iBankCoin
18 years in Wall Street, left after finding out it was all horseshit. Founder/ Master and Commander: iBankCoin, finance news and commentary from the future.
Joined Nov 10, 2007
21,014 Blog Posts

The Battle of Good Versus Evil Continues

Food for thought. Who is the evil party in this whole crisis story? Is it the people who want Europe to declare insolvency and restructure? Or, is the people who wish to “extend and pretend” through artificially propping up failed governments and institutions, which in turn hurt the people through caused inflation and harsh austerity?

The knee-jerk opinion is to declare Bernanke an evil genius, one who is interested in slaughtering poor people via starvation. However, if Ben allows the financial system to collapse, how does that help Joe Shmoe, working at the bus depot making 45k per annum? Without intervention, deflation on a massive scale will hit, which will drive prices down. On the surface, this sounds fantastic. But what will happen to margins? Everything will be CRUSHED, including stocks.

Corporations will lay off workers and the reduction of cost of goods will become a moot point, since no one will be able to afford them anyway.

The big winners will be the people who saved for a rainy day. You know that $750k house you’ve been eying? You’ll be able to buy it at $550k with a 3.5% 30 year mortgage.

On the flip-side, if we continue the path of quantitative easing, commodities will rise and our shitty banks will still withhold capital, since they are effectively insolvent and useless. Couple that with fucktarded government OVER-regulation, the price of housing isn’t going anywhere but flat to down in the foreseeable future. Stocks will outperform and 8-10% unemployment will be “the new normal.”

My point: this is not an easy problem to deal with.

While talking shit on the internet, everyone seems to be an expert. It’s easy to second guess the actions of community organizers partaking in 4 wars and a great recession. But his job sucks dick, no? I do not envy anyone in power. However, I do wish to profit from their mistakes.

It is as clear as America’s collective cholesterol levels: policy makers are committed to an reflationary response. As much as you pine for Germany to walk away from the presses and invade Greece for sport, it isn’t going to happen. The path of least resistance, especially for professional politicians who harbor not one iota of nationalistic pride, is to “extend and pretend.” If that’s the case, ask yourself, what asset class will be the big winner in such an egregious scenario?

Once you figure it out and come to grips with reality, like I have, you will be able to invest freely, without a care in the world–for time, in every sense of the word, is on your side.

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53 comments

  1. Nick

    Bravo.

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  2. Superpositron

    Long gold, glitter and Barbie Dolls.

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  3. Juice

    agreud

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  4. Mr. Cain Thaler

    I would totally agree except that the case for gold and silver is being extended to all commodities. If the Europeans start printing hard, that hurts the U.S. a lot.

    It could be months between that point and the moment when Ben fires back up the U.S. presses.

    There’s no way oil should be printing $100 here. Copper rallying makes no sense either. Pretty much all of these raw materials are at risk if U.S. or Chinese manufacturing starts getting uncompetitive.

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    • The Fly

      I am talking more longer term. Anything can happen short term. But, in the end, gold and silver will be winners. It has taken me years to finally realize this fact.

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      • DMG

        “Well yeah. I was just sitting here, eating my muffin, drinking my coffee, when I had what alcoholics refer to as a moment of clarity.”

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      • GoodAsGold

        About time! Lol

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      • MetalLeg

        Your take on the situation is spot on. You weren’t a big fan of gold when I first started reading iBC but you have now sized up the situation to perfection. The governments around the world are in between the proverbial rock and a hard place and knowing full well what their MO is, it’s quite simple to understand which path they will choose even though either will be good for gold over the long term.

        I was very early to the gold/silver accumulation and made a number of mistakes along the way but it’s better to be years early than a day late.

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      • Sierra Water

        Yes, QE to Infinity is REAL, thus the longest raging secular Bull market in history will be Gold & Silver. RGLD getting ready for $100 roll. People on the internets told me I was crazy in 2008 saying RGLD would print $80. The massive black hole that is OTC Derivatives is a never ending stock pile of fuel for higher PM prices. We maybe could have taken a reset and deflationary episode in 2006, but now they will monetize no matter the consquences, over a period of time.. The notional value is just too crazy big. 5000 -10000 /oz is in the cards by 2016.

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  5. wilmer

    Total destruction, or gradual erosion. Pretty easy choice when you’re a spineless politician.

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  6. Yabollox

    It’s cheaper for Germany to absorb debt than it is to build a bunch of new Stukas and Panzers. But that creates no jobs for miners and machinists. So they will build VWs and BMWs to sell around the world, then send the excess $ to the Mediterannean region. The Greeks and Romans earned it 2000 years ago for their development of philosiphies, culture and civilization. We are in their debt.

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    • moolahheaven

      LOL!!!

