An interesting analysis (not mine): When the money supply grows faster than real GDP, the extra money causes inflation. John Williams (at Shadow Government Statistics) posts M1 and M2 (both published by the Federal Reserve). More important, Mr. Williams recalculates and publishes two critical numbers that the government no longer does: M3 (the money supply including large institutional investors) and the original Consumer Price Index, before the government suppressed it with "hedonic adjustments." http://www.shadowstats.com/alternate_dataMr. Williams shows that the annual growth of M1, M2 and M3 are all higher than real (inflation-adjusted) GDP growth. This is inflationary. Mr. Williams calculates real inflation far above the government-massaged inflation rate. The government reports the real GDP growth rate as 1.9% but Mr. Williams calculates it as negative 2.5%. This is because real GDP is adjusted by inflation. Any growth in M1, M2 or M3 in excess of GDP growth is excess. The excess money supply came from the Federal Reserve lending money --- money that it creates out of thin air (contrary to Mr. Bernanke's explicit denial that this is what the Fed does). Bernanke is of the opinion that the Great Depression was mainly caused by monetary contraction, the consequence of poor policymaking by the American Federal Reserve System and continued crisis in the banking system. In this view, the Federal Reserve, by not acting, allowed the money supply as measured by the M2 to shrink by one-third from 1929–1933, thereby transforming a normal recession into the Great Depression. Bernanke is staying true to his word by increasing the money supply while GDP contracts. We will see more QE even if thinly veiled under another name. |
|
|
|
Can you sleep at night holding US treasuries? Fear is a tool for herding pigs and sheep toward their slaughter. Buy blood, don't chase a comet's tail.
I choose gold, silver and Bitcoin with a sprinkling of solid, dividend-paying stock in global powerhouse companies (nibbling at some juicy discounts today). Just a suggestion. I sleep very well. I'm not an institutional investor so I don't own any treasuries. Little 'ole me has the luxury of keeping dry powder in a bank account. However, if I needed to own treasuries, yes, I would sleep like a baby. The market has and continues to assert its confidence in treasuries. That's not an opinion, that's a fact. Sentiment can change of course but in its current state the amount of fear you're trying to project compared to what the market is saying is very badly askew. Greek, Italian and Spanish bonds would probably keep me up at night right now. US T's, not so much. |
|
|
|
Also, looking at the markets, treasuries have strengthened today, just like I predicted. Even if they are supposedly "less safe" than they were last week, the look a hell of a lot better than equities at the moment
Yup. The Treasury was downgraded by S&P but Europe may be on the brink of sovereign default. The US is still going to be the safe haven of choice for the fearful. |
|
|
|
i've got a huge short on the metals in place...  edit: and INCREASED my position in bitcoin over this weekend. Shorting gold with QE .... Bad Idea. Don't worry I like when people back their opinions with their money because it shows true conviction. I will take your purchasing power all day long. Scoreboard. yeah, its painful right now but keep a close eye on silver. its not confirming gold and the PM stocks are getting decimated. margin calls are going out and one usu sells their best performers under duress. silver looks to be rolling. if it continues gold will follow. it took about 4 mo after the Dow rolled in 2007 for gold/silver to roll also. be careful. i'm scaling in ZSL and DZZ double inverse shorts. I don't mind holding the gold I currently own since it was bought at around $800. I'm not a buyer at these prices although I'm not short either. Be careful of those double inverse shorts, they correlate rather poorly over the long-term with their underlying benchmarks. I find them only useful for short-term bets. |
|
|
|
|
Just closed my short positions and will sit on the sidelines for a bit. I expect a bear rally sometime this week. Even in the worse panics like the crash of '87 when the Dow dropped 22.6% in one day, a bear rally usually follows. In the case of 1987, the Dow gained 5.9% and 10.1% on Oct 20th and 21st, respectively. The bottom wasn't registered until six weeks later on December 4th.
|
|
|
|
Didn't the new dept bill only reduce spending in the BILLIONS of $$$ over 10 YEARS... when the deficit is in the TRILLIONS?
I mean, that's pretty lousy.
The largest cuts have not been agreed upon yet and have been effectively postponed until December 23rd. We will see more fireworks and political posturing before the year is done. How much really gets cut remains to be seen. |
|
|
|
One direct effect is that some of the pension funds/mutal funds have to sell US bonds due to they have a rule to only hold AAA rating securites
I have loaded quite some put options, but I think market will just seesaw until some voice come from FED on Tuesday
Or they change the rules. Fact is no one can replace the US in the debt market. There is no other alternatives. It's not like everyone can start buying AAA Canada the scale isn't there. As I write this Asian markets down 1% S&P futures down 1.5%. |
|
|
|
|
I believe it was priced in to a certain degree. I'm net short and believe the market will trend downwards, however, I do not believe Monday will be anything near "judgment day." In fact, a relief rally is not out of the possibility. Remember, there were talks about the US being downgraded to AA. S&P downgraded to AA+. So essentially if AA was priced in, AA+ is actually short-term bullish.
