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CurbsideProphet
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August 05, 2011, 09:21:28 PM
 #81

they are defaulting on SS by artificially lowering the CPI.  they're cutting Mcar benefits as well.  defense is being slimmed down.  look at NOC, RTN, LMT defense stocks.   they're telling a story.

OK, then by default you mean price inflation through debt monetization, right? The government will pay its debts with worthless paper. My vote (bet not choice) is that nearly all democracies will devalue their currencies and the few that don't (Denmark and Switzerland) are going to lock down their borders.

Switzerland is pulling out all the stops to devalue the Franc.  So far it hasn't been all that successful but it's definitely something they are trying to achieve.  Record CHF compared to other countries is very bad for their economy.

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August 05, 2011, 11:25:52 PM
 #82

they are defaulting on SS by artificially lowering the CPI.  they're cutting Mcar benefits as well.  defense is being slimmed down.  look at NOC, RTN, LMT defense stocks.   they're telling a story.

OK, then by default you mean price inflation through debt monetization, right? The government will pay its debts with worthless paper. My vote (bet not choice) is that nearly all democracies will devalue their currencies and the few that don't (Denmark and Switzerland) are going to lock down their borders.

no, the examples i gave are where they are paying out less than they should or by cutting back payements.  it has nothing to do with debt monetization; it has to do with increasing austerity.  its going on all over the world.  look at Europe.
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August 06, 2011, 04:33:58 PM
 #83

they are defaulting on SS by artificially lowering the CPI.  they're cutting Mcar benefits as well.  defense is being slimmed down.  look at NOC, RTN, LMT defense stocks.   they're telling a story.

OK, then by default you mean price inflation through debt monetization, right? The government will pay its debts with worthless paper. My vote (bet not choice) is that nearly all democracies will devalue their currencies and the few that don't (Denmark and Switzerland) are going to lock down their borders.
no, the examples i gave are where they are paying out less than they should or by cutting back payements.  it has nothing to do with debt monetization; it has to do with increasing austerity.  its going on all over the world.  look at Europe.

OK, I'm just not comfortable calling monetary inflation a form of default, which is the only way I can interpret "defaulting on SS by artificially lowering the CPI". If for example Greece's austerity brings their budget into surplus (without hand outs) then there is no reason for Greece (or the EU) to default. But I do not expect that to ever happen. Never. I expect Europe will continue to provide loans that Greece can never repay, Europe will loosen it's stability pact (>2% inflation), and debt will increase.

Likewise but to a lesser extent for the US and PIIGS. I don't expect the US to balance its budget before some huge global readjustment (default, WWIII, gold standard, total monetization, ? ?).

Switzerland is pulling out all the stops to devalue the Franc.  So far it hasn't been all that successful but it's definitely something they are trying to achieve.  Record CHF compared to other countries is very bad for their economy.

True. But Switz and Scandinavia with ~40% debt/gdp can afford to devalue the franc and kroner(s) and will need to if they hope to trade with failing neighbors. They also retain the right to lock their borders; indeed Denmark and Switz already do customs inspections at the border despite Schengen agreements.

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August 06, 2011, 05:21:25 PM
 #84

netrin:  everything you say certainly has merit.  it comes down to the fact that you see things in terms of an inflationist.  i, otoh, think we live in a boom bust cyclical society where you swing btwn extremes of inflation and deflation.  you think the central banks can continue to inflate by devaluing their currencies.  if you look at the stock mkt since 1929 as perhaps an indicator from a broad view you could be considered right. the inflation of the monetary base also argues in your favor.  so why won't everything except currencies continue to go up?

personally i think we've hit a ceiling in how much debt can be taken on.  i clearly am in the minority and could be wrong as the last 100 yrs of history argues against me.  perhaps i am stupid to bet against the current system of inflationary forces.  sometimes i question myself.

but looking back over the last 11 yrs with 2 stock mkt crashes and one ultimate housing bubble crash, i can't but help something is different this time.  as Rogoff and Reinhart argue "this time is different".  this is the contrarian viewpoint no doubt.  but when i look at whats happening in Greece and the other PIGS i don't think so.  who ever would imagine that a sovereign nation would have to consider selling off their islands to "allow" them to take on even more debt?  how insane and immoral is that?

look at the price of gold.  there is something seriously wrong. look at zero bound interest rates.  how sustainable is that?  look at the mountain of 1.7 T in excess banking reserves at the Fed.  why would banks hoard?  they don't think its worth it to lend the money out even tho they get a measly 0.25%.



