No Money Exists Without the Majority

[AnonyMint]

I should keep an eye out for the possibility that Europe could bounce until 2014.675. I need to search for facts that can tell me how long this bounce is likely to last. I don't want to be too early again, as I was on China last July 2012.

As I've been expecting, looks like we will get that a deadcat bounce in capital fleeing Europe and developing markets into the USA, which may put a temporarily top on the USA equities. Safe haven bond yields in Europe are increasing (exodus from safe havens) and US Treasury yields are declining (from recent dramatic rise) which is a combination of capital coming out of USA equities taking a breather, capital coming out of safe haven European bonds, and lower PPI placing doubt on Fed's Sept. taper.

http://www.reuters.com/article/2013/08/14/markets-usa-bonds-idUSL2N0GF0OJ20130814

http://www.bloomberg.com/news/2013-08-13/germany-s-bonds-fall-for-second-day-before-zew-sentiment-report.html

China and Europe are both posting deadcat bounces from their declines.

Europe's bounce is all confidences increases and more debt caused by a strong Euro, very low interest rates in the safe haven countries (my Belgium friend says he can borrow 5000 Euros any time and pay 230 per month), and increased government spending.

http://www.tradingfloor.com/posts/french-gdp-soundly-beats-expectations-572561113

http://www.tradingfloor.com/posts/euro-area-businesses-upbeat-economy-59627692

A chart shows it is just one of those bounces in a persistent decline since 2009:

http://www.tradingfloor.com/posts/french-production-contracts-sharply-gdp-should-rise-anyway-1352928205

And the big picture is still weak:

http://www.theguardian.com/business/2013/aug/14/eurozone-recession-germany-france-crisis

But the most important datum is what likely caused strong Euro, how about $1.7 trillion dollars being converted to Euros by the USA Fed!

http://hat4uk.wordpress.com/tag/french-debt-174-of-gdp/

€4 trillion hole in the EU banking system

US Fed ships €1.3 trillion of prop-up money into eurozone

French debt is 174% of gdp

in July this year alone the US Fed deposited some €1.3 trillion in unspecified "European banks".

So the Fed is blowing another bubble in the Euro and Europe, which provides a temporary deadcat bounce, but what happens when this €1.3 trillion flees a renewed crashing Europe back to chase yield in the USA markets (either directly or via leverage as it allows Europeans to continue to borrow and access their deposits longer).

Aug. 7 was clearly the turning point where Europe has committed to crash and burn (with the help of the Fed pushing European confidence falsely up to increase debt levels on what is already an insanely insolvent Europe), and first we get a deadcat bounce through the September elections at least.

They likely did this to help get Merkel through the September elections in Germany.

So we should get that deadcat dip in the US equities now, until the above manipulation by the Fed works its way through the system.

Then rockets up on US equities and further collapse for and exodus of capital from Europe and developing markets. The fundamentals all over the world are that debt is increasing but marginal-utility-of-debt has gone negative globally, thus confidence bounces are volatilty noise and the trend is spiraling the toilet bowl, with the US dollar at the center of the vortex sucking everything until it collapses on itself.

Then and only then, will gold make new highs:

http://armstrongeconomics.com/2013/08/14/gold-outlook/

Remember on Exter's Inverted Pyramid, that US federal reserve notes are at the bottom just above gold. Patience goldbugs, patience...

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[AnonyMint]

http://armstrongeconomics.com/2013/08/18/money-had-never-been-tangible-period-if-you-do-not-understand-what-money-is-you-will-lose-your-shirt-more/

At the above link, what Armstrong is trying to say that gold can't be the ONLY thing we use to measure value.

I had explained in past emails why we can't have the ONLY money be something that is very limited in supply growth because this would limit the rate that the economy can grow (due to prioritizing savers over at-risk investors). That is a difficult concept to understand and only 1-in-a-million will ever understand.

But even that is not a complete conceptualization. We can't have ONLY one thing be money, because never can one thing adjust to the dynamic changes in GDP, money velocity, etc.. This is why many different things are money, and they have different strengths and weaknesses (or lets just say different qualities or properties).

