Have you looked at what a bachelor degree costs at a public university?
Tuition and dorm run most 100-150k.
Who the fuck is going to buy all of the “wealthy” baby boomer assets?
You think deflation is the path that will be chosen?
No F’ing way
The system is going to crash either way because there is a structural problem that cannot be fixed without a shitload of pain.
The choice is to deal with it now or deal with it later. I understand both sides of the argument but if we had let it all crash in 2008, we’d be 4 years into a recovery but instead we are dealing with a bigger problem.
With can kicking, it’s possible that 4 years from now, we’ll still be facing even bigger problems and saying if we only dealt with it 8 years ago…
Not an easy choice but at some point, the can will be too big to kick and the ramifications will be horrendous.
Part of me wants to get on with it but at the same time, I know once we’re there, I’ll be wishing they kicked the can further. I think most who are rooting for deflation don’t really know what’s in store when it comes.
What is the structural problem in the US? There is obviously one in Europe the but the US is far far far from a Europe.
You’re an asshole! What about the people, children? You don’t truly understand the scope of destruction that will ensue. Look at the various pictures through the Long Depression. That will be kids play compared to this time around! It maybe inevitable, but why not try to lessen it, if possible.
The Germans are students of history. Their social studies teachers teach their kids about how hyperinflation via the Weimar after the debts of WW I led to the rise of Nazism and Hitler. Social studies teachers in the U.S. teach about going to jail for speaking ill of Obama.
How do you hypothesize the future will play out
Gets the award for the most ridiculus comment in this thread.
Hey dickface,
Go educate yourself:
http://www.nydailynews.com/news/national/high-school-teacher-suspended-telling-student-arrested-disrespecting-obama-article-1.1082565
Social Studies teacher, not teachers. Singular.
We’ll all be wiping are asses with the Daily News if Germany has their way.
retard.
Jesus I never realized how many idiots trade until I started reading financial msg boards.
Always some idiot has to bring Obama into the picture.
And Weimar fell bc the govt could not function anymore, not because they printed to much. Hyperinflation is not a result of overprinting, rather, it’s a loss in the system and people behind the currency.
meant to say “a loss in faith in the system”
True. Hyperinflation and total collapse of government go hand in hand.
Well fucking said sir!
It is the Germans who need to leave the Euro.
These blood suckers get a free ride from their failing Euro chums (who keep the Euro on the floor) fueling the German export led economy. Whilst they get to have their own sovereign debt (which makes borrowing nice and low) whilst their Euro chums have to pay through the nose.
Its been a nice little earner for German for years, but its got to STOP NOW!!
given some time,i think the clams only “silver” bullet left,might be that the green back could be backed by gold again. gold and the dollar can rise together.screw the eu-zone,if we dont start looking after ourselves,will end up like euro.
Monsieur Le Fly you are a very smart man but are off the mark in your understanding of economics. QE seems to work for a while for a few but it ends in destruction for a wide swath of the population. Printing money to avoid the real problem is akin to curing the hangover by staying drunk. The drunk likes the free booze. Other drunks like the free booze. But it takes a heavy toll long term on the drunk and the innocent people around the drunk. One of two things happen – the drunk dies, leaving damaged and destroyed lives as the legacy or the drunk sobers up/ is forced to sober up when the booze is taken away. The newly sober drunk has to come to terms with the unpleasantness drinking created and enabled him to ignore. It’s painful. It’s humiliating. It’s enough to drive him back to drink. But getting sober and facing the consequences is the only solution. The bar bill needs to be settled.
It is YOU who are ignorant of economics. I know Mr Page Turner believes he knows more than Bernanke and other top shelf economists; but they reality is, you are nothing more than a meatloaf thrower.
You Tea Party fuckers can suck my dick.
Fly take off that surgical mask and show your Krugman beard.
Good blogging pal. Your post about headwinds and tailwind hit home. Cramer talking about bank runs and resets. Scary stuff IMO
word.
Sir, an economy that can’t function without QE is the same as a man who can’t function without a drink.