it looks to me with the recent stock mkt plunge we're going into phase 2 of the financial crisis which never was really cured.  the ferociousness of the selloff is an indication of the gross imbalance our Fed/gov't cabal has built to an even greater degree since 3/09.  anyone in stocks now hoping for a reversal or anyone BTFD stands to get reamed big time just like the dip buyers back in 1930.

watch the gold price.  if it can continue to power forward then you'll be proven correct.  if it starts to drop, i would head underground asap.  i personally think Bernanke and the bankers realize they have to get the gold price down since leveraged investments are heading into gold and not the real economy as they would like.  the Fed can provide free cash to the system but they can't control where it goes.  i wish i could find that link to that article someone here on the forum provided about how the banks are complaining to Bernanke about the drop in the dollar b/c of alternative currencies such as btc.

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August 06, 2011, 06:55:11 PM
 #85

you see things in terms of an inflationist.  i, otoh, think we live in a boom bust cyclical society where you swing btwn extremes of inflation and deflation.  you think the central banks can continue to inflate by devaluing their currencies.

I'm not sure what an inflationist is. I expect we'll soon be on a very frightening roller coaster ride and we'll be fleeing from one bad decision to the next. Perhaps with bubbles growing and popping everywhere, contrarian thinking is the only logical approach. I appreciate your disagreement. Maybe we'll all be smarter for it.

You mention 100 years of inflation. I see thousands of years of fiat inflation ever since the Chinese invented the magical paper. After hundreds (thousands?) of attempts, we've just not quite figured it out. I've read a bit about pre-French revolution, Weimar Germany, and Japan. I don't know much about Zimbabwe (but I suspect Mugabe just kicked out the productive land owners, received no taxes, initiated starvation, and just printed). I don't know much about South America, Yugoslavia, or even the Roman Empire, etc. But ancient to modern history seems unanimously stacked against paper. I'm sure we can agree on that.

I agree that "this time is different". Why? Because the entire global economy is in debt or (for example China) is servicing the debt to prop up an otherwise fragile economy. What differentiates Japan from the United States is that Japan is a nation of savers and invested in its own industry. The United States otoh is a nation of debtors with investors outside of the nation. So, I throw out the comparison. But I feel we can compare Japan as a nation of the past fifteen years to the entire planet today. We earthlings are in debt and our few savers are obviously invested in the Earth. I don't think we'll see a redistribution of wealth between nations -- people and institutions (banks) yes -- but not nations. Asia will fall with Europe and the US.

If we're still on the same page, the question seems to be "will the economy deflate now or will/can the central banks continue to print money?" I do not disagree that the economy will collapse by deflation. I just think hyperinflation is the next train stop.

You seem to be saying that hyperinflation will be avoided by a conscious decision to deflate and unwind the economy. How would that process occur? Wouldn't the central banks have to intentionally allow all markets and private banks to collapse? How would they preserve the currencies?


but when i look at whats happening in Greece and the other PIGS i don't think so.  who ever would imagine that a sovereign nation would have to consider selling off their islands to "allow" them to take on even more debt?

I fully expect/ed Greece to default and reissue its own currency. I'm sure some generous deal was made behind closed doors "Look, if you hang in there we'll give you loans forever, no matter what we say in public."


mountain of 1.7 T in excess banking reserves at the Fed.  why would banks hoard?  they don't think its worth it to lend the money out even tho they get a measly 0.25%.
...
watch the gold price.  if it can continue to power forward then you'll be proven correct.  if it starts to drop, i would head underground asap.  i personally think Bernanke and the bankers realize they have to get the gold price down since leveraged investments are heading into gold and not the real economy as they would like.  the Fed can provide free cash to the system but they can't control where it goes.  i wish i could find that link to that article someone here on the forum provided about how the banks are complaining to Bernanke about the drop in the dollar b/c of alternative currencies such as btc.

I need to ponder this. I expect gold to drop but hoped to buy at that point. I think people are foolishly tho truly running to dollars and bonds as the dollar goes down. Please do try to find this article.

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August 06, 2011, 08:12:10 PM
 #86

I'm not sure what an inflationist is. I expect we'll soon be on a very frightening roller coaster ride and we'll be fleeing from one bad decision to the next. Perhaps with bubbles growing and popping everywhere, contrarian thinking is the only logical approach. I appreciate your disagreement. Maybe we'll all be smarter for it.

a nation that issues more debt plus currency than its productive capacity to solve their problems.