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    • Indie

      your brain is all mixed up. You must have been travelling through time without taking the special general relativity pill. ask fly for some if you’re out.

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  7. panamaorange

    Unless we get a clear resolution out of the supercommitee, and an orderly pullback in oil, the BEST the bulls can hope for is chop.

    That doesn’t mean i’m now a bear. But, it means you can and should short ALL tests of sunday night highs. And any breaks above

    Yes, there are bullish technicals in the VGK europe, and SPY sandp500.

    But, they are not enough for a sustained breakout

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  8. Colonel von Ryan

    Ben’s stated goal is to reduce the unemployment rate. So he threw shit on the wall to see what would stick, so far, nothing. He finally figured out that 0bamaCare is the real reason companies won’t hire. The solution will be dropped in his lap next year when the Supreme’s rule 0bamaCare unconstitutional and a Republican Presiednt is elected. Then, companies will go on a hiring binge bringing unemployment back down to a sustainable level. Bernanke can then serve out his lifetime appointment in grand splendor, having reminded everyone how brilliant he actually is.

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    • drummerboy

      it’s already a 9 to 3 vote on the supreme court,cocksuckers are saying that it is constitutional.my god, next they will tell us what color socks to wear. WHEN WILL THIS SHIT END,DAMN IT.

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  9. RickRossTheBoss

    Hmm. So do you prefer miners or physical gold i.e. PHYS or GLD? I’m leaning towards miners but then again if shit hits the fan and gold goes to 2,500 there’s no guarantee the miners will see any of those gains…

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  10. checklist

    its a fairly easy problem to deal with, its just that a misunderstanding of economics in politic circles and questionable motives in the same stand in the way.

    Do the repubs want the economy to recover right now? Was the Eurozone designed from the beginning to implode? Plenty have people have known that in the end fiscal union would be required to make it work, speeches have been given about its fatal flaws for nearly 20 years. Was the whole point reaching an implosion so as to force a fiscal (if not political) union?

    I’m not sure that the market is right in assuming that Europe will ultimately monetize some debt. I am 100% sure that the ESFSTSFETGSSF, even if leveraged to 11ty quadrillion euros, will not, in the long run, do enough.

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  11. JTU

    Goldman Sachs Anticipates Wti-Brent Oil Spread to Narrow to -$6.50/bbl in 12 Months

    http://www.forexbrokerz.com/news/goldman-sachs-anticipates-wti-brent-oil-spread-to-narrow-to–_6_50bbl-in-12-months

    WNR, CVI, DK and most other refiners will lose value if this is true!

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    • drummerboy

      in 12 months from now? geez, makes one real curious how anyone can make such a statement without having prior knowledge, a year down the road.

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      • brian l

        It supposedly costs about $6 a barrel to ship oil, by rail, from Cushing. As long as the WTI-Cushing spread is above that, there is basically free money for anyone who has rail capacity. Rail capacity can’t be magically created out of thin air, however. Goldman’s analysis is based on when they think enough rail capacity will come online to reduce the surplus in Cushing. They don’t need a crystal ball for that.

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        • drummerboy

          what are you talkin about. rail capacity has nothing to do with tightening surplus capacity. thats bull. capacity in rails consists only of how much/many rail cars that are used in transportation.it’s like saying i’m a trucking company,i can move more freight,if i had more trailers in which to move more freight, which would mean i need more tractors, and more drivers. with rails you just add more cars,cause you only need one engineer . and still,if your gonna have a company put out an analysis based on rail capacity,well, lets just say,maybe they should rely on a crystal ball

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          • brian l

            I don’t know what the limiting factor for the rail capacity is. My guess is that you are probably correct, there were just not enough cars capably of carrying oil in service. It takes time to build them and to arrange shipping with the train companies.

            Goldman isn’t the only one predicting a significant decrease in the Brent-WTI spread. The oil futures market also agree. A large Brent-WTI spread encourages: capacity growth at the mid-West refiners, arbitration opportunities through non-traditional oil transportation (such as rail); and pipeline build-out. The spread will decrease, that much is a certainty. The only question is when.

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  12. chivo

    gold? GOLD?

    I am long hot bitches and bars, where I can sell liquor and girls to…EVERYONE.

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  13. #OccupyGold

    Except that deflation results in more power for the governing classes, perhaps because there will be fewer alternatives that are not under their control.

    And isn’t it all about power?

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  14. 4fl3x

    Nice post Master Fly, thanks for explaining it in a way a Cubs Fan can understand.

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  15. drummerboy

    the good,for all intents and purposes have already ushered in the evil. and you know who they are. the weak,”politicians” have already surrendered the fact,that we, as a country,cannot compete,on the labor scale as does the chinese counterparts. and euro zone knows the same. the velocity of deflation will be arduous at best at to not scare the sheep. thats why the “middle class” is dissolving.19k-26k will be the new middle class,and thats about as much parity to china as i can stomach.