Edit: Middle Eastern markets open down around 5%.
|
|
|
|
There is some true to this, specially in (and I believe only related to) the banking system. The banking system is a government created oligopolly and the government has regulated the amount and type of leverage they can achive. This has lead to a unsustainable situation. If we allow the market to correct it through the natural method (bankruptcy) the correction would be very quick, but also very brutal, with a lot of people loosing their savings, etc... I dont think this would be true in any other sector, IMO only the banking sector needs some kind of special solution. There are two sensible options.
1. What sweden did in the 90's. Its a government managed bankruptcy process. The government takes care of the banks for a while, so it can guarantee the deposits, but (and this is very important) completely wipes out the shareholders and the debtors. Both groups gave their money to a badly managed company so they deserve to loose their money. After a while, the government sells the banks to the private sector to recover part of the price of saving the banks. The BIG difference to what it is being done now, is that now we are rescuing the banks, including the shareholders and the debtors. The present "solution" is insane, its pure robbery by the plutocracy.
2. End the monpolly on money by removing legal tender laws, allowing to pay taxes in any currency, etc... By doing this you allow competing currencies and a competing financial system around these new currencies. This would allow for new investment to happen, that is now blocked because the banking system is bankrupt. Also, as the USD loses marketshare it would devaluate making the USD denominated debt easier to pay helping to solve the debt crisis much quicker.
I preffer the second solution as its better long term (the first solution does not change the present monetary system), but given what we have now the first solution would be very welcome. You can imagine we wont get any of both, we will keep saving the plutocrats through taxes and inflation, and will suffer stagflation for years until all the debt is wipped out and the capital structure has recover.
Great post. I think your first solution is most plausible. However, with the spiderweb of credit default swaps, I don't know if an orderly wipeout can be achieved. |
|
|
|
ultimately i do believe Austrian Theory will be proven wrong in its position on gold/silver. maybe it had a chance before Bitcoin came along but i'm also a big believer in the Internet and Bitcoin fits extraordinarily well into a high technology age. too many ppl are on one side of the boat on this one and central banks are no exception. i view their position as a negative surprisingly; Gordon Brown of the Bank of England sold tons of gold at the bottom in 2000. yet another stupid criminal. all of them did on the way up and smart guys like Eric Sprott would say that private investors like me were happy to take the gold off their hands. so i've made extraordinary profits since and i decided to cash them all in this year and exchange into Bitcoin. could be the stupidest move of my life but i think i'll be fine at the least or extraordinarily rich if i'm right. Kind've like Joseph Kennedy, who managed to avoid the stock crash. He knew it was time to bail when the shoe-shine boy started giving him stock tips. Gold is certainly talked about and invested in by the average investor a lot more now than just a few years ago, I just don't know if we're at the "shoe-shine" stage quite yet. One of the things I've learned over the years is you can be right about a trend but being wrong about the timing can still wipe you out. I'm still struggling with the inflation/deflation argument. Mish and the other deflationists make great points but I just wonder if their timing is right. Bernanke is a monetarist. He believes the Great Depression was caused by a shrinkage in the money supply. With him steering the ship, I think a period of hyper-inflation before deflation is a likely outcome. They don't call him "helicopter" Ben for nothing. But your posts have certainly given me pause to reflect on that position. |
|
|
|
so if this has nothing to do with bitcoins or the bitcoin econemy, why is this chart here?
Um it's the economics section? And since when does unemployment have nothing to do with the economy? If you need another "zomg BTC is falling, Sell sell!" or "get aboard the train, buy! buy!", the speculation section is thataway. Edit: I'll edit the title so it's clear what this thread is about. um.. probly because the unemployment rate of what looks like of the US, has nothing to do with ecomonics of the bitcoin market imo. So if none of us had jobs, and no money, it wouldn't impact Bitcoin? Yeah, you might want to think about that for a while. No, it wouldn't because someone somewhere will be mining for bitcoins. What you're talking about is improbible. This still doesn't belong in this section of the forums -.- How do you mine with no money? How do you pay for your mining equipment? Your electricity? There's 50 other threads in this forum that talk about economics in general. If you don't think it belongs here, I suggest you start reporting all of them. |
|
|
|
You want jobs? Cut government spending, let bankruptcies happen (no bailouts and no bullshit), basically take the short term bullet and after a bit you will see a real recovery, not this jobless, stock bubbly "recovery". Bankrupt companies do not hire people. If we cut government jobs and let the private sector go bankrupt, what's left? I understand what you're saying, our current path is unsustainable. Eventually we will have to pay the piper. It's just not as easy as let everything go to shit and then pick up the pieces afterward. The risk that it turns systemic is rather high. |
|
|
|
so if this has nothing to do with bitcoins or the bitcoin econemy, why is this chart here?