You mention 100 years of inflation. I see thousands of years of fiat inflation ever since the Chinese invented the magical paper. After hundreds (thousands?) of attempts, we've just not quite figured it out. I've read a bit about pre-French revolution, Weimar Germany, and Japan. I don't know much about Zimbabwe (but I suspect Mugabe just kicked out the productive land owners, received no taxes, initiated starvation, and just printed). I don't know much about South America, Yugoslavia, or even the Roman Empire, etc. But ancient to modern history seems unanimously stacked against paper. I'm sure we can agree on that.

we do indeed.
I agree that "this time is different". Why? Because the entire global economy is in debt or (for example China) is servicing the debt to prop up an otherwise fragile economy. What differentiates Japan from the United States is that Japan is a nation of savers and invested in its own industry. The United States otoh is a nation of debtors with investors outside of the nation. So, I throw out the comparison. But I feel we can compare Japan as a nation of the past fifteen years to the entire planet today. We earthlings are in debt and our few savers are obviously invested in the Earth. I don't think we'll see a redistribution of wealth between nations -- people and institutions (banks) yes -- but not nations. Asia will fall with Europe and the US.

we agree on more things than we disagree.  i also think Japan is a template for whats going to happen to the US.  we are "pushing on a string" and failing to clean out the overindebted banks just like Japan.  their problem is that the savings are now exhausted.  especially in light of Fukushima.  several authors/investors like John Mauldin, Kyle Bass, Hugh Hendry are betting Japan is about to go over the edge.  i agree.  look at the EWJ/Nikkei.  they do some great demographic analyses and there does not seem to be enough workers to pay for the retirees.  i think the bond vigilantes are finally going to have their day in Japan.  just this last Thursday they tried another currency blast to try and stop the advance of the yen.  it looks to have failed already.  why this odd dynamic?  Strengthening Yen in the face of worsening debt?  how does that work?  i will explain below in terms of USD's.

If we're still on the same page, the question seems to be "will the economy deflate now or will/can the central banks continue to print money?" I do not disagree that the economy will collapse by deflation. I just think hyperinflation is the next train stop.

you are not alone in this thinking.  i however as well as some great thinkers, Prechter, Mish, Shilling, Rosenberg, Foss think we've already had our "hyperinflation" so to speak which topped in 2008. the ramp from 3/09 to now is the last gasp IMO.  during that time we've doubled the national debt in just 3 yrs compared to the prior 250 yr.  they've tried all sorts of wacky zero interest bound stimulative efforts like HAMP, TARP, QE 1&2, auto discounts, suspending mark to market, bailouts, and all of the worst corruption and manipulations the world has ever seen. to the US apparatchiks, its never enough.  it didn't work.  these were all inflationary stimuli and now we have to pay the piper.  

if the ECB were going to throw the Euro under the bus, why are they letting such tough austerity plans go forward in Greece, Ireland, Spain, Italy?  these are extremely dangerous so why not put the fire out with more monetization?  i would argue b/c they can't.  the debt ceiling has been hit and deflation is screaming to gets its due turn.  i say that central banks have lost control like they did in 2008.  it doesn't matter what they do, the market will dictate otherwise.  they've done a tremendous job trying to reinflate to now but Mr. Margin must be paid.  defaults are on the horizon and i agree Greece will default.
 
You seem to be saying that hyperinflation will be avoided by a conscious decision to deflate and unwind the economy. How would that process occur? Wouldn't the central banks have to intentionally allow all markets and private banks to collapse? How would they preserve the currencies?

by stopping QE2 and not doing a QE3 like everyone expects.  and this is what they've done.  when everyones on one side of the boat like they are with this theory that Bernanke will do a QE3, 4,5,6,7, etc. it probably won't happen.  its too dangerous to assume that he will.  my belief is that QE2 was to allow the banks one last chance to unload their bad debt to the public and sell off underwater stock.  to get their balance sheets in order in preparation for the inevitable which is a cleansing of the debt.  also what you'll see if this happens is a paradoxical RISE in the USD and UST's.  how so?  b/c the liquidation of the bad debt causes a scramble for cash USD's and a decrease in the amount of debt based USD's worldwide (virtual USD's).  people like to say "flight to safety".  i prefer "forced scramble for currency USD's" (cash).  this is how the US debt based system differs from Zimbabwe hyperinflation.  they didn't have a mature bond market so they just printed up the money to pay their debts.  those printed monies couldn't be easily removed from the system as their productive capacity continued to decrease so hyperinflation ensued.  compare this to our debt based system.  those debt based loans will vaporize on default thus reducing the total amount of USD's (debt plus currency) worldwide.  60% of debt worldwide is USD denominated.  this would be deflation.