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  16. Raise taxes, Cut spending
    Raise taxes, Cut spending

    The only way out of this situation is through consumers spending money, spurring demand and growth.

    Consumers will spend money during periods of high inflation because they want to spend it while it is still worth something so the feds have been desperately shovelling more money into the system trying to spark some inflation but so far it hasn’t worked. Consumers insist apon saving it and paying down debt.

    I think we are heading to a period of stagflation like we had in the 70’s.

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    • riggedgame

      Which is why we and the rest of the world should KEEP PRINTING MONEY, hand over fist.

      There is NO downside for people who count.

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  17. Hawaiifive0

    Excellent. That’s how I see it. It’s a no win situation. Both choices create serious problems.

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  18. Frog Playing a Colorful Accordion
    Frog Playing a Colorful Accordion

    LOL, another great one, Fly. The president’s job does indeed suck dick, which is why mostly fools are running for that position.

    “While talking shit on the internet, everyone seems to be an expert”

    Hit the nail on the head there too. It’s easy to come up with simple retarded solutions to complex problems, when you are not actually in charge of solving them. You do not have to worry about the consequences of your supposed “solution” that would likely make things worse if it were actually carried out. It’s easy, when talking shit on the Internets, to stick with a comfortable theory about what you solutions would do, even though it isn’t true. Because it is never put to the test of reality.

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  19. mhass33

    Fly, what happens if printing becomes politically infeasible?

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  20. john smith

    Wish they would keep printing… That’s the only thing giving the markets any certainty… Everything else is fuckery.

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  21. uncle har

    Oil should hold up either way.

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  22. TheArtist

    you can buy that 750,000 dollar house now for 550,000, if we go into a depression, it’ll be 150,000. Because when a ladder is pulled out from under you, you don’t fall slowly and hover 1 foot off the ground, you fall completely to the ground.

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  23. FIG

    Fly has finally come to the dark side. He’s finally drinking the Zerohedge Koolaid. It’s time to party people.

    Buy gold, fuck silver.

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  24. Trading_Nymph

    QE is pure evil. Let the market place take care of itself, economist always mess it up.

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  25. Super B

    Dr. Fly Why Oil is not selling off? Why Oil is still @ 98? I do not understand, can someone explain?

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  26. Frog Playing a Colorful Accordion
    Frog Playing a Colorful Accordion

    Super B, ERY is up 4.4% on the day. What do you want? Up 10% every day?

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  27. TeahouseOnTheTracks
    TeahouseOnTheTracks

    Sold CJES near $21 for close to a 20% gain …

    Long PKI low 19’s with a stop below 18.81 …

    Long USG from low 8’s and holding LT for test of 200dma …

    Bot MTOR off the bottom ($8) for a swing…

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    • TeahouseOnTheTracks
      TeahouseOnTheTracks

      also bot NOR last week for the special ($1) divy … either swing or longer term hold depending on metal prices

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      • drummerboy

        wow,your the first person here that actually trades usg that i’ve seen. used to be one of my favs.

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        • TeahouseOnTheTracks
          TeahouseOnTheTracks

          perennial favorite … use to trade it from 12’s to 16’s regularly … couldn’t pass up the op to buy at 8.

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  28. Frog Playing a Colorful Accordion
    Frog Playing a Colorful Accordion

    Thanks for posting what you’re doing, Teahouse.

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    • TeahouseOnTheTracks
      TeahouseOnTheTracks

      No problem … I should post trades more often but I get lazy and didn’t think anyone paid attention … Haha

      Maybe you’ll like some of my losers as well…

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  29. Blind Read Ant

    Shorting EUR/USD or GBP/USD is another idea in addition to long gold.

    Flight to USD will be the result of elitist’s polarization and intended suffering of the uneducated, unskilled or unfortunate.

    This, naturally, will fittingly time with the Super-Budget’s failure, causing our equity markets to tumble. Last week was just a sneak preview.

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    • drummerboy

      i have a feeling this super committee is going to put together an altogether different program that will be very unpopular. my god,this administration, and congress has to devise a stupid committee to trim a measly trillion dollars of fat with a forever timeline on such numbers. so,now what the politicians have done was hire other people to take the blame for something that they themselves want to shove down our throats , but dont have the guts to do,you know,because of voters…….something the ows’ers should be monitoring closely, it will effect them the most. oh, short the euro

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  30. wti cushing

    Heya i am for the first time here. I found this board and I find It really useful & it helped me out a lot. I hope to offer something again and help others like you aided me.

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