The Bernanke never ran a company. Never made a payroll. He’s lived his life as an academic hurling meatloaf filled economic theories against a wall to see what sticks.
Now he’s surrounded by banks and politicians so his world view is constrained. He’s a bartender in an exclusive bar whose only patrons are drunks.
No one who ever made a payroll controlled the issuance of a sovereign currency. The two aren’t analogous, and conflating budgeting for a business to running the money supply is sophistry designed to delude the half-educated.
Ben Bernanke is, in most every respect, a genius. He understands exactly what he’s doing, as he even speaks to the limitations of monetary policy and the need for directed fiscal policy in order to combat rampant deleveraging. The Tea Party has one thing right: taxes should come down across the board (though I’d argue the payroll tax should just be suspended indefinitely). Unfortunately, they’re wrong in the assertion that deficits should come down correspondingly.
Have another drink!
I’ll have what he’s drinking, because he’s right.
Just because you sobered up, doesn’t mean all people can’t handle their liquor!
The Tea Party has already kicked out two 80 year old “lifetime appointed” Republican senators in the primaries. And that’s bad?
Fucker votes for Obama in 2008 and wants to rip on the tea party..
Faahk U
I’m not the biggest fan of Obamer, but seriously, the tea party bone heads are totally clueless.
Thank you Fly. You said everything that needed to be said.
uhh…
All this digitized money is locked up in various T-bill type instruments earning no interest. The gov’t needs it out there in circulation, but people are sitting on it out of fear. When it does come out the resulting inflation will be massive. circulation or turnover is what’s lacking now.
Getting Germany out of the EU is a genius idea.
we are in this debt debacle because there is no growth.. debt is only allowed because of collateral and growth
answer this. how do you grow? usually growth = jobs.. why is there massive unemployment? and how do you solve unemployment?
well it has to be done by changes in labour costs.. or offering a service that cannot be made in another location for cheaper.. in general the later isn’t a viable option because countries are becoming more educated and technologically enabled. There arn’t that many people that can hold a comparative advantage based on their skill set. Therefore, it has to be the wages and standard of living.. the closest way to do this in a civil way is to print.
Right now you can’t print in the EU, it likely needs to be broken up or there needs to be massive write downs on debt..
Until then deflation will continue to occur and the stock market will falter.. because any strong economy in the EU would never want to pick up the slack for those that are profligate
a break up needs to happen, the cultures are too distinct for them to all be under one arm
What are the other options? I really want to know..
Brilliantly said
Exuse me but doesn´t deflation also lead to lower wages and standard of living…
I think Deflation is the more honest way to go..
look. it’s all the same, one is just a little less of a bullet and more of a death by a thousand cuts
we need growth, deflation and inflation are just synonyms… inflation is SUPPOSED to mean growth
I’s not all the same. Deflation is a motherfucker to be avoided at all costs.
my point is that deflation and inflation are metrics for growth.. but you have to consider why we have deflation and why we want inflation.. that is the real discussion
I agree that deleveraging via inflation (increasing the money supply, spending into existence) is the better alternative because massive write downs are a bullet to people and that is how you get political, social instability which leads to a rejection of a currency and hyperinflation
How do we get people working again?
an option is to decrease the minimum wage however, it is important to note that in that scenario people are getting pressed more and more because the price of survival is increasing (food inflation, rent inflation)
Technology has been the catalyst for a world balancing and creates a scenario that will have disastrous effects for Western nations
Life will go on.. but the circumstances change
My advice? use your service oriented jobs to pick up real assets and train yourself in the ways of productive technologies
Deflation typically results in a narrowing of the wealth gap, as the owners of capital suffer write-downs while the laborers see their purchasing power increase. The bottom 90% have nothing in the way of assets, so hitting their measly 401ks isn’t going to devastate them; rather, their increased purchasing power (because wages are stickier than commodity and other asset prices) will result in increased asset accumulation among workers, debt repudiation, and substantial pain for the rentiers. It would certainly suck for many frequenting this board (myself included), but it would go along way toward ending this persistent and inevitable class warfare.
