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How We the People Were Screwed by Obama’s Bogus “Recovery”
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It’s amazing how Obama was able to dupe the American people into believing that the weakest expansion in the postwar era, was an “economic recovery.” Frankly, it boggles the mind.

Think about it for a minute: Productivity, business investment, personal consumption, inflation and growth have all been either sputtering-along at half speed or at historic lows for the entire period, and yet, President Flimflam has been out taking bows and high-fiving for his stellar performance as premier steward of the world’s biggest economy. It’s ridiculous. The whole storyline is completely fake.

So let’s settle this once and for all. The economic machinations that transpired under Obama cannot be accurately called a ‘recovery’, which is merely the public relations handle he used to conceal what was really going on below the surface.

And what was going on below the surface?

Why structural adjustment of course. The economy was being rejiggered in a way that deliberately kept growth weak (by withholding fiscal stimulus) in order reduce upward pressure on wages that would have pushed inflation higher forcing the Fed to raise rates. That may sound complicated, but it’s actually a very simple and straightforward way to keep inflation at bay.

But why would Obama deliberately want to slow growth merely to keep inflation low?

It’s obvious, isn’t it? Because if inflation began to rise, then the Fed would be forced to raise rates and stop shoveling trillions of dollars to the big Wall Street investment banks which, by the way, happened to be drowning in red ink at the time. In other words, the economy was deliberately strangled to save the banks. But then you probably knew that already, didn’t you?

Tell me you haven’t noticed how all the money has been flowing upwards for the last eight years while the economy languished on life support? Tell you haven’t noticed how the chasm between rich and poor has only gotten wider under Obama?

Do you seriously think it was all an accident? Do you really think that physically stuffing the coffers of banks with truckloads of cash behind the silly Madison Avenue-coined moniker “Quantitative Easing” was supposed to trigger more lending, boost hiring, and stimulate growth??

C’mon now, let’s be serious. The whole idea is preposterous. We the People have been corn-holed bigtime, that’s what really happened. There’s no other way to put it.

Why do I bring this up now?

Because on Friday the Commerce Department released its report on 4th quarter GDP, so now we can evaluate Obama’s economic record en toto and put the whole matter to rest. The new data essentially cuts through the bullshit and allows us to see what a complete catastrophe President Snake-oil really was. Here’s a clip from an article in the Wall Street Journal:

“The U.S. ended 2016 on a familiar trajectory of roughly 2% economic growth, the lackluster trend that has prevailed through most of the current expansion… Gross domestic product, a broad measure of the goods and services produced across the economy, expanded at an inflation and seasonally adjusted annual rate of 1.9% in the fourth quarter…… That has made this the slowest expansion since World War II.”
(Economy Returns to Lackluster Growth, Wall Street Journal)

This is the flaccid, underperforming, pathetically-anemic economy about which Obama has been doing handstands and cartwheels for the last eight years. What a joke. No president in modern times has ever squeezed so many accolades out of– what amounts to –a complete failure. Here’s more from the Journal:

“So much for that economic “boom” that President Obama was supposed to have left his successor. That has been the spin among Democrats and progressive economists, but Friday’s GDP report for the fourth quarter provided another in eight years of reality checks on the Obama economic record….

Growth for all of 2016 clocked in at 1.6%, the slowest since 2011 and down from 2.6% in 2015. That marks the 11th consecutive year that GDP growth failed to reach 3%, the longest period since the Bureau of Economic Analysis began reporting the figure. The fourth quarter also rings out the Obama era with an average annual growth rate of 1.8%, which is right down there with George W. Bush for the lowest among modern Presidents.

…You have to work hard to suppress growth after a deep downturn… (Obama) achieved the remarkable feat of slower growth and more inequality.” (About that Obama “Boom”, Wall Street Journal)

Sounds pretty grim, eh? But we haven’t even gotten to the punchline yet. The real kicker is the fact that, had it not been for swelling inventories– that is, the excessive and unwanted growth in accumulated, cobweb-strewn widgets piling up to the ceiling in warehouses across the country– forth quarter GDP would have crawled in at a measly .9%. In other words, Obama’ great recovery would have been stretched out stiffly on the emergency room gurney with a sheet over its face before being rushed off hastily to the nearest belly-puncher. (Mortician)

This is the crapola economy Obama is now passing off to Donald Trump who promises to strengthen growth by cutting taxes, boosting fiscal stimulus and purging all those onerous regulations that protect the public from increasingly-frequent financial meltdowns. Trump figures that all those niggling rules just get in the way of good old profitmaking. (Where have we heard that before?)

ORDER IT NOW

In any event, Trump promises to lift GDP to a mighty 4% by spending $1 trillion rebuilding America’s dilapidated bridges, roads and infrastructure. Regrettably, neither the Fed nor the Senate are prepared to support his plan. “No Growth” Janet Yellen has already indicated that –at full employment with inflation gradually rising– she sees no need for additional stimulus which could lead to “overheating”, while Senate Majority leader Mitch McConnell has given the spending strategy a big thumbs down unless the plan is “revenue neutral” which is a sobriquet for deep cutbacks to Medicare and Social Security. If McConnell doesn’t get his blood money, Trump won’t get his stimulus, it’s as simple as that.

So, it’s gridlock once again, right?

Right. But why would Yellen and McConnell want slower growth when a little splash of stimulus could rev up activity, boost business spending, turbo-charge consumer spending, and get the economy sprinting again? Why?

Because the basic wealth transfer mechanism is different now. Fatcat CEOs no longer make their bones by scraping the gains off worker productivity. Those days are over. The way they beef up profits now is by hustling cash from the bond market that they pump into their own shares sending stocks into the stratosphere. That allows them to rake off hefty sums from their executive compensation packages while cheery shareholders walk away with a bundle. That’s how the game is played now. Ripping off workers is passe’ while financial engineering is all the rage.

But like we pointed out earlier, the game can only be played as long as inflation is kept in check. (so the Fed can keep interest rates low) When inflation takes off, the Fed has to raise rates, which means CEOs can’t get hold of all that cheap cash floating around the bond market to buyback their own shares. When that happens, the whole scam goes kaput.

Bottom line: Neither Yellen nor McConnell can allow Trump to kickstart the economy, because stronger growth puts upward pressure on wages which lifts inflation and pushes up interest rates. Higher rates are the death knell for cheap money which is the secret ingredient that keeps the nation’s wealth flowing upwards to the glorious 1 percent. That’s the whole deal in a nutshell.
MIKE WHITNEY lives in Washington state. He is a contributor to Hopeless: Barack Obama and the Politics of Illusion (AK Press). Hopeless is also available in a Kindle edition. He can be reached at fergiewhitney@msn.com.

(Reprinted from Counterpunch by permission of author or representative)
 
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  1. For Pete’s sake, stop calling rising prices (or wages) inflation.

    Inflation is a monetary phenomenon; I thought this was the dictionary definition.

    Rising prices (and wages are the price for labor) are a common symptom of inflation, but as we’ve seen for decades, like an old person with pneumonia often doesn’t run a fever, astronomical monetary inflation in the form of credit creation didn’t produce rising prices for goods, services or labor.

    Why?

    Immigrant-invasion. Export of manufacturing to low-cost countries lead to the proliferation of lower-paying jobs in the USA and the WalMart-ization of consumer goods prices (everything made in China.) And a Federal Government freed of the need to first collect via taxation what its managers spent in creating an ostensibly private, but in reality bought-and-paid-for Political Patronage Army while showering debt-loot on campaign contributors.

    That credit inflation was the Biggest Feedback Loop in Monetary History. Borrowing created bonds, and bonds were deemed wealth. The more government, business and citizens borrowed, the RICHER EVERYONE FELT!

    As long as the bond market was in a secular bull phase (dating from 1981), owning someone’s debt was like a license to print money. The “wealth effect” of filling a veritable OCEAN of bonds created mass-minded “liquidity” able to slosh from one sub-market to another, creating massive booms (and occasional busts) in stocks, real estate, farmland, the metals and commodities, one bull/bear after another for 35 straight years.

    It was collective faith (herding behavior) in the “good-as-gold” Bond Market that underpinned all of this.

    Rising CPI prices would have signaled an end to the Bond Bull, so either by design or as part of the larger mania, for decades we saw religious-like devotion to “free trade” (AKA ship them our factories and then buy their cheap crap to disguise collapsing living standards) and the rise of service jobs—including highly skilled, well-paying medical service jobs that only exist because Congress can (you guessed it) spend and spend and spend without having to TAX first.

    This looks like a virtuous feedback loop. It’s not.

    When interest rates are high, the bond ocean will be but a small puddle. Changes in rates ripple across the surface, but have relatively little effect. But 35 years of relentlessly dropping interest rates, combined with FIAT money and a social mood mania for the record books, has filled a BOND OCEAN, and even small increases in rates have HIGHLY leveraged effects on that ocean’s capital value. Rates on the 10 year T-note have literally DOUBLED since August, bleeding off unimaginable amounts of capital value from the existing debt.

    If the Bond Bull Market ended last summer (as all indicators suggest), the trend toward higher rates is going to utterly destroy tens, if not eventually hundreds of trillions of dollars of “wealth” people believe now resides in their bond holdings. We simply have no historical antecedent for what’s coming and cannot possibly be prevented.

    What credit inflation gives, credit deflation inevitably will take away. The only relevant question all along was, “WHEN?”

    Credit inflation is a state of collective mind. Unlike banknote inflation, which produces paper notes that exist in the physical world, credit inflation creates “money” that can (and does and will) evaporate every time interest rates pop higher. The closest metaphor would be if the money in your wallet could literally evaporate overnight. Banknote inflation destroys purchasing power by producing more banknotes to compete with ever previously existing banknote. Credit inflation does the same thing on the way up, but once credit deflation begins, NO FORCE ON EARTH can reverse it because it’s simply a collective state of mind.

    Buckle up. This roller-coaster has risen, and risen, and risen for a generation or two, and seems to be finally at the point where the first plunge is just beginning. It won’t be thrilling for long.

    PS: Obama’s administration was just an extreme version of what came before. The USA has been funding its Prosperity Illusion for 35 years by putting everything on the National Mastercard. Rising rates will be the signal that additional purchases are being declined.

    Read More
    • Replies: @annamaria
    Thank you
    , @Clearpoint
    Like the author's explanation much better. Whitney's makes sense, and points directly at the perpetrators, who they are and how they were enriched, the reason why it happened, and what stands in the way of a political fix to the problem. Your explanation is a long winded rambling mess that goes nowhere; Austrian economic theory at its most annoying --- Fault lies solely with government, and not the privately held "free market" banks, and therefore the answer lies in government austerity, which will adversely affect many in the 99%, and not in punishing, reforming, and regulating the criminal banks and the criminal bankers running them, which would adversely affect the 1% who are using this criminal banking system to rob us all blind. Yada, yada, yada...
    , @Anon
    Merriam-Webster on inflation: "a continuing rise in the general price level" (def. 2)
    , @islagiatt
    Thank You.
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  2. It’s amazing how Obama was able to dupe the American people into believing that the weakest expansion in the postwar era, was an “economic recovery.”

    Obama was able to convince people that things were going well because of inflating asset prices – same as for Reagan, Clinton, and the Bushes. That house I bought for 100K 5 years ago in Palmdale now has comps of 275K. The house I didn’t sell in dumpy Sylmar has at least doubled in price. An idiot like me “made” around 350K with his finger up his butt the whole time.

    What has the stock market done? If you are upper middle class you are probably doing OK. It isn’t the guy working at Walmart writing all those stories about economic recovery.

    Read More
    • Replies: @dc.sunsets

    What has the stock market done?
     
    99.9999% plus people have no idea where "value" in the market comes from. They listen to CNBC morons talk about "sideline cash" and money "moving from stocks to bonds" or vice-versa, when simple logic shows that no money moves in or out of a stock, except when new shares are issued.

    Two people trade a single share of IBM for a dollar more than the last trade. With a billion shares outstanding, the market capitalization of IBM just rose 1 billion dollars. Lots of IBM shareholders "with their finger up their butts" reaped a huge increase in wealth.

    From where did it come? If the transaction was for $101 for that single share, $101 came out of the buyer's account but the same $101 went straight back into the seller's account, for ZERO NET MOVEMENT OF "CASH."

    Market value is nothing, absolutely nothing more than mass psychology writ large. It is quite literally a state of mind (of the herd), a complete abstraction.

    But we live in a world saturated & governed by such abstractions. They create winners and losers on very important matters.

    And during a bull market in any asset, a blind monkey will make more money than a brilliant, talented analyst. Markets climb a wall of worry (and the wise are most worried.) They slide down a slope of hope.

    This is the largest credit bubble, largest debt overhang and largest asset mania in recorded history, dwarfing the twins of John Law's Mississippi Scheme and the South Sea Bubble of 300 years ago.

    , @RadicalCenter
    Agree except with the bit about upper-middle-income people. Plenty of formerly upper-middle-income people are screwed as well.

    We have friends who had successful careers in journalism and IT, who have been unable to find good-paying full-time work in their fields. What they continue to find are only positions that are part-time or, if full-time, offer neither benefits nor pension nor any apparent opportunity to advance.

    They are interchangeable parts to these employers, and despite their education, training, hard work, skills, and practical experience, they have poor prospects for the foreseeable future and are gradually depleting savings that they and their families worked many years to accumulate.

    Except for three groups -- the richest one percent, the federal-government employees, and those poor who aren't making much effort to work full-time -- many of us in the broad middle, including people who used to earn well-above-average incomes, are being ground down by this crooked socialist / fascist / corporate-crony economy.

  3. @MarkinLA
    It’s amazing how Obama was able to dupe the American people into believing that the weakest expansion in the postwar era, was an “economic recovery.”

    Obama was able to convince people that things were going well because of inflating asset prices - same as for Reagan, Clinton, and the Bushes. That house I bought for 100K 5 years ago in Palmdale now has comps of 275K. The house I didn't sell in dumpy Sylmar has at least doubled in price. An idiot like me "made" around 350K with his finger up his butt the whole time.

    What has the stock market done? If you are upper middle class you are probably doing OK. It isn't the guy working at Walmart writing all those stories about economic recovery.

    What has the stock market done?

    99.9999% plus people have no idea where “value” in the market comes from. They listen to CNBC morons talk about “sideline cash” and money “moving from stocks to bonds” or vice-versa, when simple logic shows that no money moves in or out of a stock, except when new shares are issued.

    Two people trade a single share of IBM for a dollar more than the last trade. With a billion shares outstanding, the market capitalization of IBM just rose 1 billion dollars. Lots of IBM shareholders “with their finger up their butts” reaped a huge increase in wealth.

    From where did it come? If the transaction was for $101 for that single share, $101 came out of the buyer’s account but the same $101 went straight back into the seller’s account, for ZERO NET MOVEMENT OF “CASH.”

    Market value is nothing, absolutely nothing more than mass psychology writ large. It is quite literally a state of mind (of the herd), a complete abstraction.

    But we live in a world saturated & governed by such abstractions. They create winners and losers on very important matters.

    And during a bull market in any asset, a blind monkey will make more money than a brilliant, talented analyst. Markets climb a wall of worry (and the wise are most worried.) They slide down a slope of hope.

    This is the largest credit bubble, largest debt overhang and largest asset mania in recorded history, dwarfing the twins of John Law’s Mississippi Scheme and the South Sea Bubble of 300 years ago.

    Read More
    • Replies: @Daniel Chieh
    So, how does this end for Amerika?
    , @MarkinLA
    Nobody knows how ridiculous all this stock market "wealth" is than me. I, like you, laugh at people counting their unhatched chickens every day. I realize that one can easily wake up one day to see that there are basically no bids for that valuable stock you own. The stock market has always been a vehicle for the wealthy to cheat working people out of their life savings.

    Most people don't have the slightest idea what a scam a stock market really is. The first thing every brokerage should be required to do is make everybody google "bucket shop" to see who they are really doing business with.

    Another little known aspect is what I believe were called bull clubs back in the 20s. The wealthy would get together and buy up the stock of some average company. Their buddies in the media would talk it up. This was a perfectly legal pump and dump scheme. Now of course with the SEC you have to be a little smarter. Once the public found out they didn't care. Everybody thought they were smart enough to ride with the rich and jump off just in time to take a few pennies. Of course, most of the little fry aren't so lucky. I read that they also did the same thing with shorting stocks.

    On of the best posts I ever saw on the old yahoo stock boards after the dot com bust:

    What are the three greatest scams in the history of the world:

    1. Religion
    2. Government
    3. Stock Market
  4. @dc.sunsets

    What has the stock market done?
     
    99.9999% plus people have no idea where "value" in the market comes from. They listen to CNBC morons talk about "sideline cash" and money "moving from stocks to bonds" or vice-versa, when simple logic shows that no money moves in or out of a stock, except when new shares are issued.

    Two people trade a single share of IBM for a dollar more than the last trade. With a billion shares outstanding, the market capitalization of IBM just rose 1 billion dollars. Lots of IBM shareholders "with their finger up their butts" reaped a huge increase in wealth.

    From where did it come? If the transaction was for $101 for that single share, $101 came out of the buyer's account but the same $101 went straight back into the seller's account, for ZERO NET MOVEMENT OF "CASH."