I fully expect/ed Greece to default and reissue its own currency. I'm sure some generous deal was made behind closed doors "Look, if you hang in there we'll give you loans forever, no matter what we say in public."

agreed.

I need to ponder this. I expect gold to drop but hoped to buy at that point. I think people are foolishly tho truly running to dollars and bonds as the dollar goes down. Please do try to find this article.

avoid BTFD.
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August 06, 2011, 08:18:21 PM
 #87

look what inflationary Fed policies have done to the Middle East.  soaring costs of food and financial inequities are what drove the revolutions in these countries IMO.  i followed the Egyptian revolt realtime via Twitter and AlJazeera and there is no question in my mind these were the tenets behind the younger generations revolt. 

central banks cannot continue on the same path of monetizing debt.  the markets are screaming for a correction via deflation.
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August 06, 2011, 08:38:10 PM
 #88

look what inflationary Fed policies have done to the Middle East.  soaring costs of food and financial inequities are what drove the revolutions in these countries IMO.  i followed the Egyptian revolt realtime via Twitter and AlJazeera and there is no question in my mind these were the tenets behind the younger generations revolt. 

central banks cannot continue on the same path of monetizing debt.  the markets are screaming for a correction via deflation.

So what's the best way to prepare for deflation?  I have small amounts of silver as a hedge against the dollar because QE1 and QE2 made me think the dollar was going to decline significantly in the near future.  If the Fed contracts the money supply though that will drive up the dollar and probably have the inverse effect on PMs? 
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August 06, 2011, 10:12:04 PM
 #89

look what inflationary Fed policies have done to the Middle East.  soaring costs of food and financial inequities are what drove the revolutions in these countries IMO.  i followed the Egyptian revolt realtime via Twitter and AlJazeera and there is no question in my mind these were the tenets behind the younger generations revolt. 

central banks cannot continue on the same path of monetizing debt.  the markets are screaming for a correction via deflation.

So what's the best way to prepare for deflation?  I have small amounts of silver as a hedge against the dollar because QE1 and QE2 made me think the dollar was going to decline significantly in the near future.  If the Fed contracts the money supply though that will drive up the dollar and probably have the inverse effect on PMs? 

yes, if my scenario above plays out.  i'm not your financial advisor and you have to realize mine is a contrarian view.  but at least its logical IMO.

http://www.youtube.com/watch?feature=player_embedded&v=xSLIDJ3HZHA

the safest way to prepare for deflation is to go to cash and then wait.   if we have the Great Depression 2, assets will be selling for pennies on the dollar at the bottom.  this could be the opportunity of a lifetime.  the other way, more risky, is to go short the stock market.  a tremendous amount of fast money can be made to the downside.  WAY more risky.  but if you don't use leverage you should be fine.
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August 06, 2011, 10:13:58 PM
 #90

So what's the best way to prepare for deflation?

Shed debt and save.

In a true deflationary environment, credit contracts and prices decline.  Cash is king in deflationary times.  Or maybe purchasing power is king would be a better way to put it if you've lost confidence in the USD or whatever fiat currency your country uses.  Purchasing power of course is the number of goods or services you can buy with a unit of currency.  What unit of currency you should be saving, will be up for debate and depends on how bad you think things will get.  If you believe the US will endure then cash will serve you well in deflation.  If you believe there will be a global collapse, well then things get a little harder to predict.  Currency in this situation would have to be something more intrinsically useful but still portable.  Bullets perhaps?  I don't know.  I'm not of the opinion that this is the end of the world as we know it so I haven't really thought it through to that extreme. 

Edit:  Looks like Cypher beat me to the punch while I was typing.