The economy trades between these different forms of money, because the business cycle exists. Business cycles MUST exist, because waves are a fundamental quality of inertia. Our universe is based on inertia.

So Armstrong's mistake is saying that gold is not money and trying to say that a store-of-value (wealth) is not a form of money. The reason Armstrong makes this SYNTACTICAL distinction, is because he is trying to say that money is the most liquid form of asset, i.e. the one the most people will accept in trade. It is true the dollar is more liquid than gold in many scenarios, but we are at a time where sometimes dollars are not liquid and gold is, due to capital controls and hunting down capital of all U.S. citizens.

What Armstrong is saying that is 100% accurate is that there isn't one form of base money that is tangible which everything else being not money. He is 100% correct about that.

Unfortunately this topic is above the heads of most people, so it doesn't matter how many times and ways Armstrong attempts to explain it, only a few people will truly understand.

[AnonyMint]

Although money can not be tied to a single tangible thing, because the economy must expand faster or slower than the supply of that tangible thing grows. Notwithstanding if the supply of that thing can be manipulated (e.g. the US government manipulated the supply of silver to drive China bankrupt in the 1920s enabling the socialists come into power).

So humanity must have an intangible money (sometimes known as fractional reserves of a tangible good, e.g. gold), so that debt can be created otherwise how can you pay back the lender (i.e. saver) if the economy grows faster than the supply of the tangible thing grows? Well if the value of the tangible things grows due to its limited supply, then the saver is rewarded even with an interest rate lower than than nominal GDP growth rate. But the saver takes all the increase in productivity. And what about the at-risk investor who is responsible for capitalizing those investments that create those increases in productivity? Lenders can't do that, because they refuse to take a loss, i.e. they want a guaranteed ROI-- the interest rate. So in a fixed (rate of increase of) supply money system, the saver takes the ROI from the at-risk investor. Thus society sinks into a Dark Ages, which is what happens when hoarding takes place into a tangible money when humanity loses confidence in intangible money, debt, leverage, and thus civilization collapses. Go back in history and you will not find any exception, including Byzantine (if you know the details of the history well).

But it isn't debasement of the money supply that is bad, as it can end up in workers' salaries increasing minus the portion taken by the at-risk investors who deserve it. Any worker has the opportunity to become an at-risk investor too.

What is really deleterious is when an elite group can control the debasement of the money supply. Then they can buy the regulators and run amok, e.g. the New York bankers "Club" (as Armstrong calls them, but I think he is naive and the "Club" is global including the Asian elite!). I expect Asia will cast aside its elite top-down managed economy in the coming crisis so it can rise to be #1.

Here follows the main point I want to make.

We now have the technology for money that can be debased on a set schedule that can't be controlled by any elite.

That technology is the Proof-of-Work system in Bitcoin.

However, the urgent challenge is that Bitcoin can be attacked by the "Club" using anti-money laundering laws to force everyone to reveal their identity (this is what the Edward Snowden/NSA stuff is really about), pay taxes (on capital gains earned on money itself....what a racket!), and confiscate (in the cause of fighting terrorism or tax shelters).

However, there is a solution to this. There is a combination of anonymity technologies that can be applied to an alternative bitcoin (and a new name), such that the "Club" will be impotent.

Stay tuned...

[AnonyMint]

I am referring to item #6 is the following document:

http://silverstockreport.com/2013/6-myths-inflation.html

The following is unarguable. I will refer any more of the above genre of nonsense to the following proof.

A Gold-only Economy:

1. Miner adds 2oz per year.
2. Investor invests his 100oz per year.
3. Workers are paid 1oz per year by investor.

The workers buy their production with their salaries as funded by the investor. The miner can also buy this production. So the maximum return on investment for the investor is 102oz per year, i.e. 2% per year. This is if the investment doesn't fail, so the risk is the investor will get 0oz back.

This economy can never grow, because no investor is going to take that loss (downside) risk for that tiny amount of upside return.