    Market value is nothing, absolutely nothing more than mass psychology writ large. It is quite literally a state of mind (of the herd), a complete abstraction.

    But we live in a world saturated & governed by such abstractions. They create winners and losers on very important matters.

    And during a bull market in any asset, a blind monkey will make more money than a brilliant, talented analyst. Markets climb a wall of worry (and the wise are most worried.) They slide down a slope of hope.

    This is the largest credit bubble, largest debt overhang and largest asset mania in recorded history, dwarfing the twins of John Law's Mississippi Scheme and the South Sea Bubble of 300 years ago.

    So, how does this end for Amerika?

    Read More
    • Replies: @dc.sunsets
    Let me check my crystal ball, the one that has failed me since 1995.

    There are myriad ways to separate people into two buckets. One is whether they see the glass is half full or half empty.

    I'm the latter. So I'm not the guy to ask how this plays out, unless you want to be like the characters in the movie, Airplane! who listen to the main character's life story and then invariably kill themselves.

    Nature loves rhymes, so maybe (if) bonds topped last August like they bottomed in August of 1981, stocks will top the week of July 31st this year, just like they bottomed the week of July 31st 1982. Not a prediction, just an interesting conjecture.

    Once stocks top and interest rates continue to climb, the perception of wealth will evaporate like a shallow puddle of water in Death Valley. Everything is cross-linked (just like in 2007-2009) only worse now. There's even more debt now. I doubt this time there will be a "save" (but who knows? I was wrong the last time.) It's the banking system that really worries me. Every deposit is legally a loan to the bank, and the banks have loaned out over 100% of deposits. If there's a hiccup, who gets stiffed?

    What happens when the 10 year T-note yield hits 5%? Or 8%? Somewhere in there I suspect (without doing the math) that interest on the National Debt (as it has to be rolled over, because so much of it is very short duration now) will consume 100% of tax revenues. Who here thinks that interest payments will be made by issuing new debt?

    I don't think that will work, but who knows? People believe a lot of stupid stuff. They think the Fed will fix it all, but the Fed will be watching its main asset, a huge fistful of Treasuries, collapse in value. The Fed is owned by a consortium of banks, not Uncle Sam. Who thinks they intend to take a loss?

    Sometime it will become fashionable to realize that this whole thing was a vast Ponzi. Right now it's only the doom-and-gloomers and the inveterate cranks who point this out, but every dog has its day. This, too, will come into fashion. I'll admit that some folks have made a nice living predicting the sky's falling, and done so since 1993 at least---that's when I got hooked into it.

    Chaos will result. People don't like chaos, so order will be re-established somehow. I have no idea how that will play out, but since everyone is addicted to the cash-flows, when they dry up the withdrawal is going to be something to behold.

    Everyone will insist that his cash-flows are sacrosanct, and it's everyone else who should get the haircut. I can't wait to see welfare dependents rioting, destroying their cities and burning down the Blue County Voters' lofts and condos in a return to 1960's style race extortion. (This time it won't work.) Who wins and who loses that political football donnybrook should be great entertainment...unless I'm a big loser in the contest, of course.

    In the end, I expect the essence of it all to be an accounting reconciliation to determine who actually ends up holding legal title to the relatively small amount of original, physical capital that underlies the vast labyrinth of leverage we now call the financial system. Someone owns the land, the buildings, the homes, the factories, etc., that have formed the kernel of what was lent on margin like a Russian nesting doll set. We just don't know who will end up holding the title, once all the lawsuits are decided (and we see what wasn't burned to the ground.)

    In the meantime, as financialization is drying up as a means to extract rents, we're watching as the cunning predators eye every unencumbered asset. The medical system's dysfunction is a feature, not a bug, because it is intended to allow hospitals & others in that industry to decide what you own, after they treat you, and then bill you for it all.

    What's your life worth if you have $100? What's your life worth if you have $1,000,000? They want it. It's that simple. It's a racket.

    This is but one of many systems springing up to allow legalized robbery of the dwindling number of people who actually are solvent. It's part of the plan to try to get every dime of everyone's assets into a glass bowl where bad luck or an inventive lawsuit offers the opportunity to steal it. This won't stop until either everyone who is not part of the Country Club Set is penniless or the system itself collapses.

    I warned you I was a doom-and-gloomer.

    This is just the financial side. Vast numbers of people have skills only applicable in a narrow field. Unemployment promises to exceed that of the Great Depression. Adjusting economic organization to work without Uncle Sam's Credit Card will take decades of hardship, more if politicians try to "help" as is all but certain.

    All this occurs amidst a backdrop of "diverse" people who will move from barely tolerating each other to active enmity to open warfare. I expect our lovely Diversitopia to yield an extremely target-rich environment, and I'm not being hyperbolic. The 20th century was big for wars between nation-states. I think the 21st will prove to be even bigger, but for warfare within nation-states. I expect something more like a combination of the English Civil War and the Rwandan pogrom.

    On the other hand, life could muddle through as before. I haven't a clue.

    Cheers!

    PS: Quoting Codevilla, people will wax nostalgic for these calm times under President Trump.
    , @dc.sunsets
    I found a better explanation for where this path leads (it doesn't stop there, but that's another discussion. Life is a journey, it's not about the destination.)


    https://youtu.be/4IVhYjuj-L0
    This is the most dystopian song I know, set to a dystopian First-person shooter video game. I think that about sums it up. (grin)

  5. @Daniel Chieh
    So, how does this end for Amerika?

    Let me check my crystal ball, the one that has failed me since 1995.

    There are myriad ways to separate people into two buckets. One is whether they see the glass is half full or half empty.

    I’m the latter. So I’m not the guy to ask how this plays out, unless you want to be like the characters in the movie, Airplane! who listen to the main character’s life story and then invariably kill themselves.

    Nature loves rhymes, so maybe (if) bonds topped last August like they bottomed in August of 1981, stocks will top the week of July 31st this year, just like they bottomed the week of July 31st 1982. Not a prediction, just an interesting conjecture.

    Once stocks top and interest rates continue to climb, the perception of wealth will evaporate like a shallow puddle of water in Death Valley. Everything is cross-linked (just like in 2007-2009) only worse now. There’s even more debt now. I doubt this time there will be a “save” (but who knows? I was wrong the last time.) It’s the banking system that really worries me. Every deposit is legally a loan to the bank, and the banks have loaned out over 100% of deposits. If there’s a hiccup, who gets stiffed?

    What happens when the 10 year T-note yield hits 5%? Or 8%? Somewhere in there I suspect (without doing the math) that interest on the National Debt (as it has to be rolled over, because so much of it is very short duration now) will consume 100% of tax revenues. Who here thinks that interest payments will be made by issuing new debt?

    I don’t think that will work, but who knows? People believe a lot of stupid stuff. They think the Fed will fix it all, but the Fed will be watching its main asset, a huge fistful of Treasuries, collapse in value. The Fed is owned by a consortium of banks, not Uncle Sam. Who thinks they intend to take a loss?

    Sometime it will become fashionable to realize that this whole thing was a vast Ponzi. Right now it’s only the doom-and-gloomers and the inveterate cranks who point this out, but every dog has its day. This, too, will come into fashion. I’ll admit that some folks have made a nice living predicting the sky’s falling, and done so since 1993 at least—that’s when I got hooked into it.

    Chaos will result. People don’t like chaos, so order will be re-established somehow. I have no idea how that will play out, but since everyone is addicted to the cash-flows, when they dry up the withdrawal is going to be something to behold.

    Everyone will insist that his cash-flows are sacrosanct, and it’s everyone else who should get the haircut. I can’t wait to see welfare dependents rioting, destroying their cities and burning down the Blue County Voters’ lofts and condos in a return to 1960′s style race extortion. (This time it won’t work.) Who wins and who loses that political football donnybrook should be great entertainment…unless I’m a big loser in the contest, of course.

    In the end, I expect the essence of it all to be an accounting reconciliation to determine who actually ends up holding legal title to the relatively small amount of original, physical capital that underlies the vast labyrinth of leverage we now call the financial system. Someone owns the land, the buildings, the homes, the factories, etc., that have formed the kernel of what was lent on margin like a Russian nesting doll set. We just don’t know who will end up holding the title, once all the lawsuits are decided (and we see what wasn’t burned to the ground.)

    In the meantime, as financialization is drying up as a means to extract rents, we’re watching as the cunning predators eye every unencumbered asset. The medical system’s dysfunction is a feature, not a bug, because it is intended to allow hospitals & others in that industry to decide what you own, after they treat you, and then bill you for it all.

    What’s your life worth if you have $100? What’s your life worth if you have $1,000,000? They want it. It’s that simple. It’s a racket.

    This is but one of many systems springing up to allow legalized robbery of the dwindling number of people who actually are solvent. It’s part of the plan to try to get every dime of everyone’s assets into a glass bowl where bad luck or an inventive lawsuit offers the opportunity to steal it. This won’t stop until either everyone who is not part of the Country Club Set is penniless or the system itself collapses.

    I warned you I was a doom-and-gloomer.

    This is just the financial side. Vast numbers of people have skills only applicable in a narrow field. Unemployment promises to exceed that of the Great Depression. Adjusting economic organization to work without Uncle Sam’s Credit Card will take decades of hardship, more if politicians try to “help” as is all but certain.

    All this occurs amidst a backdrop of “diverse” people who will move from barely tolerating each other to active enmity to open warfare. I expect our lovely Diversitopia to yield an extremely target-rich environment, and I’m not being hyperbolic. The 20th century was big for wars between nation-states. I think the 21st will prove to be even bigger, but for warfare within nation-states. I expect something more like a combination of the English Civil War and the Rwandan pogrom.

    On the other hand, life could muddle through as before. I haven’t a clue.

    Cheers!

    PS: Quoting Codevilla, people will wax nostalgic for these calm times under President Trump.

    Read More
    • Agree: Daniel Chieh
    • Replies: @Ted Bell
    "We just don’t know who will end up holding the title, once all the lawsuits are decided "

    Sure we do. In all of history, it's always been the same. Petty chattels remain with whomever possesses them. Sometimes, as in the fall of the Soviet Union, that possession rule can extend all the way up to homes. That case was extremely generous, as these things go. Anything bigger always, without exception, becomes property of the governing body. At least on paper, that probably won't be the government recognized at the start of the collapse. It may be a new government. Or a Church. Or a bank. Or it could just be whichever local warlord holds power over your particular area, once some semblance of order is restored. Most likely though, it's the old government, with a catchy new name. (meet the new boss, same as the old boss) Regardless, that group/person will assume ownership of everything with more than trivial value. The new boss may distribute ownership to some favored individuals, but only as a means of consolidating power. If, for instance, Bill Gates is allowed to keep Microsoft, it will be made abundantly clear that continued ownership is contingent on him kissing the ring, and doing as he's told.

    If anyone knows of a societal collapse that didn't play out as I've described, I'd be very interested in hearing about it.
    , @bluedog
    Your probably right for the bond market has been in the red for quite some time now ,and I read this morning that the countries GDP only grew at 1% over the last ten years so we have been in little but stagnation, while the fed the bankers the corporations have been goosing the street in the appearance that well hell somewhere there has to be growth...
  6. So let’s settle this once and for all.

    Here’s what needs to be settled.:

    Everything the big money crowd and big government does is fraudulent to one degree or another until proven otherwise.

    Read More
  7. @dc.sunsets

    What has the stock market done?
     
    99.9999% plus people have no idea where "value" in the market comes from. They listen to CNBC morons talk about "sideline cash" and money "moving from stocks to bonds" or vice-versa, when simple logic shows that no money moves in or out of a stock, except when new shares are issued.

    Two people trade a single share of IBM for a dollar more than the last trade. With a billion shares outstanding, the market capitalization of IBM just rose 1 billion dollars. Lots of IBM shareholders "with their finger up their butts" reaped a huge increase in wealth.

    From where did it come? If the transaction was for $101 for that single share, $101 came out of the buyer's account but the same $101 went straight back into the seller's account, for ZERO NET MOVEMENT OF "CASH."

    Market value is nothing, absolutely nothing more than mass psychology writ large. It is quite literally a state of mind (of the herd), a complete abstraction.

    But we live in a world saturated & governed by such abstractions. They create winners and losers on very important matters.

    And during a bull market in any asset, a blind monkey will make more money than a brilliant, talented analyst. Markets climb a wall of worry (and the wise are most worried.) They slide down a slope of hope.

    This is the largest credit bubble, largest debt overhang and largest asset mania in recorded history, dwarfing the twins of John Law's Mississippi Scheme and the South Sea Bubble of 300 years ago.

    Nobody knows how ridiculous all this stock market “wealth” is than me. I, like you, laugh at people counting their unhatched chickens every day. I realize that one can easily wake up one day to see that there are basically no bids for that valuable stock you own. The stock market has always been a vehicle for the wealthy to cheat working people out of their life savings.

    Most people don’t have the slightest idea what a scam a stock market really is. The first thing every brokerage should be required to do is make everybody google “bucket shop” to see who they are really doing business with.

    Another little known aspect is what I believe were called bull clubs back in the 20s. The wealthy would get together and buy up the stock of some average company. Their buddies in the media would talk it up. This was a perfectly legal pump and dump scheme. Now of course with the SEC you have to be a little smarter. Once the public found out they didn’t care. Everybody thought they were smart enough to ride with the rich and jump off just in time to take a few pennies. Of course, most of the little fry aren’t so lucky. I read that they also did the same thing with shorting stocks.

    On of the best posts I ever saw on the old yahoo stock boards after the dot com bust:

    What are the three greatest scams in the history of the world:

    1. Religion
    2. Government
    3. Stock Market

    Read More
    • Agree: dc.sunsets
    • Replies: @dc.sunsets
    We people do love our scams.

    I think the belief that "I'll be the one secret king who wins!" is hard-wired into us all. I can admit my share of foolishness.
    , @jacques sheete

    The stock market has always been a vehicle for the wealthy to cheat working people out of their life savings.
     
    True.

    One can do very well in the stock market if you keep that in mind as a cardinal rule.

    E.g., the buy and hold crapola is for suckers, and no, one doesn't "just toss in some change and see what happens." I wanna slap folks who say stuff like that, although I've heard it less and less over the past 15 or so years.
  8. @MarkinLA
    Nobody knows how ridiculous all this stock market "wealth" is than me. I, like you, laugh at people counting their unhatched chickens every day. I realize that one can easily wake up one day to see that there are basically no bids for that valuable stock you own. The stock market has always been a vehicle for the wealthy to cheat working people out of their life savings.

    Most people don't have the slightest idea what a scam a stock market really is. The first thing every brokerage should be required to do is make everybody google "bucket shop" to see who they are really doing business with.

    Another little known aspect is what I believe were called bull clubs back in the 20s. The wealthy would get together and buy up the stock of some average company. Their buddies in the media would talk it up. This was a perfectly legal pump and dump scheme. Now of course with the SEC you have to be a little smarter. Once the public found out they didn't care. Everybody thought they were smart enough to ride with the rich and jump off just in time to take a few pennies. Of course, most of the little fry aren't so lucky. I read that they also did the same thing with shorting stocks.

    On of the best posts I ever saw on the old yahoo stock boards after the dot com bust:

    What are the three greatest scams in the history of the world:

    1. Religion
    2. Government
    3. Stock Market

    We people do love our scams.

    I think the belief that “I’ll be the one secret king who wins!” is hard-wired into us all. I can admit my share of foolishness.

    Read More
  9. @dc.sunsets
    Let me check my crystal ball, the one that has failed me since 1995.

    There are myriad ways to separate people into two buckets. One is whether they see the glass is half full or half empty.

    I'm the latter. So I'm not the guy to ask how this plays out, unless you want to be like the characters in the movie, Airplane! who listen to the main character's life story and then invariably kill themselves.

    Nature loves rhymes, so maybe (if) bonds topped last August like they bottomed in August of 1981, stocks will top the week of July 31st this year, just like they bottomed the week of July 31st 1982. Not a prediction, just an interesting conjecture.

    Once stocks top and interest rates continue to climb, the perception of wealth will evaporate like a shallow puddle of water in Death Valley. Everything is cross-linked (just like in 2007-2009) only worse now. There's even more debt now. I doubt this time there will be a "save" (but who knows? I was wrong the last time.) It's the banking system that really worries me. Every deposit is legally a loan to the bank, and the banks have loaned out over 100% of deposits. If there's a hiccup, who gets stiffed?

    What happens when the 10 year T-note yield hits 5%? Or 8%? Somewhere in there I suspect (without doing the math) that interest on the National Debt (as it has to be rolled over, because so much of it is very short duration now) will consume 100% of tax revenues. Who here thinks that interest payments will be made by issuing new debt?

    I don't think that will work, but who knows? People believe a lot of stupid stuff. They think the Fed will fix it all, but the Fed will be watching its main asset, a huge fistful of Treasuries, collapse in value. The Fed is owned by a consortium of banks, not Uncle Sam. Who thinks they intend to take a loss?

    Sometime it will become fashionable to realize that this whole thing was a vast Ponzi. Right now it's only the doom-and-gloomers and the inveterate cranks who point this out, but every dog has its day. This, too, will come into fashion. I'll admit that some folks have made a nice living predicting the sky's falling, and done so since 1993 at least---that's when I got hooked into it.