Dflation shuts down economic activity, raises unemployment to massive levels. People with money keep it hidden away as it is growing in value.
Deflation also leads to massive unemployment of the working class.
This is why class warfare did not cease to be a topic during and after the depression, but rather became more of an issue.
Again.. lets talk about what deflation is..
Because if you are just talking about a general decrease in prices which leads to businesses slowing activity and then destroying jobs as a negative cycle thats fine but you are using the price as the initiator … not workforce dynamics which I believe is wrong
Deflation is a concern because of negative growth.. please focus on the issue of job growth
Or I’d love to hear how the situation we are in cannot be described by technology!
thanks.. one final point that I think is the core of this issue and is extremely important to mull over
it’s technology. please think about it
technology means:
the ability to transport goods and services cheaper and faster
information dissemination
lowering the barrier of education
the ability to manage a multi faceted multi national corporation in a central location with a relatively few number of computers (the cost to manage has massively decreased)
Important:
the ford manufacturing process means you need few smart people, dumb people to run the process and then not many others.. net net you get less jobs and a massive income disparity
the capitalist system is getting riskier by the day and it’s because of technology
Nigel’s been saying that for years!!!
he has been talking about technology? I would love a link!
for the record I am a fanboy of Nigel
If Germany leaves the Euro wont the combined credit ratings of all the countries left in the Eurozone be terrible?
For Example:
A Eurobond paying 0% could possibly be rated “junk”.
Translation:
“We will pay you nothing for buying this bond. And we cannot be trusted enough to actually pay you ZERO.”
Just weird fuzzy math and logic.
The alternative is total destruction. Would you prefer bad credit or being totally fucked?
The U.S. federal government owes 16 tril in debt.
There is zero chance of deflation.
Election year also
Print print print
Whats funny is most people have zero clue how that 16 tril has accumulated. Dare i ask if you do?
Obama took it from 9T to 16T. Bush spent 1T extra for tarp to avert massive financial crisis. Govt spending should return to former levels, but this is not Obama’s plan. Rahm Emanuel said “never let a crisis go to waste.” meaning keep the govt sector expanded to the level of spending or grow it further. They believe in more government. We are spending beyond our means. Raising taxes will help nothing, it will kill off the vibrant part of the economy.
And you think socializing medicine is going to bring down the national debt?
Paying interest to the bankers on borrowing money they printed for the government!!!
Austerity is the road to financial ruin for all, social dislocation and riots on the streets.
It did not work in the 1930’s (started a trade war and then a world war) and will not work now.
Go back to history and learn lessons. Otherwise you are doomed to repeat them.
Merkel, Cameron need to be replaced pronto!
Some call it austerity, some call it a balanced budget.
Time to pay for 30 years of debt exuberance..
It’s amazing to me that young people seem to want to take on all this debt. It’s like doubling up on your student loans.
It’s not “debt” in the true sense of the word debt. It’s something very different. Do the research,
Inflation is the FRIEND of the middle and lower incomes, whose balance sheets are mostly DEBT- mortgages,car loans,
credit card balances. Their only big asset is their house.
For a $100K house and $80K mortgage, doubling of prices raises the homeowner’s equity from from $20K to $120K, a 6x increase, making the monthly payment HALF as painful.
The retireds have their SS indexed. Our tax brackets are indexed. Look back at 1977-80 and you’ll see you got your
greatest salary increases- 10 to 15% yearly. The inflation went away, the EFFECT of your higher salary continues.
Moderate inflation encourages current consumption rather than delaying purchases,increasing demand. Authorities
realize this and set an inflation target of 2%, avoiding the death spiral of deflation where purchases are delayed as consumers wait for lower prices.
It also reduces income disparity, as the real value of stored cash decreases, while middle class retirees get a good rate of return on CD’s and bonds, and wages go up.
It reduces real value of federal and personal debt and mortgages, while raising home values and stock prices.
Inflation is the FRIEND of the supply-demand economy.
Kind sir-
Hasn’t each successive QE yielded less and less? Don’t obscenely high commodity prices as a result of QE make them net-negatives?