A rebuttal point is that some investors can lose and some investors can gain, thus providing for the winning investors to earn more return than the money supply increases.

But the problem is that capital will over time move to those who are consistently able to increase production. Thus over time the rich can no longer get more than 2% return. So what do they do? They turn to lending at a guaranteed interest rate provided by a public backstop, because it is the only way they can deploy their capital safely (because even if they are successful 90% of the time, it doesn't offset only a 2% upside).

On top of that, the workers (consumers) will not turn over their money as fast, i.e. they will sit on it, if the production is increasing faster than the money supply is growing, because they are gaining value for the risk-free action of sitting on money.

Thus the 2% upside potential is reduced to a negative potential on the upside. Loss-loss proposition for investors. So they become usurers, no other choice.

Understand that inflation is necessary to bleed money from the risk-adverse workers to those who know how to manage risks-- the successful investors. Even the Bible says money will grow wings and fly away. It must be this way.

Also it was never the case that the money supply in the USA was only metal. There always existed loans and fractional reserves.

[AnonyMint]

Thus over time the rich can no longer get more than 2% return. So what do they do? They turn to lending at a guaranteed interest rate provided by a public backstop, because it is the only way they can deploy their capital safely (because even if they are successful 90% of the time, it doesn't offset only a 2% upside).

Properly implemented inheritance tax will either cure such risk averse human beings or put hoarded capital into new flow after their death.

Incorrect.

1. A tax will always be gamed by vested interests, c.f. Some Iron Laws of Political Economics.

2. Capital sitting in a hole for a lifetime before being dishoarded is orders-of-magnitude too slow.

Debasing decentralized digital money removes the ability for any vested interests to capture and manipulate the debasement. And it is continuous, not waiting for a death event.

[SlyWax]

Thus over time the rich can no longer get more than 2% return. So what do they do? They turn to lending at a guaranteed interest rate provided by a public backstop, because it is the only way they can deploy their capital safely (because even if they are successful 90% of the time, it doesn't offset only a 2% upside).

Properly implemented inheritance tax will either cure such risk averse human beings or put hoarded capital into new flow after their death.

Incorrect.

1. A tax will always be gamed by vested interests, c.f. Some Iron Laws of Political Economics.

2. Capital sitting in a hole for a lifetime before being dishoarded is orders-of-magnitude too slow.

Debasing decentralized digital money removes the ability for any vested interests to capture and manipulate the debasement. And it is continuous, not waiting for a death event.

Your "Debasing decentralized digital money" will be gamed too.
How do you force rich people to use your money if it's not in their selfish short term interest ?

[cryptocurrencybroker]

As usual your ignorance of Asian nations differs none to many , also I can note that the Russian federation is not essentially a " top down " system , there are many revolutionary reforms taking place , none of which are backward or western .

What saddens me is the ignorance at which westerners , believe  they " own" or even know how to define " freedom" .

Yet all around them is none of it , and nor has there been for a long time .

[AnonyMint]

Thus over time the rich can no longer get more than 2% return. So what do they do? They turn to lending at a guaranteed interest rate provided by a public backstop, because it is the only way they can deploy their capital safely (because even if they are successful 90% of the time, it doesn't offset only a 2% upside).

Properly implemented inheritance tax will either cure such risk averse human beings or put hoarded capital into new flow after their death.

Incorrect.

1. A tax will always be gamed by vested interests, c.f. Some Iron Laws of Political Economics.

2. Capital sitting in a hole for a lifetime before being dishoarded is orders-of-magnitude too slow.

Debasing decentralized digital money removes the ability for any vested interests to capture and manipulate the debasement. And it is continuous, not waiting for a death event.

Your "Debasing decentralized digital money" will be gamed too.
How do you force rich people to use your money if it's not in their selfish short term interest ?

Generally someone gets rich and maintains wealth by accepting the money that majority decide to use.

[digitalindustry]

As usual your ignorance of Asian nations differs none to many , also I can note that the Russian federation is not essentially a " top down " system , there are many revolutionary reforms taking place , none of which are backward or western .