    Chaos will result. People don't like chaos, so order will be re-established somehow. I have no idea how that will play out, but since everyone is addicted to the cash-flows, when they dry up the withdrawal is going to be something to behold.

    Everyone will insist that his cash-flows are sacrosanct, and it's everyone else who should get the haircut. I can't wait to see welfare dependents rioting, destroying their cities and burning down the Blue County Voters' lofts and condos in a return to 1960's style race extortion. (This time it won't work.) Who wins and who loses that political football donnybrook should be great entertainment...unless I'm a big loser in the contest, of course.

    In the end, I expect the essence of it all to be an accounting reconciliation to determine who actually ends up holding legal title to the relatively small amount of original, physical capital that underlies the vast labyrinth of leverage we now call the financial system. Someone owns the land, the buildings, the homes, the factories, etc., that have formed the kernel of what was lent on margin like a Russian nesting doll set. We just don't know who will end up holding the title, once all the lawsuits are decided (and we see what wasn't burned to the ground.)

    In the meantime, as financialization is drying up as a means to extract rents, we're watching as the cunning predators eye every unencumbered asset. The medical system's dysfunction is a feature, not a bug, because it is intended to allow hospitals & others in that industry to decide what you own, after they treat you, and then bill you for it all.

    What's your life worth if you have $100? What's your life worth if you have $1,000,000? They want it. It's that simple. It's a racket.

    This is but one of many systems springing up to allow legalized robbery of the dwindling number of people who actually are solvent. It's part of the plan to try to get every dime of everyone's assets into a glass bowl where bad luck or an inventive lawsuit offers the opportunity to steal it. This won't stop until either everyone who is not part of the Country Club Set is penniless or the system itself collapses.

    I warned you I was a doom-and-gloomer.

    This is just the financial side. Vast numbers of people have skills only applicable in a narrow field. Unemployment promises to exceed that of the Great Depression. Adjusting economic organization to work without Uncle Sam's Credit Card will take decades of hardship, more if politicians try to "help" as is all but certain.

    All this occurs amidst a backdrop of "diverse" people who will move from barely tolerating each other to active enmity to open warfare. I expect our lovely Diversitopia to yield an extremely target-rich environment, and I'm not being hyperbolic. The 20th century was big for wars between nation-states. I think the 21st will prove to be even bigger, but for warfare within nation-states. I expect something more like a combination of the English Civil War and the Rwandan pogrom.

    On the other hand, life could muddle through as before. I haven't a clue.

    Cheers!

    PS: Quoting Codevilla, people will wax nostalgic for these calm times under President Trump.

    “We just don’t know who will end up holding the title, once all the lawsuits are decided ”

    Sure we do. In all of history, it’s always been the same. Petty chattels remain with whomever possesses them. Sometimes, as in the fall of the Soviet Union, that possession rule can extend all the way up to homes. That case was extremely generous, as these things go. Anything bigger always, without exception, becomes property of the governing body. At least on paper, that probably won’t be the government recognized at the start of the collapse. It may be a new government. Or a Church. Or a bank. Or it could just be whichever local warlord holds power over your particular area, once some semblance of order is restored. Most likely though, it’s the old government, with a catchy new name. (meet the new boss, same as the old boss) Regardless, that group/person will assume ownership of everything with more than trivial value. The new boss may distribute ownership to some favored individuals, but only as a means of consolidating power. If, for instance, Bill Gates is allowed to keep Microsoft, it will be made abundantly clear that continued ownership is contingent on him kissing the ring, and doing as he’s told.

    If anyone knows of a societal collapse that didn’t play out as I’ve described, I’d be very interested in hearing about it.

    Read More
    • Replies: @dc.sunsets

    Anything bigger always, without exception, becomes property of the governing body.
     
    I can't agree more.

    I used to be a libertarian-anarchist; "There's no [political] government like no [political] government." I naively thought that the market could provide all the structure needed, if only given a chance.

    Then I grew up.

    Ancient Roman historian Sallust said it best: "Most men do not desire liberty; most only wish for a just master." My market-anarchist hope died in the realization that maybe one person in 100,000 would actually prefer that system. Everyone else would be busy figuring out how to form a coalition to engage in the Central Organizing Principle of Politics: Concentrated Benefits, Diffuse Costs.

    So if we're to have a ruling cadre, I prefer it to be out in the open. Give me a King and Court, so I know who's in charge, so Lenin's timeless "Who, whom---who is doing what to whom" can be discerned.

    Hans Hermann Hoppe is correct; "democracy" is abysmally defective because it turns the rulers into renters, giving them as temporary "caretakers" the incentive to plunder their offices while they occupy them.

    A polity the size & complexity of the USA is a free-for-all of graft and rapine under these "rentier" political conditions. When "anyone can be king," everyone schemes to make the throne omnipotent in preparation for when THEY occupy it. This is the genesis for today, where no aspect of human life is now free from the heavy hand (curled into a mailed FIST) of the political system. What aspect of our lives is now deemed beyond the manipulation of Congress, the POTUS or the various Orwellian Ministries who write and adjudicate their own rules?

    So yes, when the dust settles the goal is to be 1) part of the oligarchy and 2) have all significant wealth be controlled by it, directly or if necessary, indirectly.

    Rulers from the dawn of civilization and before have treated what is under their control as a combination of theme park and brothel, and from the members of the tribe to the citizens of the nation-state, people lined up to entertain them and contribute their daughters as prostitutes.

    There is no breaking out of this, because it is hard-coded in our human DNA. We can no more stop this than a worker bee can choose a different path, free from the hive.

    I guess my view is that I'd rather see reality, and accept the majority of it that I cannot avoid while cushioning as best I can when those who rule me turn their beatings to my skull.

  10. @Ted Bell
    "We just don’t know who will end up holding the title, once all the lawsuits are decided "

    Sure we do. In all of history, it's always been the same. Petty chattels remain with whomever possesses them. Sometimes, as in the fall of the Soviet Union, that possession rule can extend all the way up to homes. That case was extremely generous, as these things go. Anything bigger always, without exception, becomes property of the governing body. At least on paper, that probably won't be the government recognized at the start of the collapse. It may be a new government. Or a Church. Or a bank. Or it could just be whichever local warlord holds power over your particular area, once some semblance of order is restored. Most likely though, it's the old government, with a catchy new name. (meet the new boss, same as the old boss) Regardless, that group/person will assume ownership of everything with more than trivial value. The new boss may distribute ownership to some favored individuals, but only as a means of consolidating power. If, for instance, Bill Gates is allowed to keep Microsoft, it will be made abundantly clear that continued ownership is contingent on him kissing the ring, and doing as he's told.

    If anyone knows of a societal collapse that didn't play out as I've described, I'd be very interested in hearing about it.

    Anything bigger always, without exception, becomes property of the governing body.

    I can’t agree more.

    I used to be a libertarian-anarchist; “There’s no [political] government like no [political] government.” I naively thought that the market could provide all the structure needed, if only given a chance.

    Then I grew up.

    Ancient Roman historian Sallust said it best: “Most men do not desire liberty; most only wish for a just master.” My market-anarchist hope died in the realization that maybe one person in 100,000 would actually prefer that system. Everyone else would be busy figuring out how to form a coalition to engage in the Central Organizing Principle of Politics: Concentrated Benefits, Diffuse Costs.

    So if we’re to have a ruling cadre, I prefer it to be out in the open. Give me a King and Court, so I know who’s in charge, so Lenin’s timeless “Who, whom—who is doing what to whom” can be discerned.

    Hans Hermann Hoppe is correct; “democracy” is abysmally defective because it turns the rulers into renters, giving them as temporary “caretakers” the incentive to plunder their offices while they occupy them.

    A polity the size & complexity of the USA is a free-for-all of graft and rapine under these “rentier” political conditions. When “anyone can be king,” everyone schemes to make the throne omnipotent in preparation for when THEY occupy it. This is the genesis for today, where no aspect of human life is now free from the heavy hand (curled into a mailed FIST) of the political system. What aspect of our lives is now deemed beyond the manipulation of Congress, the POTUS or the various Orwellian Ministries who write and adjudicate their own rules?

    So yes, when the dust settles the goal is to be 1) part of the oligarchy and 2) have all significant wealth be controlled by it, directly or if necessary, indirectly.

    Rulers from the dawn of civilization and before have treated what is under their control as a combination of theme park and brothel, and from the members of the tribe to the citizens of the nation-state, people lined up to entertain them and contribute their daughters as prostitutes.

    There is no breaking out of this, because it is hard-coded in our human DNA. We can no more stop this than a worker bee can choose a different path, free from the hive.

    I guess my view is that I’d rather see reality, and accept the majority of it that I cannot avoid while cushioning as best I can when those who rule me turn their beatings to my skull.

    Read More
    • Replies: @utu
    Interesting (devo)(evo)-lution you went through: from libertarian-anarchist to DNA controlled worker bee.
  11. anonymous says:     Show CommentNext New Comment

    Everywhere I’ve gone the sheer volume of homelessness and panhandling has increased like I’ve never seen before. Younger people seem to be having trouble finding worthwhile jobs outside of the low paid service sector which don’t pay enough to make the rent. For any worthwhile jobs a candidate has to jump through hoops and be scrutinized as though they’re applying to be on the Supreme Court. Yet all the talking heads keep telling us the economy is in great shape and doing better and better. Better for who? No one that I know but then I don’t hang around with the .1%ers. They keep saying unemployment is only about 5% but that’s not what I see. Underemployment in terms of hours or capability is so common as to almost be the rule. Everything is lies and spin with these people and the Nobel Peace Prize winner was just one huge deception.

    Read More
    • Replies: @dc.sunsets
    When I recall what life was like when I was a kid in 1960's Suburban Whiteopia, and compare it to now, it's like I started life in a Normal Rockwell painting and I'm passing middle age in a Picasso, on my way to that "scream" painting for old age.

    I guess I can't blame anyone. This is just part of what I believe is a natural sine wave. By 1964 people were so besotted with rising living standards and such (much of it an artifact of being the only modern economy not bombed into the Stone Age by WW2) that Utopian Fantasies and the Jungian archetype of flight took hold.

    It's been one stupid idea after another since then, all promising to create Heaven on Earth.

    Instead we have chronic unemployment, a straight-jacket for employment (you're qualified only for a very narrow occupation, and if that one blows up, you're fooked) and are bathed in Feelz-Good propaganda not even Orwell's Ministry of Truth could imagine.

    Most people are idiots (or herd animals, or hive insects, I can't decide which metaphor is apt.) They cannot see past the curtain drawn by our Wizards of Oz. All they see is the veneer. Of course, few of them think deeper than a millimeter, when grasping a deeper reality requires a dive measured in fathoms.

    All we can do is all we can do.
    , @RadicalCenter
    Well put, anonymous. Whenever talking about unemployment, we need to remind everyone that the official unemployment figures typically do not include people who have looked fruitlessly for work for so long that they have given up -- either retiring very early, going on disability when such a claim can be ginned up, or working low-paying part-time cash jobs off the books and living a low existence.

    The labor participation rate is part of the picture that must always be mentioned, and the picture is a fairly grim one.
    , @Calthorn
    "They keep saying unemployment is only about 5% but that’s not what I see."
    Nor I.

    Here's a simple metric to test your local economy and make people aware of the
    Obama Depression: Ask people you meet,

    "Do you personally know someone who has obtained a full time job,
    with benefits in the last year?

    How about in the last five years?

    What about in the last ten years?

    How many people do you know?"
  12. Maybe that’s why Presnit Trump is declaring war on Iran and Russia? No other way to make money. What a Nasty Mess.

    Read More
    • Replies: @Taras77
    More war was the answer in the back of my mind as well after reading this excellent discussion in the comments above; all wars are bankers' wars and what better way to crank up the money machines than crank up more wars and military spending. We have already dropped $6 trillion on the stupid war on terror with zero results except more civilians and countries destroyed.

    But who the hell is counting? If you believe Jack Ma, founder of Alibaba: over the past thirty years, the Americans had thirteen wars spending 40.2 trillion dollars,” said Ma, speaking at the World Economic Forum in Davos. (I personnally think he has missed a few wars, or at least interventions). The neo cons and their enablers should stand up and be proud?!!!
  13. @anonymous
    Everywhere I've gone the sheer volume of homelessness and panhandling has increased like I've never seen before. Younger people seem to be having trouble finding worthwhile jobs outside of the low paid service sector which don't pay enough to make the rent. For any worthwhile jobs a candidate has to jump through hoops and be scrutinized as though they're applying to be on the Supreme Court. Yet all the talking heads keep telling us the economy is in great shape and doing better and better. Better for who? No one that I know but then I don't hang around with the .1%ers. They keep saying unemployment is only about 5% but that's not what I see. Underemployment in terms of hours or capability is so common as to almost be the rule. Everything is lies and spin with these people and the Nobel Peace Prize winner was just one huge deception.

    When I recall what life was like when I was a kid in 1960′s Suburban Whiteopia, and compare it to now, it’s like I started life in a Normal Rockwell painting and I’m passing middle age in a Picasso, on my way to that “scream” painting for old age.

    I guess I can’t blame anyone. This is just part of what I believe is a natural sine wave. By 1964 people were so besotted with rising living standards and such (much of it an artifact of being the only modern economy not bombed into the Stone Age by WW2) that Utopian Fantasies and the Jungian archetype of flight took hold.

    It’s been one stupid idea after another since then, all promising to create Heaven on Earth.

    Instead we have chronic unemployment, a straight-jacket for employment (you’re qualified only for a very narrow occupation, and if that one blows up, you’re fooked) and are bathed in Feelz-Good propaganda not even Orwell’s Ministry of Truth could imagine.

    Most people are idiots (or herd animals, or hive insects, I can’t decide which metaphor is apt.) They cannot see past the curtain drawn by our Wizards of Oz. All they see is the veneer. Of course, few of them think deeper than a millimeter, when grasping a deeper reality requires a dive measured in fathoms.

    All we can do is all we can do.

    Read More
    • Replies: @animalogic
    What you say is very thought provoking.
    "By 1964 people were so besotted with rising living standards and such (much of it an artifact of being the only modern economy not bombed into the Stone Age by WW2) that Utopian Fantasies and the Jungian archetype of flight took hold."
    Now I won't excuse average "besotted" people -- but, did the average voter choose neo-liberalism or were they tricked ?
    Capitalism (& neoliberalism especially) is a system which best gives play to people's baser instincts. As we have clearly seen our current system is one that is a celebration of corruption: GFC, QE, NIRP etc etc. Corruption is, of course, not merely an ethical issue, it's also an indicator of systemic "health".
    Were average people duped ? Or were they so self absorbed that they didn't care as their countries went down the sluice ? Consider just how well Elites market themselves -- the MSM is their TOOL. Why did Christians & progressives embrace every lesser issue rather than the # 1 issue: economic justice ?
    But, some countries embraced neoliberalism more than others. Why ? Culture ? Preexisting material advantages ?
    I simply don't know.
    , @Anonymous
    "When I recall what life was like when I was a kid in 1960′s Suburban Whiteopia, and compare it to now, it’s like I started life in a Normal Rockwell painting and I’m passing middle age in a Picasso, on my way to that “scream” painting for old age."

    https://m.youtube.com/watch?v=goNO5OyhDXc
    (Frank Sinatra, "The World We Knew" - this is really a love song, but it's feels related to the above sentence, plus it's just a very good song.)

  14. @Daniel Chieh
    So, how does this end for Amerika?

    I found a better explanation for where this path leads (it doesn’t stop there, but that’s another discussion. Life is a journey, it’s not about the destination.)

    This is the most dystopian song I know, set to a dystopian First-person shooter video game. I think that about sums it up. (grin)

    Read More
  15. @MarkinLA
    It’s amazing how Obama was able to dupe the American people into believing that the weakest expansion in the postwar era, was an “economic recovery.”

    Obama was able to convince people that things were going well because of inflating asset prices - same as for Reagan, Clinton, and the Bushes. That house I bought for 100K 5 years ago in Palmdale now has comps of 275K. The house I didn't sell in dumpy Sylmar has at least doubled in price. An idiot like me "made" around 350K with his finger up his butt the whole time.

    What has the stock market done? If you are upper middle class you are probably doing OK. It isn't the guy working at Walmart writing all those stories about economic recovery.

    Agree except with the bit about upper-middle-income people. Plenty of formerly upper-middle-income people are screwed as well.

    We have friends who had successful careers in journalism and IT, who have been unable to find good-paying full-time work in their fields. What they continue to find are only positions that are part-time or, if full-time, offer neither benefits nor pension nor any apparent opportunity to advance.

    They are interchangeable parts to these employers, and despite their education, training, hard work, skills, and practical experience, they have poor prospects for the foreseeable future and are gradually depleting savings that they and their families worked many years to accumulate.

    Except for three groups — the richest one percent, the federal-government employees, and those poor who aren’t making much effort to work full-time — many of us in the broad middle, including people who used to earn well-above-average incomes, are being ground down by this crooked socialist / fascist / corporate-crony economy.

    Read More
    • Replies: @Alden
    Whites should always, always check either the black or Hispanic box (depending on the last name) when applying for jobs, loans or college or private school.