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August 06, 2011, 10:31:52 PM
 #91

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?
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August 07, 2011, 02:42:12 AM
 #92

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

Keynes had pointed out: People will spend less when their income decrease, but not as much as income decreased. So the total consumption is actually higher even if income drops to the previous level

Another thing, like Telecom/IT/housing, those bubbles always can bring some years of boom, since they will bring easy/quick profit and generate lots of new job. We need another bubble to bring some easy/quick profit, and gold is very likely to be such a bubble,
BTC have the potential but just technically too complex for the majorities

When gold is selling at 10000$/ounce, there will be many jobs/products created around gold: Gold mining equipment manufacture, gold research scientists, gold certificate issuer, gold sales manager, gold derivatives, gold CDS/CDO, and many new invented gold related concepts...  Wink

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August 07, 2011, 03:48:05 AM
 #93

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.

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August 07, 2011, 05:59:13 AM
 #94


It's still difficult to explain to people that saving hurts economy


wow, that hurts.

i've grown up a saver and always will be.  i don't mind debt when necessary like for my mortgage and business but i've since paid both off given the crisis which has been debt driven.

you seem to be doubling down and i'd be careful given what i feel is a large topping formation since 2001.  we just can't assume anymore debt.

have you studied demographics?  we and China are getting much older and these elders are moving into the dependent state.  they also sell stocks and RE during retirement not to mention draw on SS and Mcar.  they'll be many fewer workers to support those dependents. 

did you see the labor participation rate this AM?

Well, it's exactly this way of thinking put the recession much prolonged. But there is nothing to blame, people should always seek for security when there is uncertainty. Unless saving has accumulated to a very high level, they dare not to spend again.

This careful and planned thinking is supported by Austrian Economists, if everyone in the society act like this, then we have a perfect stable economic system. But the problem is, the majority of people are not like this, they don't even know how to manage their personal economy. I looked around my friends nearby, none of them without a debt bounded on a house.

So, even you can handle yourself very well, we are all on the same planet, if most of the other guys got problem, you can not get out of it



Is the takeaway message here that austrian economics is correct in theory, but lacks predictive power because market participants refuse to behave according to its tenants?

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August 07, 2011, 07:13:11 AM
 #95

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.

+1

and all that speculation in commodities actually hurts the avg person.  look at the Middle East explosion.  its over food and financial repression.

i just had dinner with a highly successful multimillion dollar hedge fund manager and i picked his brain about the economy and the future of our country.  he actually is as pessimistic as i am and said whats happening is typical for a empire starting a long decline.  he thinks the youth in our country will have a great burden to bear and won't have our lifestyles.  he said our administration is doing all the wrong things with Obama being 3x worse than Bush.  and Bush was bad.  he has a crapload of CDS against all PIGS, Japan, and US debt.  he is VERY bearish on CMBS and has CDS against them as well.  he says commercial RE is heading into the crapper and will suffer greatly in the coming decline.  he said we should have let the system implode in 2001 and 2008 but our admins wouldn't allow it.  and now we have to pay.  we disagreed in that he thinks the gov't and Fed will continue to inflate and he holds a large portfolio of gold mining stocks.  i pointed out they'd been getting killed but he said the fund has had them for many years so i guess he means since back in 2002 b/c thats the only way they'd still be up.  they also have a small holding of bullion.  they are buying farmland and select residential and strip malls but only if he can get them for cents on the dollar.  he thinks they should buy guns too.  i asked him about the gov't losing control and deflation setting in and he said no one knows for sure whats going to happen.  couldn't argue about that.
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August 07, 2011, 04:08:03 PM
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It's still difficult to explain to people that saving hurts economy


wow, that hurts.

i've grown up a saver and always will be.  i don't mind debt when necessary like for my mortgage and business but i've since paid both off given the crisis which has been debt driven.

you seem to be doubling down and i'd be careful given what i feel is a large topping formation since 2001.  we just can't assume anymore debt.

have you studied demographics?  we and China are getting much older and these elders are moving into the dependent state.  they also sell stocks and RE during retirement not to mention draw on SS and Mcar.  they'll be many fewer workers to support those dependents.  

did you see the labor participation rate this AM?

Well, it's exactly this way of thinking put the recession much prolonged. But there is nothing to blame, people should always seek for security when there is uncertainty. Unless saving has accumulated to a very high level, they dare not to spend again.

This careful and planned thinking is supported by Austrian Economists, if everyone in the society act like this, then we have a perfect stable economic system. But the problem is, the majority of people are not like this, they don't even know how to manage their personal economy. I looked around my friends nearby, none of them without a debt bounded on a house.