What saddens me is the ignorance at which westerners , believe  they " own" or even know how to define " freedom" .

Yet all around them is none of it , and nor has there been for a long time .

I've lived in Asia since 1991 and am recognized by the China expert:

http://blog.mpettis.com/2013/08/the-urbanization-fallacy/#comment-644

Grab your foot, place in your mouth. Much safer for you.

you know what's safer for you ?....

keep chatting here on this thread by your self.

correction..

safer for others.

[Lauda]

you know what's safer for you ?....

keep chatting here on this thread by your self.

correction..

safer for others.

Isn't there some disease that you meantioned or something to explain his actions. He's posting to himself in his own thread all the time...

[AnonyMint]

The two Muppets are back, I must be saying something important. Their envy is unparalleled.

"Guys" (males?) I don't give a horse's-ass what you "think" (brains?).   You two bozos are certified idiots (and trolls).

[digitalindustry]

you know what's safer for you ?....

keep chatting here on this thread by your self.

correction..

safer for others.

Isn't there some disease that you meantioned or something to explain his actions. He's posting to himself in his own thread all the time...

" New World Disorder" , or "New World Depression"

I won't be tedious with the detail, but its just the consequence of shifting reality from the observer.

[smolen]

Thus over time the rich can no longer get more than 2% return. So what do they do? They turn to lending at a guaranteed interest rate provided by a public backstop, because it is the only way they can deploy their capital safely (because even if they are successful 90% of the time, it doesn't offset only a 2% upside).

Properly implemented inheritance tax will either cure such risk averse human beings or put hoarded capital into new flow after their death.

Incorrect.

1. A tax will always be gamed by vested interests, c.f. Some Iron Laws of Political Economics.

2. Capital sitting in a hole for a lifetime before being dishoarded is orders-of-magnitude too slow.

Debasing decentralized digital money removes the ability for any vested interests to capture and manipulate the debasement. And it is continuous, not waiting for a death event.

To successfully play the inheritance tax the riches should employ layers of legal structures like trusts over holdings over corporations and so on. Using simpler structures increases the risk of government attack, the heirs should be properly distanced from the capital while remaining the beneficiaries. Usage of too long legal chains is dangerous because of raiders attacks, there will be too many doors where they can put the foot in. So properly created (and maintained, and renewed, and disposed) structures are expensive and while the government gets nothing at the due time, the money actually are injected into economy via peoples who do all that work and via taxes that have to be paid to support said legal constructions. So even avoided inheritance tax creates additional money flow in such liquidity deprived economy you've described. OK, the riches can buy lawmakers and abolish that tax (which they actually did here in Russia in 2005), but let me quote myself: "Properly implemented inheritance tax"
Inheritance tax (as every tax) is an economic intensive that modifies human behaviour. Knowing that money will be confiscated, umm, taxed after his death an individual will spend more. Be it spent on himself or donated to the Church or charities, or spent in corporate wars makes no difference in this context - it will be spent, it will create new money flow, new economics activity and new jobs.
The immobilized money pose no danger, the economy will be served by the rest of it. The troubles start when there is no effective money pump in the country, usually such situation is caused by ineffective government, but that's another question.

Edit: I'm sorry, may be I missed where you stated it - what kind of debasement do you mean? "One point" inflation, proportional decentralized inflation, demmurage or something else?

[AnonyMint]

To successfully play the inheritance tax the riches should employ layers of legal structures like trusts over holdings over corporations and so on. Using simpler structures increases the risk of government attack, the heirs should be properly distanced from the capital while remaining the beneficiaries. Usage of too long legal chains is dangerous because of raiders attacks, there will be too many doors where they can put the foot in. So properly created (and maintained, and renewed, and disposed) structures are expensive and while the government gets nothing at the due time,

Easier is put your money in a perfectly anonymous decentralized digital currency, then transfer it to your heirs anonymously.

One might tell the government they bought gold bars and buried them, but they were stolen.

Disclaimer: I am not giving financial nor tax advice, consult your own professional advisor.