    Check White and you may end up homeless.
    Check black or brown and you will have a decent job, a home and a pension.
    If you have children check the black box when you enroll them in school. First semester of junior year they will be getting unsolicited letters from numerous colleges begging them to deign to accept full
    scholarships.
    Our government and elites want us gone. There are too many of us to do to what the Jews did to the Russians in the 20th century What our government is doing to us is more like what the English did to the Irish Catholics after 1610.

    Our government calls it affirmative action for anything but a White American born citizen. It is exactly what the English did to the Irish Catholics; make laws that forbade Catholics from working at virtually every job but farm labor, pass laws that forbade Catholic tenant farmers from increasing their herds to more than 2 cows, 4 pigs or 2 horses.

    The Irish Catholics could have avoided all this by simply converting to the only legal church, the Church of Ireland But they didn't and starved for 350 years.

    Middle aged adult Whites might or might not survive. But will your children and grandchildren survive if labeled White? There is a good chance they won't

    Trunp stated a couple years ago he is just fine with affirmative action. Even if Trump brought back the old civil service exams, remember the private sector is totally committed to cheap immigrant Hispanic, Asian and Indian labor
    So either check the black box or legally change your children's last name to a Hispanic one.
  16. @anonymous
    Everywhere I've gone the sheer volume of homelessness and panhandling has increased like I've never seen before. Younger people seem to be having trouble finding worthwhile jobs outside of the low paid service sector which don't pay enough to make the rent. For any worthwhile jobs a candidate has to jump through hoops and be scrutinized as though they're applying to be on the Supreme Court. Yet all the talking heads keep telling us the economy is in great shape and doing better and better. Better for who? No one that I know but then I don't hang around with the .1%ers. They keep saying unemployment is only about 5% but that's not what I see. Underemployment in terms of hours or capability is so common as to almost be the rule. Everything is lies and spin with these people and the Nobel Peace Prize winner was just one huge deception.

    Well put, anonymous. Whenever talking about unemployment, we need to remind everyone that the official unemployment figures typically do not include people who have looked fruitlessly for work for so long that they have given up — either retiring very early, going on disability when such a claim can be ginned up, or working low-paying part-time cash jobs off the books and living a low existence.

    The labor participation rate is part of the picture that must always be mentioned, and the picture is a fairly grim one.

    Read More
    • Replies: @dc.sunsets
    FWIW, I'm one of the uncounted Not In Labor Force. Nowhere near retirement age, capable of doing almost any work short of engineering (I'm even a fair amateur surgeon) but no jobs are available. No one will hire anyone over 49 in my old occupation and I'm actually too wealthy to consider part-time minimum wage jobs or even full-time low wage 50-weeks-a-year jobs.

    Capable of almost anything, this shit economy full of endless red tape licensing requirements & insistent on narrowly-focused job experience has nowhere for me to contribute.

    This is a perfect example of why a catastrophe this way comes.
  17. @RadicalCenter
    Well put, anonymous. Whenever talking about unemployment, we need to remind everyone that the official unemployment figures typically do not include people who have looked fruitlessly for work for so long that they have given up -- either retiring very early, going on disability when such a claim can be ginned up, or working low-paying part-time cash jobs off the books and living a low existence.

    The labor participation rate is part of the picture that must always be mentioned, and the picture is a fairly grim one.

    FWIW, I’m one of the uncounted Not In Labor Force. Nowhere near retirement age, capable of doing almost any work short of engineering (I’m even a fair amateur surgeon) but no jobs are available. No one will hire anyone over 49 in my old occupation and I’m actually too wealthy to consider part-time minimum wage jobs or even full-time low wage 50-weeks-a-year jobs.

    Capable of almost anything, this shit economy full of endless red tape licensing requirements & insistent on narrowly-focused job experience has nowhere for me to contribute.

    This is a perfect example of why a catastrophe this way comes.

    Read More
    • Replies: @jacques sheete

    No one will hire anyone over 49 in my old occupation and I’m actually too wealthy to consider part-time minimum wage jobs or even full-time low wage 50-weeks-a-year jobs.

    Capable of almost anything, this shit economy full of endless red tape licensing requirements & insistent on narrowly-focused job experience has nowhere for me to contribute.
     

    I know several extremely competent and experienced people in the same boat and I also know several top notch young people who can't obtain the required tickets because the ticket obtaining positions seem to go to members of "special" groups and I'm not talking race.

    Red tape, taxes and other forms of theft/extortion drove me out and they're what keep me out. I don't care because I have a ton of interests, so I'm never bored.

    Atlas has Shrugged.

  18. Two important points this article ignores:

    1. GDP is not a measure of prosperity.

    2. Population growth is a factor.

    From my blog:

    Nov 4, 2016 – Is America’s 1.2% Annual GDP Growth Dismal?

    First of all, GDP is just a rough measure of economic activity, not prosperity. Hurricanes, floods, and smoking are good for GDP. When a used car is sold, GDP activity and sales tax is generated, but nothing is created. As the Fed turns over debt by selling bonds, that is lots of financial activity and boosts GDP, but is just computer activity and nothing real is produced. Lower interest rates produced many billions of dollars in mortgage refinance GDP activity, but no real product was produced. Also note that official population growth in the USA is 0.77% a year, so GDP growth per person is less than half the current 1.2% GDP growth rate.

    Read More
  19. GDP growth during Obama’s reign is an accounting mirage. It was “achieved” by understating the inflation rate (GDP deflator). Real inflation in the US is around 4-5 pct, not the ridiculous 1-2pct that is embedded in GDP calculations. Once you apply 4-5 percent, the “growth” instantly becomes negative.
    That’s right, the US economy didn’t grow at all since 2008. In all likelihood, it’s actually still smaller than it was then.

    Read More
  20. @anonymous
    Everywhere I've gone the sheer volume of homelessness and panhandling has increased like I've never seen before. Younger people seem to be having trouble finding worthwhile jobs outside of the low paid service sector which don't pay enough to make the rent. For any worthwhile jobs a candidate has to jump through hoops and be scrutinized as though they're applying to be on the Supreme Court. Yet all the talking heads keep telling us the economy is in great shape and doing better and better. Better for who? No one that I know but then I don't hang around with the .1%ers. They keep saying unemployment is only about 5% but that's not what I see. Underemployment in terms of hours or capability is so common as to almost be the rule. Everything is lies and spin with these people and the Nobel Peace Prize winner was just one huge deception.

    “They keep saying unemployment is only about 5% but that’s not what I see.”
    Nor I.

    Here’s a simple metric to test your local economy and make people aware of the
    Obama Depression: Ask people you meet,

    “Do you personally know someone who has obtained a full time job,
    with benefits in the last year?

    How about in the last five years?

    What about in the last ten years?

    How many people do you know?”

    Read More
  21. @dc.sunsets
    When I recall what life was like when I was a kid in 1960's Suburban Whiteopia, and compare it to now, it's like I started life in a Normal Rockwell painting and I'm passing middle age in a Picasso, on my way to that "scream" painting for old age.

    I guess I can't blame anyone. This is just part of what I believe is a natural sine wave. By 1964 people were so besotted with rising living standards and such (much of it an artifact of being the only modern economy not bombed into the Stone Age by WW2) that Utopian Fantasies and the Jungian archetype of flight took hold.

    It's been one stupid idea after another since then, all promising to create Heaven on Earth.

    Instead we have chronic unemployment, a straight-jacket for employment (you're qualified only for a very narrow occupation, and if that one blows up, you're fooked) and are bathed in Feelz-Good propaganda not even Orwell's Ministry of Truth could imagine.

    Most people are idiots (or herd animals, or hive insects, I can't decide which metaphor is apt.) They cannot see past the curtain drawn by our Wizards of Oz. All they see is the veneer. Of course, few of them think deeper than a millimeter, when grasping a deeper reality requires a dive measured in fathoms.

    All we can do is all we can do.

    What you say is very thought provoking.
    “By 1964 people were so besotted with rising living standards and such (much of it an artifact of being the only modern economy not bombed into the Stone Age by WW2) that Utopian Fantasies and the Jungian archetype of flight took hold.”
    Now I won’t excuse average “besotted” people — but, did the average voter choose neo-liberalism or were they tricked ?
    Capitalism (& neoliberalism especially) is a system which best gives play to people’s baser instincts. As we have clearly seen our current system is one that is a celebration of corruption: GFC, QE, NIRP etc etc. Corruption is, of course, not merely an ethical issue, it’s also an indicator of systemic “health”.
    Were average people duped ? Or were they so self absorbed that they didn’t care as their countries went down the sluice ? Consider just how well Elites market themselves — the MSM is their TOOL. Why did Christians & progressives embrace every lesser issue rather than the # 1 issue: economic justice ?
    But, some countries embraced neoliberalism more than others. Why ? Culture ? Preexisting material advantages ?
    I simply don’t know.

    Read More
    • Replies: @dc.sunsets
    Your question revolves around the proverbial chicken-egg dichotomy.

    My prefered answer is that social action is preceded by social mood, and social mood is endogenously regulated. People feel, then they act, not the other way around.

    There's no way to prove this, but the data are pretty good that moves in the stock market precede moves in the outside world, and not the other way around. The most extreme example is war. You'd think that war would make people fearful and cause stocks to fall.

    On the contrary, wars only break out after stocks have fallen a long, long way for a period of time (what Elliotticians call Cycle Degree declines or larger) and stock lows occur either shortly before or shortly after the war gets going in earnest.

    This is totally paradoxical.

    So my answer is, people were besotted by an optimistic social mood because that was simply where people were in the patterned fractal of social mood's endogenous rise and fall, and optimsitic people vote for and support people, politicians and systems that enable the indulgence of their optimism.

    The times pick the leaders, the leaders don't steer the times.

    In any event, all of this is a vast complex system so there's really no way to steer it anyway. We're all passengers, like it or not.

    That's how I see it.
    , @Wizard of Oz
    What do you mean by "neo-liberalism"? As a long time advocate for throwing off the protectionism, picking of winners and running of businesses by governments,and excessive regulation of labor and other markets that had become conventional policy from the 30s to the 70s - market oriented economic liberalism ("rationalism" too) I would have called it - I was puzzled to come across the pejorative use of "neo-liberalism" in the 21st century.

    It may be an over simple view but I see the great gains to people worldwide (with exceptions including the parts of Africa and the Middle East with uncontrolled fertility) as being squandered in America, partly by wars as well as crime and health care costs, but also in America not managed so that there was a decent minimum share of the gains for the middle classes.

    , @utu
    "Were average people duped ? Or were they so self absorbed that they didn’t care as their countries went down the sluice ?"

    There is nothing "neo" in the neoliberalism. Marx and Dickens would recognize neoliberalism right away. They'd rather be surprised by the period when capitalism was constrained by regulations and trade unions. But this was just the phase. Thatcher and then Reagan started reclaiming back the freedom for capitalism. Unions were busted, worker wages were liberated and corporations were shut down and moved to places with lower wages. In the US Rust Belt was first transferred to Southern states and later to Mexico and then Asia. And yes, people were duped. In this a prominent role was played by libertarian ideology particularly among young who were the most susceptible to it. Any social paradigm shift always hinges on the masses of useful idiots. Now some of them are waking up. But it is too late.
  22. @MarkinLA
    Nobody knows how ridiculous all this stock market "wealth" is than me. I, like you, laugh at people counting their unhatched chickens every day. I realize that one can easily wake up one day to see that there are basically no bids for that valuable stock you own. The stock market has always been a vehicle for the wealthy to cheat working people out of their life savings.

    Most people don't have the slightest idea what a scam a stock market really is. The first thing every brokerage should be required to do is make everybody google "bucket shop" to see who they are really doing business with.

    Another little known aspect is what I believe were called bull clubs back in the 20s. The wealthy would get together and buy up the stock of some average company. Their buddies in the media would talk it up. This was a perfectly legal pump and dump scheme. Now of course with the SEC you have to be a little smarter. Once the public found out they didn't care. Everybody thought they were smart enough to ride with the rich and jump off just in time to take a few pennies. Of course, most of the little fry aren't so lucky. I read that they also did the same thing with shorting stocks.

    On of the best posts I ever saw on the old yahoo stock boards after the dot com bust:

    What are the three greatest scams in the history of the world:

    1. Religion
    2. Government
    3. Stock Market

    The stock market has always been a vehicle for the wealthy to cheat working people out of their life savings.

    True.

    One can do very well in the stock market if you keep that in mind as a cardinal rule.

    E.g., the buy and hold crapola is for suckers, and no, one doesn’t “just toss in some change and see what happens.” I wanna slap folks who say stuff like that, although I’ve heard it less and less over the past 15 or so years.

    Read More
    • Replies: @Wizard of Oz
    No, "buy and hold" is a protection for potential suckers who would otherwise be paying commissions to brokers who want them to churn their portfolios. I know lots of merely quite-well-off investors whose core assets are bought to hold even if they have 2 to 10 per cent of their portfolios in speculative stocks. In Australia there are many LICs (listed investment companies which give shareholders a good spread of investments in a single holding, don't have to worry about providing liquidity for unit holders withdrawing their investments, and have management expense ratios as low as 0.08 per cent of assets for those that invest mostly in leading stocks.

    Even assessing "buy and hold" - especially if you have been geared - against a hypothetical investment of say $25,000 a year from 1975 to 2005 in (effectually) the S & P 500 accumulation index would surely show that you are wrong. But perhaps you tried to be cleverer and proved that investing benefits from knowledge and application.
  23. @dc.sunsets
    FWIW, I'm one of the uncounted Not In Labor Force. Nowhere near retirement age, capable of doing almost any work short of engineering (I'm even a fair amateur surgeon) but no jobs are available. No one will hire anyone over 49 in my old occupation and I'm actually too wealthy to consider part-time minimum wage jobs or even full-time low wage 50-weeks-a-year jobs.

    Capable of almost anything, this shit economy full of endless red tape licensing requirements & insistent on narrowly-focused job experience has nowhere for me to contribute.

    This is a perfect example of why a catastrophe this way comes.

    No one will hire anyone over 49 in my old occupation and I’m actually too wealthy to consider part-time minimum wage jobs or even full-time low wage 50-weeks-a-year jobs.

    Capable of almost anything, this shit economy full of endless red tape licensing requirements & insistent on narrowly-focused job experience has nowhere for me to contribute.

    I know several extremely competent and experienced people in the same boat and I also know several top notch young people who can’t obtain the required tickets because the ticket obtaining positions seem to go to members of “special” groups and I’m not talking race.

    Red tape, taxes and other forms of theft/extortion drove me out and they’re what keep me out. I don’t care because I have a ton of interests, so I’m never bored.

    Atlas has Shrugged.

    Read More
  24. @animalogic
    What you say is very thought provoking.
    "By 1964 people were so besotted with rising living standards and such (much of it an artifact of being the only modern economy not bombed into the Stone Age by WW2) that Utopian Fantasies and the Jungian archetype of flight took hold."
    Now I won't excuse average "besotted" people -- but, did the average voter choose neo-liberalism or were they tricked ?
    Capitalism (& neoliberalism especially) is a system which best gives play to people's baser instincts. As we have clearly seen our current system is one that is a celebration of corruption: GFC, QE, NIRP etc etc. Corruption is, of course, not merely an ethical issue, it's also an indicator of systemic "health".
    Were average people duped ? Or were they so self absorbed that they didn't care as their countries went down the sluice ? Consider just how well Elites market themselves -- the MSM is their TOOL. Why did Christians & progressives embrace every lesser issue rather than the # 1 issue: economic justice ?
    But, some countries embraced neoliberalism more than others. Why ? Culture ? Preexisting material advantages ?
    I simply don't know.

    Your question revolves around the proverbial chicken-egg dichotomy.

    My prefered answer is that social action is preceded by social mood, and social mood is endogenously regulated. People feel, then they act, not the other way around.

    There’s no way to prove this, but the data are pretty good that moves in the stock market precede moves in the outside world, and not the other way around. The most extreme example is war. You’d think that war would make people fearful and cause stocks to fall.

    On the contrary, wars only break out after stocks have fallen a long, long way for a period of time (what Elliotticians call Cycle Degree declines or larger) and stock lows occur either shortly before or shortly after the war gets going in earnest.

    This is totally paradoxical.

    So my answer is, people were besotted by an optimistic social mood because that was simply where people were in the patterned fractal of social mood’s endogenous rise and fall, and optimsitic people vote for and support people, politicians and systems that enable the indulgence of their optimism.

    The times pick the leaders, the leaders don’t steer the times.

    In any event, all of this is a vast complex system so there’s really no way to steer it anyway. We’re all passengers, like it or not.

    That’s how I see it.

    Read More
  25. Folks politics and politicians are one huge reality show and nothing more than ‘B’ rated actors and actresses.

    Jul 22, 2009 Speaker Pelosi on Restoring Pay-As-You-Go Budget Discipline

    Today, the House passed the Statutory Pay-As-You-Go Act 2009 (HR 2920) by a vote of 265-166. This bill requires Congress to offset the costs of tax cuts or increases in entitlement spending with savings elsewhere in the budget. If the net effect of all legislation enacted during a session of Congress increased the deficit, there would be an across-the-board reduction in certain mandatory programs. By restoring pay-as-you-go’ budget discipline as the law of the land, we are returning to the basic rule for every family budget: you don’t spend money you don’t have.