Um it's the economics section? And since when does unemployment have nothing to do with the economy? If you need another "zomg BTC is falling, Sell sell!" or "get aboard the train, buy! buy!", the speculation section is thataway. Edit: I'll edit the title so it's clear what this thread is about. um.. probly because the unemployment rate of what looks like of the US, has nothing to do with ecomonics of the bitcoin market imo. So if none of us had jobs, and no money, it wouldn't impact Bitcoin? Yeah, you might want to think about that for a while. |
|
|
|
so if this has nothing to do with bitcoins or the bitcoin econemy, why is this chart here?
Um it's the economics section? And since when does unemployment have nothing to do with the economy? If you need another "zomg BTC is falling, Sell sell!" or "get aboard the train, buy! buy!", the speculation section is thataway. Edit: I'll edit the title so it's clear what this thread is about. |
|
|
|
 S&P wants us to cut spending. The politicians want to cut spending (okay they want votes, but they say they want to cut spending). We need to cut spending. UNFORTUNATELY when you cut spending you cut jobs. Looking at that chart, is this really the best time to be cutting? Damned if we do, damned if we don't. |
|
|
|
|
Already a thread. And it's the onion, it's fake.
|
|
|
|
|
Probably less than I'll lose in Vegas next week.
|
|
|
|
I am shocked that the rating agencies didn't wait until after a default.
Me too. Im very curious as to why they did it. I suspect there might be political reasons, because having the USA government with AAA for so long was ridiculous long ago, so why downgrade now? It was well stated that the rating agencies were not only looking for a raise in the debt ceiling but also a comprehensive plan to cut spending. The S&P Chairman even put a number out, $4 trillion over 10 years. It should also be noted that the cut was to AA+, rather than AA, which many had anticipated. We'll see how the market reacts but I would not be all that surprised if we see somewhat of a relief rally on Monday as the downgrade was not as severe as it could have been. (Although outlook is still negative so another downgrade can still come if the economy continues to deteriorate) |
|
|
|
forgot that one Curbside. yes, pay off debt! i personally am debt free and loving it. and i do have a lot of assets. i use cash to play the markets in stocks, PM's, and btc. Its way too dangerous IMO to play the debt game assuming Ben will inflate it away. why would you depend on that criminal? also, why would the bankers allow him to do that to their assets=loans?
I don't think they will repeat what happened in 1930s, and QE2 really increased many institution/corporation's cash reserve, it's not far away before they start to actively invest/take risk Not far away before they start taking risks? That's ALL they're doing with the Fed's cash is taking risks. Why do you think commodities are so high? If QE is supposed to help the average person, then why is unemployment and leverage still so high? QE is a free pass for banks to take risks with the house's money. Who can blame them, I'd be doing it too if I could. |
|
|
|
I seem to recall having read elsewhere stuff about how great it is to have one's money go down in price in terms of other types of money, it is supposed to stimulate people who have those other kinds of money into spending into your economy, apparently because when they think in terms of their currency instead of yours they perceive your economy as a bargain cornucopia in which they can buy everything your merchants are offering at what to them seems low prices.
Is that whole line of bull just a line of bull that tries to pretend there is no such thing as arbitrage?
Or is it basically saying that people who think in some other currency than yours will see the low price of your currency as an arbitrage opportunity so big and/or lucrative that even they the common folk who are not normally into arbitrage will buy your goods thus acting as arbitragers?
(Maybe we are screwing ourselves by being such efficient arbitragers that the outside world doesn't have time to notice our prices have fallen before our shopkeepers raise them?)
-MarkM-
It's not a line of bull, it's actually basic economics. Having a weak currency in comparison to another currency allows you to manufacture and export more goods. It's the reason why China has been devaluing the Renminbi versus the dollar for so long. The Swiss Franc is at a historic high compared to almost every currency in the world. What is the government doing? Everything in its power to devalue the Franc. |
|
|
|
|
Show Posts