Edit: I'm sorry, may be I missed where you stated it - what kind of debasement do you mean? "One point" inflation, proportional decentralized inflation, demmurage or something else?

Creating new coins forever:

https://bitcointalk.org/index.php?topic=279340
http://blog.mpettis.com/2013/08/the-urbanization-fallacy/#comment-644

[AnonyMint]

Best to click the following link to read the following discussion in context:

http://blog.mpettis.com/2013/08/the-urbanization-fallacy/#comment-689

I am 48, so technically I am not still in the youth (mirror don’t tell me that!), but we X-gen were dominated by the boomers so we have to extend our range to the next generation to make our biggest impact.

Note that the two leading journalists publishing the Snowden revelations are Glenn Greenwald age 46 and Laura Poitras age 48.

The leaker Snowden was age 29, who believes everything might work out okay if the people become aware of what is going on. His naivety got him stuck in Russia, because he didn't plan for the near-term reality that the political transformation he wants will require years or a decade or more. There is an interim reality which we X-gen look at realistically.

In the link I provided upthread [in the thread at the link at the top of this] about traits of us X-gen, we are untrusting and see through BS to the truth behind the curtain. We don't believe in "don't worry, everything will work out okay", because it didn't for us until we strived to make it so. Thus, our idealism is measured in results.

Timing is important. Gold will go higher than $2300, but first it will come back down again to $1050 or below (after this Fall 2013 deadcat bounce). Because capital is flowing out of the rest of the world into the dollar, and a stronger dollar and booming USA equities meaning a rush out of gold temporary. Until the dollar gets too strong, the US Treasuries interest rates too high (choking off the USA economy), exports to rest of world cratering, and the ingress capital flow stops or reverses, then the world collapses and then gold rockets as the only remaining safe haven. Yet don't forget we have the decentralized digital currencies coming as another outlet for capital yet this is probably too small to absorb $40 trillion (but we will see, I'll be content if I gain 0.0001% = $40 million of that for my programming efforts).

Many of those students will easily be able to pay off that debt if they get the kind of jobs that provide them higher incomes.

You and your astute STEM fields student body are not the problem.

My point is that a significant percent (probably the majority or nearly so) are pursuing liberal arts not STEM degrees, the aggregate statistics show they are accumulating significant per capita debts, they are able to support themselves (tuition, boarding, food stamps perhaps) with this funding (would otherwise be unemployed given the bad economy), thus the economy will implode faster once they can't borrow more, and they will have no choice but to throw their political support to socialism (along with the boomers) to tax higher than the Laffer limit. Remember debt is always future taxation, even if you write it down the misallocation cost was already incurred. Just think about the effects of getting the wrong kind of degree, of not being young any more, of having kids already, etc..

On top of that, I want to reiterate my point from my prior comment, that as we write down the capital stock, the remaining capital is going to be scarce and so interest rates will skyrocket. Thus the (strictly undischargeable in bankruptcy) student loan debts will grow, not shrink. It is your non-linearity point about interest rates and debt rising beyond 100% of GDP (an individual's annual income). Thus this will become a 15% discretionary income garnishment tax (paid to the bankers or the government is the same now, same entity) for 25 years by law.

The new proposals are for all new federal student loans to be indexed to Treasuries plus 1 or 2%, and Obama's version has no cap on the interest rate!

Even homebuyers are locking in 5/1 ARMs because the spread between fixed rate mortgages increased by a percentage point this summer. Crazy.

The above is the reason I want to crash the system as soon as possible with a new decentralized digital currency (that can scale to Visa-scale, Bitcoin's current blockchain design can't). The sooner we can stop the youth from destroying themselves with debt, the better for the future.

[SlyWax]

The above is the reason I want to crash the system as soon as possible with a new decentralized digital currency (that can scale to Visa-scale, Bitcoin's current blockchain design can't). The sooner we can stop the youth from destroying themselves with debt, the better for the future.