    Read More
    • Replies: @dc.sunsets
    Recall:

    The Bank Secrecy Act actually eliminated banking privacy.
    The Patriot Act is the most unpatriotic piece of legislative excrement available.
    The Affordable Care Act made 100% of medical care unaffordable (up from 90%)

    "Named" legislation obeys a law: its reality will always be a 100% inversion of the name.

    If Uncle Sam were to slam on the brakes and spend only what it took in in taxes, the USA would collapse directly into the Greater Depression. Jobs throughout the economy are totally addicted to the FedGov's profligacy (and the value of incumbency is entirely run by it; Congressmen quite literally puchase their reelections by distributing the loot to their supporters.)

    The end will come, we just don't know when. Rising interest rates (and rates are NOT in the control of the Fed, Treasury or anyone else) will eventually choke off this grand Ponzi Scheme. I'm cautiously predicting that this trend has now, finally, begun. But I was fooled in 2009, so I remain completely neutral, regarding my personal finances.

    As Prechter has noted, the next time rates begin to rise, it will be because bondholders turn from worrying about return ON their money to worrying about return OF their money. Fear is a "spikey" emotion. Once rates begin to rise in earnest, they may well do so quite rapidly, retracing 35 years of decline in a lot less than three decades. I'm guessing we could go from "normal" to SHTF in as little as four years.
  26. eh, money has been flowing upwards since 1980. that trickle down BS reagan fed the retards was like the floodgates being thrown open.

    1970s, thousands of bankers went to jail.

    2007, zero bankers went to jail. a big fat zero.

    adjusted for inflation, american wages hasn’t grown at all in the last 50 years or so. while everything else has gone up in price. it is why our living standards went down.

    guys, save monies and do index funds if you don’t how to invest yourself. help yourselves, the govt is out to fuck you over.

    Read More
    • Replies: @MarkinLA
    Reagan's S&L fiasco was the dry run. The market insider's learned that you cannot be convicted of a white collar crime when you cannot prove intent. When a guy shoves a gun in your face, even if he doesn't ask for your money, you have intent. When you listen to a guy who he knows is cheating you but doesn't say it - he is merely an idiot no matter how many years he has been in the market.

    I wouldn't be surprised if the lawyers for those firms with the garbage CDO and RMBS called each employee into an office, closed the door, and told him that if you keep keep your mouth shut and stick to the story - "Nobody could have foreseen this" that you will never spend a day in jail.
    , @Mark F.
    Would you really want to go back to 1967? Things really weren't as good as you think for most people at that time. My dad had a union job then, but we still had very few luxuries . One car, one phone, a small television, and a really a small house with one bathroom and no garage. My father had just purchased his first air conditioner, and I only had a few changes of clothes. We only went out to eat or out to the movies a few times a year. Vacation was a week at a very small cabin in Northern Wisconsin. We weren't poor, but we were hardly very well off.
  27. It’s just not that deep.

    How can wages rise when ‘labor’ flooding into the country drives wages down.

    Supply & demand basics.

    Read More
  28. Anonymous says:     Show CommentNext New Comment
    @dc.sunsets
    When I recall what life was like when I was a kid in 1960's Suburban Whiteopia, and compare it to now, it's like I started life in a Normal Rockwell painting and I'm passing middle age in a Picasso, on my way to that "scream" painting for old age.

    I guess I can't blame anyone. This is just part of what I believe is a natural sine wave. By 1964 people were so besotted with rising living standards and such (much of it an artifact of being the only modern economy not bombed into the Stone Age by WW2) that Utopian Fantasies and the Jungian archetype of flight took hold.

    It's been one stupid idea after another since then, all promising to create Heaven on Earth.

    Instead we have chronic unemployment, a straight-jacket for employment (you're qualified only for a very narrow occupation, and if that one blows up, you're fooked) and are bathed in Feelz-Good propaganda not even Orwell's Ministry of Truth could imagine.

    Most people are idiots (or herd animals, or hive insects, I can't decide which metaphor is apt.) They cannot see past the curtain drawn by our Wizards of Oz. All they see is the veneer. Of course, few of them think deeper than a millimeter, when grasping a deeper reality requires a dive measured in fathoms.

    All we can do is all we can do.

    “When I recall what life was like when I was a kid in 1960′s Suburban Whiteopia, and compare it to now, it’s like I started life in a Normal Rockwell painting and I’m passing middle age in a Picasso, on my way to that “scream” painting for old age.”

    https://m.youtube.com/watch?v=goNO5OyhDXc

    (Frank Sinatra, “The World We Knew” – this is really a love song, but it’s feels related to the above sentence, plus it’s just a very good song.)

    Read More
  29. @dc.sunsets
    For Pete's sake, stop calling rising prices (or wages) inflation.

    Inflation is a monetary phenomenon; I thought this was the dictionary definition.

    Rising prices (and wages are the price for labor) are a common symptom of inflation, but as we've seen for decades, like an old person with pneumonia often doesn't run a fever, astronomical monetary inflation in the form of credit creation didn't produce rising prices for goods, services or labor.

    Why?

    Immigrant-invasion. Export of manufacturing to low-cost countries lead to the proliferation of lower-paying jobs in the USA and the WalMart-ization of consumer goods prices (everything made in China.) And a Federal Government freed of the need to first collect via taxation what its managers spent in creating an ostensibly private, but in reality bought-and-paid-for Political Patronage Army while showering debt-loot on campaign contributors.

    That credit inflation was the Biggest Feedback Loop in Monetary History. Borrowing created bonds, and bonds were deemed wealth. The more government, business and citizens borrowed, the RICHER EVERYONE FELT!

    As long as the bond market was in a secular bull phase (dating from 1981), owning someone's debt was like a license to print money. The "wealth effect" of filling a veritable OCEAN of bonds created mass-minded "liquidity" able to slosh from one sub-market to another, creating massive booms (and occasional busts) in stocks, real estate, farmland, the metals and commodities, one bull/bear after another for 35 straight years.

    It was collective faith (herding behavior) in the "good-as-gold" Bond Market that underpinned all of this.

    Rising CPI prices would have signaled an end to the Bond Bull, so either by design or as part of the larger mania, for decades we saw religious-like devotion to "free trade" (AKA ship them our factories and then buy their cheap crap to disguise collapsing living standards) and the rise of service jobs---including highly skilled, well-paying medical service jobs that only exist because Congress can (you guessed it) spend and spend and spend without having to TAX first.

    This looks like a virtuous feedback loop. It's not.

    When interest rates are high, the bond ocean will be but a small puddle. Changes in rates ripple across the surface, but have relatively little effect. But 35 years of relentlessly dropping interest rates, combined with FIAT money and a social mood mania for the record books, has filled a BOND OCEAN, and even small increases in rates have HIGHLY leveraged effects on that ocean's capital value. Rates on the 10 year T-note have literally DOUBLED since August, bleeding off unimaginable amounts of capital value from the existing debt.

    If the Bond Bull Market ended last summer (as all indicators suggest), the trend toward higher rates is going to utterly destroy tens, if not eventually hundreds of trillions of dollars of "wealth" people believe now resides in their bond holdings. We simply have no historical antecedent for what's coming and cannot possibly be prevented.

    What credit inflation gives, credit deflation inevitably will take away. The only relevant question all along was, "WHEN?"

    Credit inflation is a state of collective mind. Unlike banknote inflation, which produces paper notes that exist in the physical world, credit inflation creates "money" that can (and does and will) evaporate every time interest rates pop higher. The closest metaphor would be if the money in your wallet could literally evaporate overnight. Banknote inflation destroys purchasing power by producing more banknotes to compete with ever previously existing banknote. Credit inflation does the same thing on the way up, but once credit deflation begins, NO FORCE ON EARTH can reverse it because it's simply a collective state of mind.

    Buckle up. This roller-coaster has risen, and risen, and risen for a generation or two, and seems to be finally at the point where the first plunge is just beginning. It won't be thrilling for long.

    PS: Obama's administration was just an extreme version of what came before. The USA has been funding its Prosperity Illusion for 35 years by putting everything on the National Mastercard. Rising rates will be the signal that additional purchases are being declined.

    Thank you

    Read More
  30. @RadicalCenter
    Agree except with the bit about upper-middle-income people. Plenty of formerly upper-middle-income people are screwed as well.

    We have friends who had successful careers in journalism and IT, who have been unable to find good-paying full-time work in their fields. What they continue to find are only positions that are part-time or, if full-time, offer neither benefits nor pension nor any apparent opportunity to advance.

    They are interchangeable parts to these employers, and despite their education, training, hard work, skills, and practical experience, they have poor prospects for the foreseeable future and are gradually depleting savings that they and their families worked many years to accumulate.

    Except for three groups -- the richest one percent, the federal-government employees, and those poor who aren't making much effort to work full-time -- many of us in the broad middle, including people who used to earn well-above-average incomes, are being ground down by this crooked socialist / fascist / corporate-crony economy.

    Whites should always, always check either the black or Hispanic box (depending on the last name) when applying for jobs, loans or college or private school.

    Check White and you may end up homeless.
    Check black or brown and you will have a decent job, a home and a pension.
    If you have children check the black box when you enroll them in school. First semester of junior year they will be getting unsolicited letters from numerous colleges begging them to deign to accept full
    scholarships.
    Our government and elites want us gone. There are too many of us to do to what the Jews did to the Russians in the 20th century What our government is doing to us is more like what the English did to the Irish Catholics after 1610.

    Our government calls it affirmative action for anything but a White American born citizen. It is exactly what the English did to the Irish Catholics; make laws that forbade Catholics from working at virtually every job but farm labor, pass laws that forbade Catholic tenant farmers from increasing their herds to more than 2 cows, 4 pigs or 2 horses.

    The Irish Catholics could have avoided all this by simply converting to the only legal church, the Church of Ireland But they didn’t and starved for 350 years.

    Middle aged adult Whites might or might not survive. But will your children and grandchildren survive if labeled White? There is a good chance they won’t

    Trunp stated a couple years ago he is just fine with affirmative action. Even if Trump brought back the old civil service exams, remember the private sector is totally committed to cheap immigrant Hispanic, Asian and Indian labor
    So either check the black box or legally change your children’s last name to a Hispanic one.

    Read More
    • Replies: @dc.sunsets
    Once the monetary-financial-economic Ponzi is finally recognized by the Hivemind, consent to statutes that destroy "heritage" Americans in favor of Derbyshire's Coalition of the Fringes will evaporate along with the wealth.

    I anticipate very difficult conditions. Given that the Fruits of Homogeneous Diversity are most prevalent in the Halls of Government, when everyone suddenly decides to go to war over the scraps that are left, the political system could simply crumble.

    Given that people really prefer order to chaos, I anticipate that very local levels of maintaining order will rise, and rise very rapidly. The cities may burn, but anything that doesn't have large numbers of dysfunctional people stacked on top of each other may do okay.

    One thing that will probably happen is that groups of people who CAN'T DO may attempt to rob groups who CAN DO, and the latter (there are still a whole lot of them in the USA, esp. in flyover country) will bite the bullet and utterly exterminate the CAN'T DO's out of self-preservation.

    It's bad when potential adversaries are mixed together like the suits in a well-shuffled deck of cards. When the chips get really down, and people's social mood is so negative that they're just spoiling for any excuse to go on a rampage, such conditions are an utter powder keg.

    I hope the Zombie Apocalypse genre's popularity is not some sort of foreshadowing of Life Imitating Art.
  31. @Agent76
    Folks politics and politicians are one huge reality show and nothing more than 'B' rated actors and actresses.

    Jul 22, 2009 Speaker Pelosi on Restoring Pay-As-You-Go Budget Discipline

    Today, the House passed the Statutory Pay-As-You-Go Act 2009 (HR 2920) by a vote of 265-166. This bill requires Congress to offset the costs of tax cuts or increases in entitlement spending with savings elsewhere in the budget. If the net effect of all legislation enacted during a session of Congress increased the deficit, there would be an across-the-board reduction in certain mandatory programs. By restoring pay-as-you-go' budget discipline as the law of the land, we are returning to the basic rule for every family budget: you don't spend money you don't have.

    https://youtu.be/jmiU_C2UEdM

    Recall:

    The Bank Secrecy Act actually eliminated banking privacy.
    The Patriot Act is the most unpatriotic piece of legislative excrement available.
    The Affordable Care Act made 100% of medical care unaffordable (up from 90%)

    “Named” legislation obeys a law: its reality will always be a 100% inversion of the name.

    If Uncle Sam were to slam on the brakes and spend only what it took in in taxes, the USA would collapse directly into the Greater Depression. Jobs throughout the economy are totally addicted to the FedGov’s profligacy (and the value of incumbency is entirely run by it; Congressmen quite literally puchase their reelections by distributing the loot to their supporters.)

    The end will come, we just don’t know when. Rising interest rates (and rates are NOT in the control of the Fed, Treasury or anyone else) will eventually choke off this grand Ponzi Scheme. I’m cautiously predicting that this trend has now, finally, begun. But I was fooled in 2009, so I remain completely neutral, regarding my personal finances.

    As Prechter has noted, the next time rates begin to rise, it will be because bondholders turn from worrying about return ON their money to worrying about return OF their money. Fear is a “spikey” emotion. Once rates begin to rise in earnest, they may well do so quite rapidly, retracing 35 years of decline in a lot less than three decades. I’m guessing we could go from “normal” to SHTF in as little as four years.

    Read More
    • Replies: @annamaria
    Here is an interesting paper on the upcoming financial armageddon: http://www.zerohedge.com/news/2017-02-06/which-assets-are-most-likely-survive-system-re-set: "...your skills, knowledge and and social capital will emerge unscathed on the other side of the re-set wormhole. Land and real property you own free and clear (no debt) is likely to remain in your possession, as long as you can pay soaring taxes/junk fees during the crisis phase. Your financial assets held in centrally controlled institutions will not make it through unscathed; they are simply too easy for central authorities to expropriate."
    , @MarkinLA
    Rising interest rates (and rates are NOT in the control of the Fed, Treasury or anyone else) will eventually choke off this grand Ponzi Scheme.

    I am not so sure about this happening any time soon. All Treasury bill and bond yields are subject to auctions. However, I think the Fed does come in and buy Treasury Bills and they are buddy-buddy with the brokerages authorized to bid and let them know that they should be bidding up the prices.

    It is hard for long term yields to go too high when short term yields are so low.
  32. @Alden
    Whites should always, always check either the black or Hispanic box (depending on the last name) when applying for jobs, loans or college or private school.

    Check White and you may end up homeless.
    Check black or brown and you will have a decent job, a home and a pension.
    If you have children check the black box when you enroll them in school. First semester of junior year they will be getting unsolicited letters from numerous colleges begging them to deign to accept full
    scholarships.
    Our government and elites want us gone. There are too many of us to do to what the Jews did to the Russians in the 20th century What our government is doing to us is more like what the English did to the Irish Catholics after 1610.

    Our government calls it affirmative action for anything but a White American born citizen. It is exactly what the English did to the Irish Catholics; make laws that forbade Catholics from working at virtually every job but farm labor, pass laws that forbade Catholic tenant farmers from increasing their herds to more than 2 cows, 4 pigs or 2 horses.

    The Irish Catholics could have avoided all this by simply converting to the only legal church, the Church of Ireland But they didn't and starved for 350 years.

    Middle aged adult Whites might or might not survive. But will your children and grandchildren survive if labeled White? There is a good chance they won't

    Trunp stated a couple years ago he is just fine with affirmative action. Even if Trump brought back the old civil service exams, remember the private sector is totally committed to cheap immigrant Hispanic, Asian and Indian labor
    So either check the black box or legally change your children's last name to a Hispanic one.

    Once the monetary-financial-economic Ponzi is finally recognized by the Hivemind, consent to statutes that destroy “heritage” Americans in favor of Derbyshire’s Coalition of the Fringes will evaporate along with the wealth.

    I anticipate very difficult conditions. Given that the Fruits of Homogeneous Diversity are most prevalent in the Halls of Government, when everyone suddenly decides to go to war over the scraps that are left, the political system could simply crumble.

    Given that people really prefer order to chaos, I anticipate that very local levels of maintaining order will rise, and rise very rapidly. The cities may burn, but anything that doesn’t have large numbers of dysfunctional people stacked on top of each other may do okay.

    One thing that will probably happen is that groups of people who CAN’T DO may attempt to rob groups who CAN DO, and the latter (there are still a whole lot of them in the USA, esp. in flyover country) will bite the bullet and utterly exterminate the CAN’T DO’s out of self-preservation.

    It’s bad when potential adversaries are mixed together like the suits in a well-shuffled deck of cards. When the chips get really down, and people’s social mood is so negative that they’re just spoiling for any excuse to go on a rampage, such conditions are an utter powder keg.

    I hope the Zombie Apocalypse genre’s popularity is not some sort of foreshadowing of Life Imitating Art.

    Read More
    • Replies: @Alden
    One can but hope. But we Whites have done absolutely nothing since the year the courts began our decline; 1956, school desegregation. We fled to the suburbs in the 1940s as refugees from black terrorists. We have been unable to resist affirmative action. We can't exactly boycott computers, but we don't even boycott restaurants and fast food places that don't hire Whites


    And just yesterday we observed the highest of the high holy days of the religion of WMWBT, the Super Bowl.