Trying to see how this ends well regardless of suggested solutions.
The problem is monetary policy can’t do it all. We’ve hamstrung ourselves by denying any additional fiscal stimulus. It all gets mucked up by politicians wielding samurai swords to decapitate their opponents in the opposite party and or pay off their political friends.
Keep schoolin’ them Dr. Fly. The greatest product of the internet age is economic ignorance.
I fear the Fly has nailed it.
Thanks, definitely gives me something to think about. I’m curious though, what evidence have you seen that tells you the trillions of dollars that the Fed has printed has already been absorbed into the system and WON’T lead to higher interest rates and higher inflation?
Look at the bond market. That’s enough proof.
That’s not a good enough answer. Don’t you think WE are artificially keeping these yields low?
There is a SHORTAGE of currency at the moment. It has nothing to do with artificial anything.
Yep, and we can do it forever. Look at Japan. No substantial inflation, and they’ve been at this a looooooong time.
The net credit numbers outstanding are compelling evidence that the dollars are being more than offset by credit destruction/deleveraging.
Fly
Best thread of the year.
First thing to do when you find your self in a hole is stop digging. You don’t solve a debt crisis with more debt.
Actually you do.
You won’t accomplish anything by cutting spending as the economy is contracting.
That’s exactly what we have done in the US for the last 4 years and all weve done is transfer bad debt from irresposible corporations to the public. Now the credit worthiness of the US is questionable.
Of course! I mean, we might not have enough money to honor our debts, what with a printing press and all… Oh, but then we might hyperinflate! Wait… that’s not happening either. Maybe the world will stop using dollars because we have stable inflation and still comprise the largest single contribution to global GDP! Wait… nope, not that either.
I know, why don’t you short Treasuries, grab your ankles and hold on. As long as a plurality of the population thinks as you do, I’m stuck holding a modicum of gold, even if it’s an anachronistic bet.
Is that why TLT is about to break to new highs? It’s all relative, my friend, but the flexibility of floating exchange-rates is what makes it all go. The system is not cogs and grease, it’s just grease and more grease floating around.
This will get O’s algae energy directly to the back burner:
Cranbury, NJ (May 22, 2012) — BlackLight Power, Inc. (BLP) today announced a major breakthrough in clean energy technology, which experts agree holds tremendous promise for a wide range of commercial applications. The announcement comes on the heels of BlackLight’s recent completion of a $5 million round of financing to support commercial development of its new process for producing affordable, reliable energy from water vapor.
a stock market that may eventually start pricing in the fact that 10% deficits are unsustainable isn’t deflation..it’s simply deflation of your stock portfolio..the stock market has doubled in 3yrs..if that isn’t enough to get the “wealth effect” going (which i assume you’d agree hasn’t happened, given your view that we need more stimulus), how high exactly must we pump it before that actually starts trickling down to the real economy. The stock charts of SPG (raising rents by 15% across the board), UNH (up 400% off the lows), and WFM certainly do not scream deflation for our largest expenditures (food, healthcare, and housing)..
Fair points.
But where do you think the market will settle if we “reset”?
Put stocks aside, I am talking about prices. The price of everything BUT organic food has been declining for more than 5 years.
what exactly has gone down? housing prices that in most areas have taken us ALL the way back to 2003 prices..and as you’ve said your self, in nicer areas housing screaming…where i live i’m guessing they are 10-15% off the bubble highs..prices of stupid shit like flat screen tv’s have gone down..i agree..but so what.. i spend 2500 on a tv every 4yrs..what is that, 50/month?? I have 3 kids, that’s my food bill in one day…the problem with “stimulating”, is that we have such a backward corrupt system that all it does is goes into tradeable assets..it does zilch for the real economy..and you can see this through the fact that we haven’t had wage growth in this country forever..all that “stimulating” does is further crush the discretionary income of the middle class, because it sure as hell hasn’t created jobs, or driven wages up..all it has done is made it more expensive to fill up their minivans and feed their families..”stimulus” at this point is 100% for the benefit of speculators..the game is what it is, but let’s not defend our stock portfolios under the guise that that’s actually what’s best for the economy…it’s what’s best for people’s high beta stock portfolios, and that’s it..as for a reset level, i’m not sure..but i don’t care what P/E’s are here, because it’s all a mirage as long as we run 10% deficits plus countless unknown asset swaps at the fed..it’s a joke..i would think if this country were forced to run a balanced budget, stocks need to get under the 2008 lows…
Well said
Absolutely correct!