Ok but what is your plan to redistribute money equally.
Your decentralized digital currency won't solve this problem.
If it succeed it will only allow the rich to escape tax.

[AnonyMint]

The above is the reason I want to crash the system as soon as possible with a new decentralized digital currency (that can scale to Visa-scale, Bitcoin's current blockchain design can't). The sooner we can stop the youth from destroying themselves with debt, the better for the future.

Ok but what is your plan to redistribute money equally.
Your decentralized digital currency won't solve this problem.
If it succeed it will only allow the rich to escape tax.

It will also allow the poor and middle class to escape tax (and debt collection), and they pay most of the tax.

The solution is not to tax the rich more (impossible), but to tax everyone less, and shrink the parasites who rely on taxation.

Money should not be distributed equally, that is socialism. Rather it should be distributed to those who generate the most profitable returns.

Once you remove the ability to control the system by controlling the printing of money, then those who are now making money by gambling with other people's money (keeping the profits and charging the losses to the public) will go bankrupt.

[SlyWax]

The above is the reason I want to crash the system as soon as possible with a new decentralized digital currency (that can scale to Visa-scale, Bitcoin's current blockchain design can't). The sooner we can stop the youth from destroying themselves with debt, the better for the future.

Ok but what is your plan to redistribute money equally.
Your decentralized digital currency won't solve this problem.
If it succeed it will only allow the rich to escape tax.

It will also allow the poor and middle class to escape tax (and debt collection), and they pay most of the tax.

When you are poor you have no money, and even more you have no money to put in a virtual currency.

The solution is not to tax the rich more (impossible), but to tax everyone less, and shrink the parasites who rely on taxation.

Taxation is used to build the common (road, school, etc...)
If the people who manage taxation use are bad, then the problem is not taxation, but the way you chose those managers (politician) !

What you are proposing will be the tragedy of the common.

Money should not be distributed equally, that is socialism. Rather it should be distributed to those who generate the most profitable returns.

There is more to life than money.
How do you evaluate the returns that can't be counted in money ?

Once you remove the ability to control the system by controlling the printing of money, then those who are now making money by gambling with other people's money (keeping the profits and charging the losses to the public) will go bankrupt.

You are just changing the rules by witch they win now, what makes you think the new rules will not make them win even bigger ?

[smolen]

To successfully play the inheritance tax the riches should employ layers of legal structures like trusts over holdings over corporations and so on.

Easier is put your money in a perfectly anonymous decentralized digital currency, then transfer it to your heirs anonymously.

One might tell the government they bought gold bars and buried them, but they were stolen.

Disclaimer: I am not giving financial nor tax advice, consult your own professional advisor.

Oh no. The anonymity does not work in the long-term and is quite expensive. For anything important consider it nonexistent.
Next, there is a big difference between breaking the law (as your solution suggests) and getting around it. And with numerous jurisdictions and almost infinite amount of badly written laws there is no need for big money to break the law.

Edit: I'm sorry, may be I missed where you stated it - what kind of debasement do you mean? "One point" inflation, proportional decentralized inflation, demmurage or something else?

Creating new coins forever:

https://bitcointalk.org/index.php?topic=279340
http://blog.mpettis.com/2013/08/the-urbanization-fallacy/#comment-644

Yes, but what exactly kind of inflation? Are you going to propose adding the interest to each coin proportionally?

[AnonyMint]

Ok but what is your plan to redistribute money equally.
Your decentralized digital currency won't solve this problem.
If it succeed it will only allow the rich to escape tax.

It will also allow the poor and middle class to escape tax (and debt collection), and they pay most of the tax.

When you are poor you have no money, and even more you have no money to put in a virtual currency.

The solution is not to tax the rich more (impossible), but to tax everyone less, and shrink the parasites who rely on taxation.

Taxation is used to build the common (road, school, etc...)
If the people who manage taxation use are bad, then the problem is not taxation, but the way you chose those managers (politician) !

What you are proposing will be the tragedy of the common.

I am not going to argue with a communist socialist. I aim to destroy your ideology, i.e.  make it impotent and bankrupt.