    White Men Worshipping Black Thugs

    If we don't even boycott restaurants that don't hire Whites I doubt we could ever organize even a demonstration honoring White victims of black crime.

    2 amendment NRA guys think that if they have a few guns and know how to use them they will be safe from government encouraged black in White crime and that is the be all and end all of White resistance.

    That may be so. But shooting a burglar or attempted robber or rapist does nothing to end affirmative action, and. the endless stream of non White immigrant workers does it?

    There is no White underground. There was a small one at one time. But is was a provacatuer project of the FBI, ATF, ACLU, AJC and other anti White organizations.
    That ended when we saw what happened to the Weaver family.

    Take care of yourself and your family. Other Whites either won't help us regain our rights or they are totally committed to our destruction

  33. Ya think the addition of 70,000,000 1st, 2nd, and 3rd generation foreign affirmative action beneficiaries and permanent gov’t dependents added to the population since 1990, both legal and illegal, would have just a teeny tiny bit of an effect on wages and every measurable aspect of the economy?

    Read More
    • Replies: @dc.sunsets
    The only reason Washington DC isn't covered in guillotines and the headless corpses of politicians is that at the same time the supply of labor was ramped higher by immigration high and low, legal and illegal, and most of America's manufacturing base was disassembled here and reassembled in Mexico, Brazil, China, etc., the real prices of consumer goods collapsed as well.

    In 1967 a pair of Levi's cost, in today's dollars, probably $80. Or another way, in 1967 dollars, WalMart's blue jean knock offs probably cost about $5. Today, if you want 1967 quality clothes you go to Nordstrom and pay Nordstrom prices.

    Factory farming (feedlots and pesticide-saturated crops) also drove the price (and quality) of food down into the dirt. A Big Mac today probably costs half what one cost in constant dollars from the 1960's. For 1967 qualify food you buy top-of-the-line organic produce and grass-fed meats at four times the price of mass market crap.

    The real cost of living plunged with incomes, along with the quality of goods across the economy. People don't expect a refrigerator to last 20 years, they're happy they get 8 years (and then it's time to landfill it in favor of the newest trendy color scheme.)

    Add in skyrocketing welfare rolls ("food stamps for EVERYONE!!") and the political patronage armies employed to distribute all those social programs (most of whom are not "direct" public employees, but who are reliable votes for anyone promising more Loot for the Poor and those who take care of the Poor) and you see that as long as Uncle Sam could put it all on the National Mastercard, everyone was largely satisfied.

    Not for much longer, it seems.

    Recall "hedonic adjustment?" That's when the cost of good quality meat goes up, people supposedly substitute crappier meat and the Fed's economists call that "zero inflation."

    Don't get me started on "health care," and how we now pay 20 times what stuff cost 40 years ago yet life expectancies have hardly budged and chronic diseases are rampant. Seems that something's rotten in Denmark.

    Our last 30-50 years have been one huge illustration of how long people in the hive will continue to deceive themselves and beg to be decieved by others.

  34. @Eric Novak
    Ya think the addition of 70,000,000 1st, 2nd, and 3rd generation foreign affirmative action beneficiaries and permanent gov't dependents added to the population since 1990, both legal and illegal, would have just a teeny tiny bit of an effect on wages and every measurable aspect of the economy?

    The only reason Washington DC isn’t covered in guillotines and the headless corpses of politicians is that at the same time the supply of labor was ramped higher by immigration high and low, legal and illegal, and most of America’s manufacturing base was disassembled here and reassembled in Mexico, Brazil, China, etc., the real prices of consumer goods collapsed as well.

    In 1967 a pair of Levi’s cost, in today’s dollars, probably $80. Or another way, in 1967 dollars, WalMart’s blue jean knock offs probably cost about $5. Today, if you want 1967 quality clothes you go to Nordstrom and pay Nordstrom prices.

    Factory farming (feedlots and pesticide-saturated crops) also drove the price (and quality) of food down into the dirt. A Big Mac today probably costs half what one cost in constant dollars from the 1960′s. For 1967 qualify food you buy top-of-the-line organic produce and grass-fed meats at four times the price of mass market crap.

    The real cost of living plunged with incomes, along with the quality of goods across the economy. People don’t expect a refrigerator to last 20 years, they’re happy they get 8 years (and then it’s time to landfill it in favor of the newest trendy color scheme.)

    Add in skyrocketing welfare rolls (“food stamps for EVERYONE!!”) and the political patronage armies employed to distribute all those social programs (most of whom are not “direct” public employees, but who are reliable votes for anyone promising more Loot for the Poor and those who take care of the Poor) and you see that as long as Uncle Sam could put it all on the National Mastercard, everyone was largely satisfied.

    Not for much longer, it seems.

    Recall “hedonic adjustment?” That’s when the cost of good quality meat goes up, people supposedly substitute crappier meat and the Fed’s economists call that “zero inflation.”

    Don’t get me started on “health care,” and how we now pay 20 times what stuff cost 40 years ago yet life expectancies have hardly budged and chronic diseases are rampant. Seems that something’s rotten in Denmark.

    Our last 30-50 years have been one huge illustration of how long people in the hive will continue to deceive themselves and beg to be decieved by others.

    Read More
  35. @dc.sunsets
    Once the monetary-financial-economic Ponzi is finally recognized by the Hivemind, consent to statutes that destroy "heritage" Americans in favor of Derbyshire's Coalition of the Fringes will evaporate along with the wealth.

    I anticipate very difficult conditions. Given that the Fruits of Homogeneous Diversity are most prevalent in the Halls of Government, when everyone suddenly decides to go to war over the scraps that are left, the political system could simply crumble.

    Given that people really prefer order to chaos, I anticipate that very local levels of maintaining order will rise, and rise very rapidly. The cities may burn, but anything that doesn't have large numbers of dysfunctional people stacked on top of each other may do okay.

    One thing that will probably happen is that groups of people who CAN'T DO may attempt to rob groups who CAN DO, and the latter (there are still a whole lot of them in the USA, esp. in flyover country) will bite the bullet and utterly exterminate the CAN'T DO's out of self-preservation.

    It's bad when potential adversaries are mixed together like the suits in a well-shuffled deck of cards. When the chips get really down, and people's social mood is so negative that they're just spoiling for any excuse to go on a rampage, such conditions are an utter powder keg.

    I hope the Zombie Apocalypse genre's popularity is not some sort of foreshadowing of Life Imitating Art.

    One can but hope. But we Whites have done absolutely nothing since the year the courts began our decline; 1956, school desegregation. We fled to the suburbs in the 1940s as refugees from black terrorists. We have been unable to resist affirmative action. We can’t exactly boycott computers, but we don’t even boycott restaurants and fast food places that don’t hire Whites

    And just yesterday we observed the highest of the high holy days of the religion of WMWBT, the Super Bowl.

    White Men Worshipping Black Thugs

    If we don’t even boycott restaurants that don’t hire Whites I doubt we could ever organize even a demonstration honoring White victims of black crime.

    2 amendment NRA guys think that if they have a few guns and know how to use them they will be safe from government encouraged black in White crime and that is the be all and end all of White resistance.

    That may be so. But shooting a burglar or attempted robber or rapist does nothing to end affirmative action, and. the endless stream of non White immigrant workers does it?

    There is no White underground. There was a small one at one time. But is was a provacatuer project of the FBI, ATF, ACLU, AJC and other anti White organizations.
    That ended when we saw what happened to the Weaver family.

    Take care of yourself and your family. Other Whites either won’t help us regain our rights or they are totally committed to our destruction

    Read More
  36. @dc.sunsets
    Recall:

    The Bank Secrecy Act actually eliminated banking privacy.
    The Patriot Act is the most unpatriotic piece of legislative excrement available.
    The Affordable Care Act made 100% of medical care unaffordable (up from 90%)

    "Named" legislation obeys a law: its reality will always be a 100% inversion of the name.

    If Uncle Sam were to slam on the brakes and spend only what it took in in taxes, the USA would collapse directly into the Greater Depression. Jobs throughout the economy are totally addicted to the FedGov's profligacy (and the value of incumbency is entirely run by it; Congressmen quite literally puchase their reelections by distributing the loot to their supporters.)

    The end will come, we just don't know when. Rising interest rates (and rates are NOT in the control of the Fed, Treasury or anyone else) will eventually choke off this grand Ponzi Scheme. I'm cautiously predicting that this trend has now, finally, begun. But I was fooled in 2009, so I remain completely neutral, regarding my personal finances.

    As Prechter has noted, the next time rates begin to rise, it will be because bondholders turn from worrying about return ON their money to worrying about return OF their money. Fear is a "spikey" emotion. Once rates begin to rise in earnest, they may well do so quite rapidly, retracing 35 years of decline in a lot less than three decades. I'm guessing we could go from "normal" to SHTF in as little as four years.

    Here is an interesting paper on the upcoming financial armageddon: http://www.zerohedge.com/news/2017-02-06/which-assets-are-most-likely-survive-system-re-set: “…your skills, knowledge and and social capital will emerge unscathed on the other side of the re-set wormhole. Land and real property you own free and clear (no debt) is likely to remain in your possession, as long as you can pay soaring taxes/junk fees during the crisis phase. Your financial assets held in centrally controlled institutions will not make it through unscathed; they are simply too easy for central authorities to expropriate.”

    Read More
    • Replies: @dc.sunsets

    Here is an interesting paper on the upcoming financial armageddon: http://www.zerohedge.com/news/2017-02-06/which-assets-are-most-likely-survive-system-re-set: “…
     

    your skills, knowledge and and social capital will emerge unscathed on the other side of the re-set wormhole.
     
    Bullshit. If your skills are embedded in occupations for which demand has cratered, you're screwed. We have a labor economy characterized by high walls between occupations. If you qualify for one, you will have great difficulty jumping to another.

    Land and real property you own free and clear (no debt) is likely to remain in your possession, as long as you can pay soaring taxes/junk fees during the crisis phase.
     
    This. Visible wealth will be targeted, and during the Great Depression many people lost their property not to the bank forclosure but to tax foreclosure. Cash flows will likely be extremely difficult to maintain for most of us, and if your bank account gets gutted by bail-ins, how you going to pay your property taxes?

    Your financial assets held in centrally controlled institutions will not make it through unscathed; they are simply too easy for central authorities to expropriate.”
     
    Everyone's account depends on everyone else's account. Banks loaned out OVER 100% of deposits. When the cross-linked Jenga Tower of all this starts to fall, it all falls together. This is the real danger we all face in the financial world.

    Let's face it, when this party gets going, there's going to be Open Warfare between various factions trying to avoid the hardships & haircuts. Each faction will be arrayed against every other in the political realm, everyone trying to insure it's others who hold all these hand grenades as they detonate. What we do know for sure is that none of us is in the Country Club Set who will exercise the greatest influence over those in power. Unless Uncle Sam dissolves in the same factional fighting (a prospect that holds great promise and even greater chaos), we're the grass that will suffer while elephants battle.
  37. @jacques sheete

    The stock market has always been a vehicle for the wealthy to cheat working people out of their life savings.
     
    True.

    One can do very well in the stock market if you keep that in mind as a cardinal rule.

    E.g., the buy and hold crapola is for suckers, and no, one doesn't "just toss in some change and see what happens." I wanna slap folks who say stuff like that, although I've heard it less and less over the past 15 or so years.

    No, “buy and hold” is a protection for potential suckers who would otherwise be paying commissions to brokers who want them to churn their portfolios. I know lots of merely quite-well-off investors whose core assets are bought to hold even if they have 2 to 10 per cent of their portfolios in speculative stocks. In Australia there are many LICs (listed investment companies which give shareholders a good spread of investments in a single holding, don’t have to worry about providing liquidity for unit holders withdrawing their investments, and have management expense ratios as low as 0.08 per cent of assets for those that invest mostly in leading stocks.

    Even assessing “buy and hold” – especially if you have been geared – against a hypothetical investment of say $25,000 a year from 1975 to 2005 in (effectually) the S & P 500 accumulation index would surely show that you are wrong. But perhaps you tried to be cleverer and proved that investing benefits from knowledge and application.

    Read More
    • Replies: @MarkinLA
    $25,000 a year from 1975 to 2005

    How many people even earned 25,000 a year in 1975?

    The problem with looking at stock averages is that they don't account for the actual stocks in those averages and the costs that are incurred. That S&P fund may not actually return what the S&P average is. When a stock is dropped off the S&P the fund sells it and buys it's replacement. You get a statement saying you have capital gain or loss. It is up to you to determine how to settle the tax liability - the fund keeps going on as if nothing happened.

    Do you sell part of your holding or just pay the tax out of pocket to keep your share the same? You should sell part of your holdings for an accurate comparison. Granted these and the taxes owed on dividends are small but the big selling point about investing for the long term is just how much of a difference these small changes in percentages can be. They show you that 50 year graph of how by putting 200 a month into their fund you eventually have 20 billion dollars.

    The other factor is picking the correct end points. If you chose 1929 or 1966 as your starting point your long term gains don't look so great. Will 2006 be another one of those points?
  38. @Astuteobservor II
    eh, money has been flowing upwards since 1980. that trickle down BS reagan fed the retards was like the floodgates being thrown open.

    1970s, thousands of bankers went to jail.

    2007, zero bankers went to jail. a big fat zero.

    adjusted for inflation, american wages hasn't grown at all in the last 50 years or so. while everything else has gone up in price. it is why our living standards went down.

    guys, save monies and do index funds if you don't how to invest yourself. help yourselves, the govt is out to fuck you over.

    Reagan’s S&L fiasco was the dry run. The market insider’s learned that you cannot be convicted of a white collar crime when you cannot prove intent. When a guy shoves a gun in your face, even if he doesn’t ask for your money, you have intent. When you listen to a guy who he knows is cheating you but doesn’t say it – he is merely an idiot no matter how many years he has been in the market.

    I wouldn’t be surprised if the lawyers for those firms with the garbage CDO and RMBS called each employee into an office, closed the door, and told him that if you keep keep your mouth shut and stick to the story – “Nobody could have foreseen this” that you will never spend a day in jail.

    Read More
    • Replies: @Astuteobservor II
    come on, their intent was easily proven. betting against the sub prime mortgages they were selling to their own clients. I remember listening to a recording of them laughing at a client after a successful sale of those sub prime loans. that is as clear as intent goes.

    that is like a lawyer getting a payday if his client loses.

    a doctor getting paid if his patients dies.

    crystal clear right?
  39. @animalogic
    What you say is very thought provoking.
    "By 1964 people were so besotted with rising living standards and such (much of it an artifact of being the only modern economy not bombed into the Stone Age by WW2) that Utopian Fantasies and the Jungian archetype of flight took hold."
    Now I won't excuse average "besotted" people -- but, did the average voter choose neo-liberalism or were they tricked ?
    Capitalism (& neoliberalism especially) is a system which best gives play to people's baser instincts. As we have clearly seen our current system is one that is a celebration of corruption: GFC, QE, NIRP etc etc. Corruption is, of course, not merely an ethical issue, it's also an indicator of systemic "health".
    Were average people duped ? Or were they so self absorbed that they didn't care as their countries went down the sluice ? Consider just how well Elites market themselves -- the MSM is their TOOL. Why did Christians & progressives embrace every lesser issue rather than the # 1 issue: economic justice ?
    But, some countries embraced neoliberalism more than others. Why ? Culture ? Preexisting material advantages ?
    I simply don't know.

    What do you mean by “neo-liberalism”? As a long time advocate for throwing off the protectionism, picking of winners and running of businesses by governments,and excessive regulation of labor and other markets that had become conventional policy from the 30s to the 70s – market oriented economic liberalism (“rationalism” too) I would have called it – I was puzzled to come across the pejorative use of “neo-liberalism” in the 21st century.

    It may be an over simple view but I see the great gains to people worldwide (with exceptions including the parts of Africa and the Middle East with uncontrolled fertility) as being squandered in America, partly by wars as well as crime and health care costs, but also in America not managed so that there was a decent minimum share of the gains for the middle classes.

    Read More
    • Replies: @animalogic
    You were "puzzled" by the pejorative use of neo-liberalism ? And you a constant reader of this site ?
    Yes, there have been "great gains"... China, Korea, Japan, Singapore...whoops, my bad, none of those countries ever practiced the off-the-leash Capitalism the US does...
    Oh, & the US middle classes ?they are being reamed out because that is the NATURE of US capitalism (ie: neoliberalism)
  40. @dc.sunsets
    Recall:

    The Bank Secrecy Act actually eliminated banking privacy.
    The Patriot Act is the most unpatriotic piece of legislative excrement available.
    The Affordable Care Act made 100% of medical care unaffordable (up from 90%)

    "Named" legislation obeys a law: its reality will always be a 100% inversion of the name.

    If Uncle Sam were to slam on the brakes and spend only what it took in in taxes, the USA would collapse directly into the Greater Depression. Jobs throughout the economy are totally addicted to the FedGov's profligacy (and the value of incumbency is entirely run by it; Congressmen quite literally puchase their reelections by distributing the loot to their supporters.)

    The end will come, we just don't know when. Rising interest rates (and rates are NOT in the control of the Fed, Treasury or anyone else) will eventually choke off this grand Ponzi Scheme. I'm cautiously predicting that this trend has now, finally, begun. But I was fooled in 2009, so I remain completely neutral, regarding my personal finances.