Right on the Mark!
good thought mark, we the people r gittin f’d
what if china goes to a gold backed currency?what country is increased their gold holdings? the dollar would be desimated. this is just a thought,
No one will ever back their currency with gold.
The gold standard is extinct for a good reason. Anybody backing their currency in gold these days will get fucked.
Just reread your column, you sound like a Keynesian. You should embrace your inner Keynesian, shout it from the rooftops and then explain to all of us how MORE gov’t spending is going to solve the problem that we’ve spent too much and we continue to spend too much. You have a lot of LOYAL followers and I’m sure at least some of them are as confused as me.
kick the can till it explodes! fuck the mule load the cart…this will end in disaster.
Joe
The private sector doesn’t have the power to increase monetary supply. This isn’t about BIG government. This is about supply/demand.
The problem with the idea of a QE 3, 4, 5, 6 is that sure we’ll see results in the short term, and it makes it a hell of a lot easier to finance our debt – But no one is buying this crap anymore. We are financing 70% of these treasury purchases OURSELVES! So while you will see positive results in the short term, and that might make us think it is working – It won’t be until further down the line when the shit hits the fan.
No he’s not. Fly is basically touting more of the Friedman school, which is use monetary policy and go light on the fiscal side for a while.
Everyone get back in your PODS and get back to dreamland. We gonna rally!
“Gentlemen,
Theory has now overtaken reality: as I predicted in the hallowed pages of Science, we are now facing a veritable menstrual moment.”
Dr. Hymen Q. Braveflaps
Chief Economist
May 23, 2012
Herr Doktor, history tells us: “Loose lips sink ships”
Short Silver rocking! ZSL +5%
Now your starting to sweat!!!
The funny thing is that if Germany was thrown out of the euro, they would have to do what the Switzerland is doing, which is to link back to the PIIG euro or they are fucked.
I despise Krugman for the partisan lying fucking hack he is, but he’s right on one point. Germany has been telling the others that in order for them to get out of their problems they have to be like Germany and reform their economies the way they did earlier in the decade. This would mean building large export machines. However Germany’s cure is bullshit, because there isn’t a big enough world for the rest of them to run trade surpluses as someone needs to run a deficit.
Germans are arseholes. They’ve always been that way though.
The ironic thing is Germany got a leg up on its post WWII future by having half its debts written off in 1953. Seems like turnabout is fair game at this juncture.
I murdered myself with silver yesterday…jesuz fucking christ.
Now you tell us, Fly. Should’ve just listened to Obama and voted Democrat in 2010.
Will have to seriously think about buying some TZA towards the end of today.
The possibility that we have reached the other side of the mountain on $RUT is looking more and more likely each day. I thought we wouldn’t get below zero on the monthly coppock score until June but if May were to close at this level then it has already turned negative. Also if May were to close at this level then this would be the worst May ever for $RUT. Looking at $RUT chart, we’ve already got two lower lows sandwiched around a lower high (ie, a downtrend).
Sentiment has not yet reached a level which would almost certainly portend a quick snapback to the upside. I thought for sure this week’s AAII report would show we’d reached less than 35% bulls in the most recent AAII survey and a ratio of less than 1:1 bulls:bears (hallmarks of tradable lows). That didn’t happen and sentiment still seems to allow the likelihood for much lower prices.
Le Fly,
I think I read that Germany had considered dropping the Euro, rather than force Greece and the other eurotards to do so. They figured they would take a 40% hit on all of their foreign assets and that exports would freeze. Their Marks would become much more valuable, but something less than a “safe haven” currency as their own economy would be severely impacted. I figured that’s why they’re trying to keep all of their sinking neighbors with them in the same boat. But for a 20 year old Greek, Spaniard or Italian, what’s in it for them?