So, even you can handle yourself very well, we are all on the same planet, if most of the other guys got problem, you can not get out of it



Is the takeaway message here that austrian economics is correct in theory, but lacks predictive power because market participants refuse to behave according to its tenants?

i believe Austrian economics has been quite predictive about what has happened the last 11 yrs.  Its been quite useful for me since 2005 when i started buying gold, silver and as well in 2007 when i shorted stocks.

i did quite well during those times but did get hurt in my portfolio of mining stocks and energy.  i used a stagflationary approach except that the -flationary part got hurt quite badly with the gold/silver/energy stocks getting literally destroyed.  i went back and studied very hard as to why and came across Robert Prechters theories as well as Mish's whose theories played out extraordinarily well.  that is, one of absolute deflationary forces imposed on the market at that time.

since then we've not had the washout we should have had.  according to Prechter he thinks the Dow goes to 400.  extraordinary call i admit.  but with the greater distortions that the gov't/banks have created since 3/09 and the increasingly bold corruption of the banks enabled by crooks/criminals like Geithner, Bernanke, and Paulson (these guys should go down in history as traitors and should be jailed) we've entered an extremely dangerous phase of the crisis.  the forces for a great deflationary washout feel large to me.  

i'm not necessarily a believer in Elliott Wave Theory technical analysis but it does provide a fascinating potentially useful predictive framework on which to see what might happen.  its based on psychology and wave formation.  Prechter is calling for entry into a devastating wave 3 down right about now.  he's been off on his timing but overall i think he might be proven correct.  the fundamentals certainly support it.  i am a believer in cycle theory and we've just had the most powerful stock rally since 1932 with about a 79-80% retrace from the bottom exceeding all Fibonacci levels to the upside.  extraordinary.  i've been getting hurt short alot of the way up but its payback time.

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.
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August 07, 2011, 06:51:15 PM
 #97

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.

If you have billions of dollar like those bankers, I think you will consider how to help the average person Cool

What FED can do is monitoring the economy development and support with needed cash. In a recession, many people will unavoidably start to borrow money (Governement need them most in today's system, they need to pay the unemployment benefit and social security), so keep plenty of money supply is necessary. These money can only help to hold the situation and will increase the future burden, but still better than killing lot's of businesses rightaway

Of course some of these money pushed commodity price, but I think most of them transfered into some type of saving

I have a simple model can prove: Suppose that normal business trasaction need 1 million dollar, if people start to save, then at least 10 million dollar or even 100 million dollar of money supply is needed


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August 07, 2011, 07:07:17 PM
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Is the takeaway message here that austrian economics is correct in theory, but lacks predictive power because market participants refuse to behave according to its tenants?

Not refuse, just reluctant. Most of the people will dislike a careful and monk-like life. Many things in the social are so complex, people seldom have insight about the consequence of their action 10 or 20 years later, they just follow the majority

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August 07, 2011, 07:17:32 PM
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i just had dinner with a highly successful multimillion dollar hedge fund manager and i picked his brain about the economy and the future of our country.  he actually is as pessimistic as i am and said whats happening is typical for a empire starting a long decline.  he thinks the youth in our country will have a great burden to bear and won't have our lifestyles.  he said our administration is doing all the wrong things with Obama being 3x worse than Bush.  and Bush was bad.  he has a crapload of CDS against all PIGS, Japan, and US debt.  he is VERY bearish on CMBS and has CDS against them as well.  he says commercial RE is heading into the crapper and will suffer greatly in the coming decline.  he said we should have let the system implode in 2001 and 2008 but our admins wouldn't allow it.  and now we have to pay.  we disagreed in that he thinks the gov't and Fed will continue to inflate and he holds a large portfolio of gold mining stocks.  i pointed out they'd been getting killed but he said the fund has had them for many years so i guess he means since back in 2002 b/c thats the only way they'd still be up.  they also have a small holding of bullion.  they are buying farmland and select residential and strip malls but only if he can get them for cents on the dollar.  he thinks they should buy guns too.  i asked him about the gov't losing control and deflation setting in and he said no one knows for sure whats going to happen.  couldn't argue about that.

When a bubble burst, we always need another bigger bubble to get out of the problem, but the housing bubble is too big, difficult to imagin a new bubble that is even bigger, maybe that's the reason Japan stayed put for about 20 years

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August 07, 2011, 08:32:02 PM
 #100

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.

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