    As Prechter has noted, the next time rates begin to rise, it will be because bondholders turn from worrying about return ON their money to worrying about return OF their money. Fear is a "spikey" emotion. Once rates begin to rise in earnest, they may well do so quite rapidly, retracing 35 years of decline in a lot less than three decades. I'm guessing we could go from "normal" to SHTF in as little as four years.

    Rising interest rates (and rates are NOT in the control of the Fed, Treasury or anyone else) will eventually choke off this grand Ponzi Scheme.

    I am not so sure about this happening any time soon. All Treasury bill and bond yields are subject to auctions. However, I think the Fed does come in and buy Treasury Bills and they are buddy-buddy with the brokerages authorized to bid and let them know that they should be bidding up the prices.

    It is hard for long term yields to go too high when short term yields are so low.

    Read More
    • Replies: @dc.sunsets
    You're forgetting that actions have consequences.

    The entire capital structure of the world's economies is being warped by financialization and debt=wealth accounting.

    It's not a perpetual motion machine, and while we still think about ZIRP, ZIRP isn't still here. The 3-month T-bill yield was NEGATIVE 18 months ago, after being below 0.15% for more than 3 years prior.

    It is now .55% which if you think about it is infinitely more than a year and a half ago, and higher than any point since late 2009!!

    The odds favor "the bottom is in." There may well be rate declines ahead, but I think we'll see pigs fly before we see zero interest rates again.
  41. @Wizard of Oz
    No, "buy and hold" is a protection for potential suckers who would otherwise be paying commissions to brokers who want them to churn their portfolios. I know lots of merely quite-well-off investors whose core assets are bought to hold even if they have 2 to 10 per cent of their portfolios in speculative stocks. In Australia there are many LICs (listed investment companies which give shareholders a good spread of investments in a single holding, don't have to worry about providing liquidity for unit holders withdrawing their investments, and have management expense ratios as low as 0.08 per cent of assets for those that invest mostly in leading stocks.

    Even assessing "buy and hold" - especially if you have been geared - against a hypothetical investment of say $25,000 a year from 1975 to 2005 in (effectually) the S & P 500 accumulation index would surely show that you are wrong. But perhaps you tried to be cleverer and proved that investing benefits from knowledge and application.

    $25,000 a year from 1975 to 2005

    How many people even earned 25,000 a year in 1975?

    The problem with looking at stock averages is that they don’t account for the actual stocks in those averages and the costs that are incurred. That S&P fund may not actually return what the S&P average is. When a stock is dropped off the S&P the fund sells it and buys it’s replacement. You get a statement saying you have capital gain or loss. It is up to you to determine how to settle the tax liability – the fund keeps going on as if nothing happened.

    Do you sell part of your holding or just pay the tax out of pocket to keep your share the same? You should sell part of your holdings for an accurate comparison. Granted these and the taxes owed on dividends are small but the big selling point about investing for the long term is just how much of a difference these small changes in percentages can be. They show you that 50 year graph of how by putting 200 a month into their fund you eventually have 20 billion dollars.

    The other factor is picking the correct end points. If you chose 1929 or 1966 as your starting point your long term gains don’t look so great. Will 2006 be another one of those points?

    Read More
    • Replies: @Wizard of Oz
    You are obviously right about starting points if you are talking about single lump sum investments which is why your average dumb but honest adviser will talk of "dollar averaging". Starting to save and invest 15 per cent of salary evety year from 1929 looks pretty good...

    You may be right about tax and other problems with American collective investment vehicles. I have never bothered with index funds so don't know how far behind the indices they customarily end up. But I find it hard to believe that you can't find fund managers who don't do at least half as well in percentage terms as Warren Buffett if you don't want to ride in his nil dividend train. I can name at least six Australian listed investment companies which have typically provided dividends of 4 to 5 per cent and growing better than inflation.
  42. @dc.sunsets
    Let me check my crystal ball, the one that has failed me since 1995.

    There are myriad ways to separate people into two buckets. One is whether they see the glass is half full or half empty.

    I'm the latter. So I'm not the guy to ask how this plays out, unless you want to be like the characters in the movie, Airplane! who listen to the main character's life story and then invariably kill themselves.

    Nature loves rhymes, so maybe (if) bonds topped last August like they bottomed in August of 1981, stocks will top the week of July 31st this year, just like they bottomed the week of July 31st 1982. Not a prediction, just an interesting conjecture.

    Once stocks top and interest rates continue to climb, the perception of wealth will evaporate like a shallow puddle of water in Death Valley. Everything is cross-linked (just like in 2007-2009) only worse now. There's even more debt now. I doubt this time there will be a "save" (but who knows? I was wrong the last time.) It's the banking system that really worries me. Every deposit is legally a loan to the bank, and the banks have loaned out over 100% of deposits. If there's a hiccup, who gets stiffed?

    What happens when the 10 year T-note yield hits 5%? Or 8%? Somewhere in there I suspect (without doing the math) that interest on the National Debt (as it has to be rolled over, because so much of it is very short duration now) will consume 100% of tax revenues. Who here thinks that interest payments will be made by issuing new debt?

    I don't think that will work, but who knows? People believe a lot of stupid stuff. They think the Fed will fix it all, but the Fed will be watching its main asset, a huge fistful of Treasuries, collapse in value. The Fed is owned by a consortium of banks, not Uncle Sam. Who thinks they intend to take a loss?

    Sometime it will become fashionable to realize that this whole thing was a vast Ponzi. Right now it's only the doom-and-gloomers and the inveterate cranks who point this out, but every dog has its day. This, too, will come into fashion. I'll admit that some folks have made a nice living predicting the sky's falling, and done so since 1993 at least---that's when I got hooked into it.

    Chaos will result. People don't like chaos, so order will be re-established somehow. I have no idea how that will play out, but since everyone is addicted to the cash-flows, when they dry up the withdrawal is going to be something to behold.

    Everyone will insist that his cash-flows are sacrosanct, and it's everyone else who should get the haircut. I can't wait to see welfare dependents rioting, destroying their cities and burning down the Blue County Voters' lofts and condos in a return to 1960's style race extortion. (This time it won't work.) Who wins and who loses that political football donnybrook should be great entertainment...unless I'm a big loser in the contest, of course.

    In the end, I expect the essence of it all to be an accounting reconciliation to determine who actually ends up holding legal title to the relatively small amount of original, physical capital that underlies the vast labyrinth of leverage we now call the financial system. Someone owns the land, the buildings, the homes, the factories, etc., that have formed the kernel of what was lent on margin like a Russian nesting doll set. We just don't know who will end up holding the title, once all the lawsuits are decided (and we see what wasn't burned to the ground.)

    In the meantime, as financialization is drying up as a means to extract rents, we're watching as the cunning predators eye every unencumbered asset. The medical system's dysfunction is a feature, not a bug, because it is intended to allow hospitals & others in that industry to decide what you own, after they treat you, and then bill you for it all.

    What's your life worth if you have $100? What's your life worth if you have $1,000,000? They want it. It's that simple. It's a racket.

    This is but one of many systems springing up to allow legalized robbery of the dwindling number of people who actually are solvent. It's part of the plan to try to get every dime of everyone's assets into a glass bowl where bad luck or an inventive lawsuit offers the opportunity to steal it. This won't stop until either everyone who is not part of the Country Club Set is penniless or the system itself collapses.

    I warned you I was a doom-and-gloomer.

    This is just the financial side. Vast numbers of people have skills only applicable in a narrow field. Unemployment promises to exceed that of the Great Depression. Adjusting economic organization to work without Uncle Sam's Credit Card will take decades of hardship, more if politicians try to "help" as is all but certain.

    All this occurs amidst a backdrop of "diverse" people who will move from barely tolerating each other to active enmity to open warfare. I expect our lovely Diversitopia to yield an extremely target-rich environment, and I'm not being hyperbolic. The 20th century was big for wars between nation-states. I think the 21st will prove to be even bigger, but for warfare within nation-states. I expect something more like a combination of the English Civil War and the Rwandan pogrom.

    On the other hand, life could muddle through as before. I haven't a clue.

    Cheers!

    PS: Quoting Codevilla, people will wax nostalgic for these calm times under President Trump.

    Your probably right for the bond market has been in the red for quite some time now ,and I read this morning that the countries GDP only grew at 1% over the last ten years so we have been in little but stagnation, while the fed the bankers the corporations have been goosing the street in the appearance that well hell somewhere there has to be growth…

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    • Replies: @dc.sunsets
    Folks, I think we all are missing the forest for the trees.

    I'm not entirely innumerate, but I just hate bond price calculations. To me, they're just ugly, so I don't think much about them.

    But there are a whole lot of well-paid people who DO think about them, and I wonder how they sleep at night.

    Model your own assumptions here: https://www.easycalculation.com/finance/bond-price-calculator.php

    If a one year $60 bond issued with 0.01% yield has to be rolled over at 0.50%, we're talking $0.29 in extra capital required to do it. The latter is literally worth that much less than the former.

    Now if that's $60 Trillion, and not $60, the difference is $290,000,000,000 give or take a few pennies. $290 BILLION DOLLARS.

    This is what happens when instead of rates grinding lower, they vault higher.

    For a 5 year duration, a straight up bond with no coupon that sees rates at issue at 1% and then rates go to 5% experiences a capital loss in value of almost 25% of its original.

    The actual 5-year Note hit about 0.6% in late 2012, and is now above 1.8%. That's a capital value change of about six cents on the dollar, which means rolling over that debt will require that much more original capital.

    Longer-dated debt is undoubtedly sinking outright in value. You bought a bond for $1000 before, now it's worth $940. Quite a change from 1981 through 2012 or 2015, when each bond actually rose in value the whole time you held it due to declining interest rates.

    This is effectively Mt. Vesuvius belching smoke and small earthquakes while Pompeii's residents roll themselves in the jubilation of their stock portfolios.
  43. @Wizard of Oz
    What do you mean by "neo-liberalism"? As a long time advocate for throwing off the protectionism, picking of winners and running of businesses by governments,and excessive regulation of labor and other markets that had become conventional policy from the 30s to the 70s - market oriented economic liberalism ("rationalism" too) I would have called it - I was puzzled to come across the pejorative use of "neo-liberalism" in the 21st century.

    It may be an over simple view but I see the great gains to people worldwide (with exceptions including the parts of Africa and the Middle East with uncontrolled fertility) as being squandered in America, partly by wars as well as crime and health care costs, but also in America not managed so that there was a decent minimum share of the gains for the middle classes.

    You were “puzzled” by the pejorative use of neo-liberalism ? And you a constant reader of this site ?
    Yes, there have been “great gains”… China, Korea, Japan, Singapore…whoops, my bad, none of those countries ever practiced the off-the-leash Capitalism the US does…
    Oh, & the US middle classes ?they are being reamed out because that is the NATURE of US capitalism (ie: neoliberalism)

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    • Replies: @Wizard of Oz
    I said I "was" puzzled (scil. before UR existed) and as there had been so much benefit from what could properly have been described as traditional liberal (not US sense of "socialist") economic reforms in e.g. New Zealand and then Australia I think it worthwhile to get people to spell out what they regard as neo-liberal with reasons and what they see as the definitely neo-liberal problems.

    I am now encouraged in that view by noting the oddity that "liberal" in America means left or socialist so "neoliberal" sounds strange when coming from Americans.

  44. @dc.sunsets

    Anything bigger always, without exception, becomes property of the governing body.
     
    I can't agree more.

    I used to be a libertarian-anarchist; "There's no [political] government like no [political] government." I naively thought that the market could provide all the structure needed, if only given a chance.

    Then I grew up.

    Ancient Roman historian Sallust said it best: "Most men do not desire liberty; most only wish for a just master." My market-anarchist hope died in the realization that maybe one person in 100,000 would actually prefer that system. Everyone else would be busy figuring out how to form a coalition to engage in the Central Organizing Principle of Politics: Concentrated Benefits, Diffuse Costs.

    So if we're to have a ruling cadre, I prefer it to be out in the open. Give me a King and Court, so I know who's in charge, so Lenin's timeless "Who, whom---who is doing what to whom" can be discerned.

    Hans Hermann Hoppe is correct; "democracy" is abysmally defective because it turns the rulers into renters, giving them as temporary "caretakers" the incentive to plunder their offices while they occupy them.

    A polity the size & complexity of the USA is a free-for-all of graft and rapine under these "rentier" political conditions. When "anyone can be king," everyone schemes to make the throne omnipotent in preparation for when THEY occupy it. This is the genesis for today, where no aspect of human life is now free from the heavy hand (curled into a mailed FIST) of the political system. What aspect of our lives is now deemed beyond the manipulation of Congress, the POTUS or the various Orwellian Ministries who write and adjudicate their own rules?

    So yes, when the dust settles the goal is to be 1) part of the oligarchy and 2) have all significant wealth be controlled by it, directly or if necessary, indirectly.

    Rulers from the dawn of civilization and before have treated what is under their control as a combination of theme park and brothel, and from the members of the tribe to the citizens of the nation-state, people lined up to entertain them and contribute their daughters as prostitutes.

    There is no breaking out of this, because it is hard-coded in our human DNA. We can no more stop this than a worker bee can choose a different path, free from the hive.

    I guess my view is that I'd rather see reality, and accept the majority of it that I cannot avoid while cushioning as best I can when those who rule me turn their beatings to my skull.

    Interesting (devo)(evo)-lution you went through: from libertarian-anarchist to DNA controlled worker bee.

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    • Replies: @dc.sunsets
    But I like me Bee-ness. It's Beeutiful.

    Seriously, please point me to anyone who thinks he's not part of the Matrix. I could use a few laughs.
  45. @animalogic
    You were "puzzled" by the pejorative use of neo-liberalism ? And you a constant reader of this site ?
    Yes, there have been "great gains"... China, Korea, Japan, Singapore...whoops, my bad, none of those countries ever practiced the off-the-leash Capitalism the US does...
    Oh, & the US middle classes ?they are being reamed out because that is the NATURE of US capitalism (ie: neoliberalism)

    I said I “was” puzzled (scil. before UR existed) and as there had been so much benefit from what could properly have been described as traditional liberal (not US sense of “socialist”) economic reforms in e.g. New Zealand and then Australia I think it worthwhile to get people to spell out what they regard as neo-liberal with reasons and what they see as the definitely neo-liberal problems.

    I am now encouraged in that view by noting the oddity that “liberal” in America means left or socialist so “neoliberal” sounds strange when coming from Americans.

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  46. @Renoman
    Maybe that's why Presnit Trump is declaring war on Iran and Russia? No other way to make money. What a Nasty Mess.

    More war was the answer in the back of my mind as well after reading this excellent discussion in the comments above; all wars are bankers’ wars and what better way to crank up the money machines than crank up more wars and military spending. We have already dropped $6 trillion on the stupid war on terror with zero results except more civilians and countries destroyed.

    But who the hell is counting? If you believe Jack Ma, founder of Alibaba: over the past thirty years, the Americans had thirteen wars spending 40.2 trillion dollars,” said Ma, speaking at the World Economic Forum in Davos. (I personnally think he has missed a few wars, or at least interventions). The neo cons and their enablers should stand up and be proud?!!!

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    • Replies: @Taras77
    Paul Craig Roberts usually succeeds in preventing me from getting too giddy about the trump admin; I never was to that point but the previous admins, 8 yrs obama/clinton fraud, 8 yrs bush el stupidito war, 8 yrs clinton criminal looting/destruction, etc, etc, has caused me to at least think it cannot get any worse. But now, I am a looong way from giddiness about trump and his cronies.

    Here is one of PCR's latest:

    http://www.unz.com/proberts/is-the-trump-administration-already-over/
  47. @MarkinLA
    $25,000 a year from 1975 to 2005

    How many people even earned 25,000 a year in 1975?

    The problem with looking at stock averages is that they don't account for the actual stocks in those averages and the costs that are incurred. That S&P fund may not actually return what the S&P average is. When a stock is dropped off the S&P the fund sells it and buys it's replacement. You get a statement saying you have capital gain or loss. It is up to you to determine how to settle the tax liability - the fund keeps going on as if nothing happened.

    Do you sell part of your holding or just pay the tax out of pocket to keep your share the same? You should sell part of your holdings for an accurate comparison. Granted these and the taxes owed on dividends are small but the big selling point about investing for the long term is just how much of a difference these small changes in percentages can be. They show you that 50 year graph of how by putting 200 a month into their fund you eventually have 20 billion dollars.

    The other factor is picking the correct end points. If you chose 1929 or 1966 as your starting point your long term gains don't look so great. Will 2006 be another one of those points?

    You are obviously right about starting points if you are talking about single lump sum investments which is why your average dumb but honest adviser will talk of “dollar averaging”. Starting to save and invest 15 per cent of salary evety year from 1929 looks pretty good…

    You may be right about tax and other problems with American collective investment vehicles. I have never bothered with index funds so don’t know how far behind the indices they customarily end up. But I find it hard to believe that you can’t find fund managers who don’t do at least half as well in percentage terms as Warren Buffett if you don’t want to ride in his nil dividend train. I can name at least six Australian listed investment companies which have typically provided dividends of 4 to 5 per cent and growing better than inflation.