And if Germany was to exit, how would a Eurobond, composed of eurotrash and pipe dream rainbows help? Who would buy such shit? What interest rate would you have to receive to make it worth holding this pinless hand grenade bond bomb? How much of each bond would just go to paying the entitlements and other benefits of countries who promise near full salary lifetime pensions to people who retire at 50? How does that help build infrastructure and put a soon-to-be lost European generation to work?
Not fucking with you, but please explain.
You are grasping the logic of Götterdämmerung
Dell is getting clobbered. Kind of strange.. From what I hear, Dell Compellent, their data storage group, has been hiring like crazy in my neck of the woods.
So, is it weak sales or increased spending? Or both. HP earnings today should be interesting.
Germans don’t really do the whole inflation thing after the Weimar Republic. The problem is no Germany pretty much means no Euro. It’s weird that Greece and the other debt-ridden countries seem to think they have leverage when if the Germans even hint that they’re looking at leaving the euro it’ll lose 10% in a day.
http://www.youtube.com/watch?v=5L0q09CgUWo
down, down, down…
While arguing “inflate” verse “austerity” is entertaining, it probably isn’t very useful at this point. All asset classes are overpriced here.
Unless you start sending regular checks to every man and woman in the US, and intentionally inflate wages, the inflation solution isn’t an option. The Fed can print money, but they can’t target where it goes. Using traditional Fed methods, they have only managed to realize temporary asset appreciation, targetting mainly commodities, and equities and bonds secondarily.
That doesn’t help the millions of people out of the network; in fact, it fucks them over and makes things worse.
So the Fed prints, destroys demand, and leaves equity prices way over priced OR the Fed doesn’t print, deflation sets in, and leaves equity prices way over priced.
We need wage inflation, if the inflation method of curing our ills is even a viable option. Otherwise, you drive a spike into the fifth of the country that isn’t able to play the game. And Ben can’t print revolution away.
Other than that, you have a hybrid strategy, which involves blowing bubbles, then deflating them, so you can blow them again, hoping the people who are driving the costs of living up get their skulls smashed the fuck in along the way (that’s what we seem to be doing now).
So, get ready for your annual crash until leverage becomes more sustainable – 2010, 2011, 2012,….
wage inflation to keep up with food, gas? maybe naft should of kept the right to unionize, and the right to epa. just sayin it evens the playin field. at least thats the way reagan wrote nafta. so even if your against unions, u can see how slave labor is crushing us at this point.
Cain, love your writing, but seriously, isn’t the solution simple: suspend the payroll tax indefinitely. Bam, instant middle/lower class pay bump. Warren Mosler suggested this back in 2007. The payroll tax is regressive in the first place and should have been the hallmark of Bush’s tax policy as opposed to simply offering upper-class handouts in homage to his supply-side gods. It’s the only practical way to put money back in the hands of working people, and anyone making up to $250,000/yr (I realize SS cuts out before then, but I figure that’s the level at which the tax cut is still meaningful relative to AGI) will feel an immediate, meaningful increase in purchasing power.
And this helps the budget/debt side of the equation how?
That’s a one time gain. The government needs to inflate the currency to rise all boats; they can’t keep helping out the little guy at the expense of the deficit. They’re going to fucking blow a gasket in the bond market, if they’re not careful.
The Fed controls the US Treasury market. If the Fed wanted to it could replace every piece of US debt with dollars and nothing would happen. Think of US debt as higher yielding dollars, that is what they essentially are. They are interchangable. What the US needs is greater demand; once demand picks up and the economy starts growing at a faster pace, the deficit and debt “problem” will naturally correct. Looking at certain aspects of the economy in isolation i.e. the deficit, is a sure fire way to make poor policy decisions. Everything is interconnected.
I’d like to see this gasket blow. What will people buy in lieu of Treasuries? Bunds? Gold? Even then, the Fed can support the market ad infinitum. Let’s say they “blow a hole” in the bond market and investors exchange their Treasuries for dollars: what’s the end game? They’ve just given up a money good investment paying yield for one that’s just as liquid sans the yield. As long as inflation is tame, deficits just don’t matter. The “one time fix” of eliminating the payroll tax is a structural increase in middle class wages that would provide an increase in wages that would stick, as opposed to the “making work pay” credit and other such handouts. You asked for an inflation-side solution that would spur wage growth; increased take-home pay via elimination of the payroll tax is wage growth.
It’s impossible for all asset classes to be overpriced.
“All of the money that has been printed has been absorbed into the system and is being destroyed.”
It’s like at the end of Star Trek (2009) when they shot antimatter (quantitative easing) into the black hole (deflationary spiral).
Hey Everyone! Why don’t we just ask Obama what to do? He has lots of ideas and he sounds so smart, he’ll know what to do. Oh, and he’s good looking too!
Dude will talk for 10 minutes and say nothing.
WWHD – What Would Hitler Do?
Nce thread!
oh we are so close to the iran oil sanctions being officially delayed. If there are no oil sanctions in July, Russia and Saudies have a hell of a lot of oil to sell cheap. Brent should start a beautiful freefall, Obama has his lower Gas Prices..and I can continue my sweet downtrend until some clam messes it all up. BTW, little surprised that BoJ Bank of Japan didn’t add stimulus last night.
A point I heard a long time ago in refute to Mr. Schiff was that you have to have two conditions to have substantial inflation. 1) An increase in the monetary base and 2) An increase in the velocity of money. From what I can see, we have 1) in spades, but are incredibly far off from having 2). This leads me to believe we won’t have inflation, let alone hyper inflation, until criteria 2) starts. So, why are we worried about inflation, when credit destruction and deleveraging are offsetting the printing of money? Is it more complex than this? Or is the only rebuttal that we won’t be able to control inflation if it happens? Isn’t this quite the gamble with the known consequences of deflation?
German bunds are likely pricing in some potential for re denomination into dmarks that of course would then rally.
Nothing wrong with 5,000. So what?
We are not in a depression? Never got out of the one from 2008 asswipe.
the main question is: would Fly be defending Bernanke and the QE way of life if his portfolio contained TLT and UVXY? No. Because he’s human and humans are selfish.
not to be a pain in the inflationistas arse, but hte fed can’t create dollars even if it tries.
can it buy treasuries with money printed “out of thin air”? sure it can. but in the process it un-prints the treasuries. it gives the world cash and takes treasuries, a wash.
QE prints nothing, but it lowers the interest payments to the rest of the world (the non-us government rest of the world). Net, QE REDUCES the amount of dollars in existence for this reason.
the one, and only, way that the US government can print money is by running deficits. then new financial assets (dollars and/or treasuries) are created. ONLY deficits create new dollars.
this isn’t arguable or complex, yet it is somehow wildly misunderstood.
We need fiscal stimulus. Europe needs more Euros. In fact, thats really all they need.
Would new Euros used to retire sovereign debt over there cause hyperinflation? HOW COULD THEY, THEY AREN’T BEING SPENT ON ANYTHING. lol
Fly, w.respect, I would advise restraint from shitting on Bo$$ Schiff’s House.
He’s a corporate general.
He’ll probably preside over the AU or found a new chain of islands to print Schiff dollars, better than Lordy Bronson’s Virgin dollars.
The Schiff standard, Euro Pacific intends to align their investment bank arm with merchants for their clients, with PM backed debit cards, to accept PM consideration in payment world wide.
Schiff’s part 19th century tycoon, part Futurist. Not a good adversary to have, M. LeFly.
RGR is the stock of the year for me. When the going gets tough, get you a gun!!
I love the print theories but its so awesome to think the fed could buy the entire planet’s debt load and shred it and send to be recycled. BOOM, Gold/Silver? My mind can’t get around it. Unfucking believable. Do it. The Bearded Clam might go down in history as the man who saved the world. Every man woman and child as well as soveriegn would start with a clean balance sheet. I guess houses would be worth ten fold? A solid used Toyota 75,000 or 750,000?