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    • Replies: @MarkinLA
    You can't compare Berkshire Hathaway to an index fund. Buffet doesn't just buy and sell stock. He makes agreements with companies that an index fund could not make - maybe some hedge funds. However hedge funds require a lot of money to get into and the managers cut is huge.

    When Solomon Brothers got in trouble in the 90s when Buffet had a big stake he actually took control of the company temporarily. He made deals with GE in 2008 when GE Capital almost broke them. He got preferred stock that was not available to anybody else that paid well above what anybody else could get. I believe he did the same thing with Goldman Sachs.

    Berkshire Hathaway is also involved in insurance.

    The idea that it is easy to simply dump your money off and make a better than average return is ridiculous. This why people recommend index funds. Because there is no active management the fees are far less than traditional managed funds. Since most actively managed funds don't beat the averages, the thinking goes that choosing one of them takes too much work and is little more than dart throwing so why pay for it?

    One of the great funds coming out of the 80s was the Fidelity Magellan fund. It made it's manager (Peter Lynch who wrote the book -"One up on Wall Street") famous and everybody started piling in. The extremely large amount of money made it almost impossible to do what it had done - make bets on unique situations such as Ford stock after the 80s recession. There just aren't that many totally out of whack situations at any given time in the market. The second fund manager was under performing so badly compared to the initial manager that he resorted to using the media in pump and dump schemes. Eventually he was found out and disgraced.

    There are a lot of stories about fund managers looking like heroes and then goats. If it so easy why doesn't every managed fund beat the averages?
  48. @Taras77
    More war was the answer in the back of my mind as well after reading this excellent discussion in the comments above; all wars are bankers' wars and what better way to crank up the money machines than crank up more wars and military spending. We have already dropped $6 trillion on the stupid war on terror with zero results except more civilians and countries destroyed.

    But who the hell is counting? If you believe Jack Ma, founder of Alibaba: over the past thirty years, the Americans had thirteen wars spending 40.2 trillion dollars,” said Ma, speaking at the World Economic Forum in Davos. (I personnally think he has missed a few wars, or at least interventions). The neo cons and their enablers should stand up and be proud?!!!

    Paul Craig Roberts usually succeeds in preventing me from getting too giddy about the trump admin; I never was to that point but the previous admins, 8 yrs obama/clinton fraud, 8 yrs bush el stupidito war, 8 yrs clinton criminal looting/destruction, etc, etc, has caused me to at least think it cannot get any worse. But now, I am a looong way from giddiness about trump and his cronies.

    Here is one of PCR’s latest:

    http://www.unz.com/proberts/is-the-trump-administration-already-over/

    Read More
  49. @Wizard of Oz
    You are obviously right about starting points if you are talking about single lump sum investments which is why your average dumb but honest adviser will talk of "dollar averaging". Starting to save and invest 15 per cent of salary evety year from 1929 looks pretty good...

    You may be right about tax and other problems with American collective investment vehicles. I have never bothered with index funds so don't know how far behind the indices they customarily end up. But I find it hard to believe that you can't find fund managers who don't do at least half as well in percentage terms as Warren Buffett if you don't want to ride in his nil dividend train. I can name at least six Australian listed investment companies which have typically provided dividends of 4 to 5 per cent and growing better than inflation.

    You can’t compare Berkshire Hathaway to an index fund. Buffet doesn’t just buy and sell stock. He makes agreements with companies that an index fund could not make – maybe some hedge funds. However hedge funds require a lot of money to get into and the managers cut is huge.

    When Solomon Brothers got in trouble in the 90s when Buffet had a big stake he actually took control of the company temporarily. He made deals with GE in 2008 when GE Capital almost broke them. He got preferred stock that was not available to anybody else that paid well above what anybody else could get. I believe he did the same thing with Goldman Sachs.

    Berkshire Hathaway is also involved in insurance.

    The idea that it is easy to simply dump your money off and make a better than average return is ridiculous. This why people recommend index funds. Because there is no active management the fees are far less than traditional managed funds. Since most actively managed funds don’t beat the averages, the thinking goes that choosing one of them takes too much work and is little more than dart throwing so why pay for it?

    One of the great funds coming out of the 80s was the Fidelity Magellan fund. It made it’s manager (Peter Lynch who wrote the book -”One up on Wall Street”) famous and everybody started piling in. The extremely large amount of money made it almost impossible to do what it had done – make bets on unique situations such as Ford stock after the 80s recession. There just aren’t that many totally out of whack situations at any given time in the market. The second fund manager was under performing so badly compared to the initial manager that he resorted to using the media in pump and dump schemes. Eventually he was found out and disgraced.

    There are a lot of stories about fund managers looking like heroes and then goats. If it so easy why doesn’t every managed fund beat the averages?

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    • Replies: @Wizard of Oz
    I'm not sure that I disagree with anything you say but I also don't see why you seemed to think I did e.g. think Berhshire Hathaway was comparable to an index fund. If someone spread their snnual buy and hold investments between Berkshire Hathaway, Fidelity Magellan and several other low turnover equity funds they should have done quite well.
  50. @MarkinLA
    You can't compare Berkshire Hathaway to an index fund. Buffet doesn't just buy and sell stock. He makes agreements with companies that an index fund could not make - maybe some hedge funds. However hedge funds require a lot of money to get into and the managers cut is huge.

    When Solomon Brothers got in trouble in the 90s when Buffet had a big stake he actually took control of the company temporarily. He made deals with GE in 2008 when GE Capital almost broke them. He got preferred stock that was not available to anybody else that paid well above what anybody else could get. I believe he did the same thing with Goldman Sachs.

    Berkshire Hathaway is also involved in insurance.

    The idea that it is easy to simply dump your money off and make a better than average return is ridiculous. This why people recommend index funds. Because there is no active management the fees are far less than traditional managed funds. Since most actively managed funds don't beat the averages, the thinking goes that choosing one of them takes too much work and is little more than dart throwing so why pay for it?

    One of the great funds coming out of the 80s was the Fidelity Magellan fund. It made it's manager (Peter Lynch who wrote the book -"One up on Wall Street") famous and everybody started piling in. The extremely large amount of money made it almost impossible to do what it had done - make bets on unique situations such as Ford stock after the 80s recession. There just aren't that many totally out of whack situations at any given time in the market. The second fund manager was under performing so badly compared to the initial manager that he resorted to using the media in pump and dump schemes. Eventually he was found out and disgraced.

    There are a lot of stories about fund managers looking like heroes and then goats. If it so easy why doesn't every managed fund beat the averages?

    I’m not sure that I disagree with anything you say but I also don’t see why you seemed to think I did e.g. think Berhshire Hathaway was comparable to an index fund. If someone spread their snnual buy and hold investments between Berkshire Hathaway, Fidelity Magellan and several other low turnover equity funds they should have done quite well.

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  51. @MarkinLA
    Reagan's S&L fiasco was the dry run. The market insider's learned that you cannot be convicted of a white collar crime when you cannot prove intent. When a guy shoves a gun in your face, even if he doesn't ask for your money, you have intent. When you listen to a guy who he knows is cheating you but doesn't say it - he is merely an idiot no matter how many years he has been in the market.

    I wouldn't be surprised if the lawyers for those firms with the garbage CDO and RMBS called each employee into an office, closed the door, and told him that if you keep keep your mouth shut and stick to the story - "Nobody could have foreseen this" that you will never spend a day in jail.

    come on, their intent was easily proven. betting against the sub prime mortgages they were selling to their own clients. I remember listening to a recording of them laughing at a client after a successful sale of those sub prime loans. that is as clear as intent goes.

    that is like a lawyer getting a payday if his client loses.

    a doctor getting paid if his patients dies.

    crystal clear right?

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    • Replies: @MarkinLA
    I remember listening to a recording of them laughing at a client after a successful sale of those sub prime loans. that is as clear as intent goes.

    And their cover was that the buyer was an experienced fund manager who did not do the necessary due diligence. They never claimed they were cheating the other people only that they were selling what they believed to be "crap". That isn't the same thing. Crap gets sold all the time in the market - it is only the price that makes it crap.

    I have stupidly bought some bonds that seemed like a screaming buy. The only problem was that they were callable. If the bonds got called they were worse than just letting the money sit in my brokerage account. There was no way these bonds weren't going to be called given the interest rate differential and the bond rating of the company. Two days later just for laughs I saw them bid up in the paper (back when NYSE traded bonds were also generally listed). I could actually make 20 bucks plus the accrued interest. I called the broker and got the bid. I told the story to the broker after I got the confirmation - Somebody out there is dumber than me and we both laughed.

    Did I cheat him?
  52. @MarkinLA
    Rising interest rates (and rates are NOT in the control of the Fed, Treasury or anyone else) will eventually choke off this grand Ponzi Scheme.

    I am not so sure about this happening any time soon. All Treasury bill and bond yields are subject to auctions. However, I think the Fed does come in and buy Treasury Bills and they are buddy-buddy with the brokerages authorized to bid and let them know that they should be bidding up the prices.

    It is hard for long term yields to go too high when short term yields are so low.

    You’re forgetting that actions have consequences.

    The entire capital structure of the world’s economies is being warped by financialization and debt=wealth accounting.

    It’s not a perpetual motion machine, and while we still think about ZIRP, ZIRP isn’t still here. The 3-month T-bill yield was NEGATIVE 18 months ago, after being below 0.15% for more than 3 years prior.

    It is now .55% which if you think about it is infinitely more than a year and a half ago, and higher than any point since late 2009!!

    The odds favor “the bottom is in.” There may well be rate declines ahead, but I think we’ll see pigs fly before we see zero interest rates again.

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  53. @utu
    Interesting (devo)(evo)-lution you went through: from libertarian-anarchist to DNA controlled worker bee.

    But I like me Bee-ness. It’s Beeutiful.

    Seriously, please point me to anyone who thinks he’s not part of the Matrix. I could use a few laughs.

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  54. @bluedog
    Your probably right for the bond market has been in the red for quite some time now ,and I read this morning that the countries GDP only grew at 1% over the last ten years so we have been in little but stagnation, while the fed the bankers the corporations have been goosing the street in the appearance that well hell somewhere there has to be growth...

    Folks, I think we all are missing the forest for the trees.

    I’m not entirely innumerate, but I just hate bond price calculations. To me, they’re just ugly, so I don’t think much about them.

    But there are a whole lot of well-paid people who DO think about them, and I wonder how they sleep at night.

    Model your own assumptions here: https://www.easycalculation.com/finance/bond-price-calculator.php

    If a one year $60 bond issued with 0.01% yield has to be rolled over at 0.50%, we’re talking $0.29 in extra capital required to do it. The latter is literally worth that much less than the former.

    Now if that’s $60 Trillion, and not $60, the difference is $290,000,000,000 give or take a few pennies. $290 BILLION DOLLARS.

    This is what happens when instead of rates grinding lower, they vault higher.

    For a 5 year duration, a straight up bond with no coupon that sees rates at issue at 1% and then rates go to 5% experiences a capital loss in value of almost 25% of its original.

    The actual 5-year Note hit about 0.6% in late 2012, and is now above 1.8%. That’s a capital value change of about six cents on the dollar, which means rolling over that debt will require that much more original capital.

    Longer-dated debt is undoubtedly sinking outright in value. You bought a bond for $1000 before, now it’s worth $940. Quite a change from 1981 through 2012 or 2015, when each bond actually rose in value the whole time you held it due to declining interest rates.

    This is effectively Mt. Vesuvius belching smoke and small earthquakes while Pompeii’s residents roll themselves in the jubilation of their stock portfolios.

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  55. @annamaria
    Here is an interesting paper on the upcoming financial armageddon: http://www.zerohedge.com/news/2017-02-06/which-assets-are-most-likely-survive-system-re-set: "...your skills, knowledge and and social capital will emerge unscathed on the other side of the re-set wormhole. Land and real property you own free and clear (no debt) is likely to remain in your possession, as long as you can pay soaring taxes/junk fees during the crisis phase. Your financial assets held in centrally controlled institutions will not make it through unscathed; they are simply too easy for central authorities to expropriate."

    Here is an interesting paper on the upcoming financial armageddon: http://www.zerohedge.com/news/2017-02-06/which-assets-are-most-likely-survive-system-re-set: “…

    your skills, knowledge and and social capital will emerge unscathed on the other side of the re-set wormhole.

    Bullshit. If your skills are embedded in occupations for which demand has cratered, you’re screwed. We have a labor economy characterized by high walls between occupations. If you qualify for one, you will have great difficulty jumping to another.

    Land and real property you own free and clear (no debt) is likely to remain in your possession, as long as you can pay soaring taxes/junk fees during the crisis phase.

    This. Visible wealth will be targeted, and during the Great Depression many people lost their property not to the bank forclosure but to tax foreclosure. Cash flows will likely be extremely difficult to maintain for most of us, and if your bank account gets gutted by bail-ins, how you going to pay your property taxes?

    Your financial assets held in centrally controlled institutions will not make it through unscathed; they are simply too easy for central authorities to expropriate.”

    Everyone’s account depends on everyone else’s account. Banks loaned out OVER 100% of deposits. When the cross-linked Jenga Tower of all this starts to fall, it all falls together. This is the real danger we all face in the financial world.

    Let’s face it, when this party gets going, there’s going to be Open Warfare between various factions trying to avoid the hardships & haircuts. Each faction will be arrayed against every other in the political realm, everyone trying to insure it’s others who hold all these hand grenades as they detonate. What we do know for sure is that none of us is in the Country Club Set who will exercise the greatest influence over those in power. Unless Uncle Sam dissolves in the same factional fighting (a prospect that holds great promise and even greater chaos), we’re the grass that will suffer while elephants battle.

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    • Replies: @Miro23

    Each faction will be arrayed against every other in the political realm, everyone trying to insure it’s others who hold all these hand grenades as they detonate.
     
    I don't think it's so complicated.

    The $ Trillions of US government debt are either going to be paid back with interest or inflated away. They're certainly not going to be paid back, so it just seems to be an inflation question of when and how fast.

    It's true that real assets like office buildings don't disappear in big inflations, but their ownership does change hands.
  56. @Astuteobservor II
    come on, their intent was easily proven. betting against the sub prime mortgages they were selling to their own clients. I remember listening to a recording of them laughing at a client after a successful sale of those sub prime loans. that is as clear as intent goes.

    that is like a lawyer getting a payday if his client loses.

    a doctor getting paid if his patients dies.

    crystal clear right?

    I remember listening to a recording of them laughing at a client after a successful sale of those sub prime loans. that is as clear as intent goes.

    And their cover was that the buyer was an experienced fund manager who did not do the necessary due diligence. They never claimed they were cheating the other people only that they were selling what they believed to be “crap”. That isn’t the same thing. Crap gets sold all the time in the market – it is only the price that makes it crap.

    I have stupidly bought some bonds that seemed like a screaming buy. The only problem was that they were callable. If the bonds got called they were worse than just letting the money sit in my brokerage account. There was no way these bonds weren’t going to be called given the interest rate differential and the bond rating of the company. Two days later just for laughs I saw them bid up in the paper (back when NYSE traded bonds were also generally listed). I could actually make 20 bucks plus the accrued interest. I called the broker and got the bid. I told the story to the broker after I got the confirmation – Somebody out there is dumber than me and we both laughed.

    Did I cheat him?

    Read More
    • Replies: @Astuteobservor II
    totally different cases bro.

    you were buying and selling.

    you are not an investment bank broker selling and betting against the very sub prime mortgage packages the broker was selling to the very people/customers who hired the broker.

    if that is not intent, I dunno what is :/ this is the crystal clear difference.
  57. @MarkinLA
    I remember listening to a recording of them laughing at a client after a successful sale of those sub prime loans. that is as clear as intent goes.

    And their cover was that the buyer was an experienced fund manager who did not do the necessary due diligence. They never claimed they were cheating the other people only that they were selling what they believed to be "crap". That isn't the same thing. Crap gets sold all the time in the market - it is only the price that makes it crap.

    I have stupidly bought some bonds that seemed like a screaming buy. The only problem was that they were callable. If the bonds got called they were worse than just letting the money sit in my brokerage account. There was no way these bonds weren't going to be called given the interest rate differential and the bond rating of the company. Two days later just for laughs I saw them bid up in the paper (back when NYSE traded bonds were also generally listed). I could actually make 20 bucks plus the accrued interest. I called the broker and got the bid. I told the story to the broker after I got the confirmation - Somebody out there is dumber than me and we both laughed.

    Did I cheat him?

    totally different cases bro.

    you were buying and selling.

    you are not an investment bank broker selling and betting against the very sub prime mortgage packages the broker was selling to the very people/customers who hired the broker.

    if that is not intent, I dunno what is :/ this is the crystal clear difference.

    Read More
    • Replies: @MarkinLA
    Given their actions you might have a case for intent to the average person but not in any legal sense that would get past a judge who handles laws concerning securities.

    This my understanding.

    Initially Wall Street bought a lot of crap mortgage because they thought they could make AAA bonds out of them by prioritizing who got the cash from the income stream generated by those mortgages. The people at the lowest tranche had bonds that weren't rated.

    Some people realized that it would only take a relatively few foreclosures on the underlying mortgages to make the lower tranches worthless. They asked the brokerages if they could bet against those tranches. The experts at the brokerages laughed their butts off that somebody could be so stupid and entered into those contracts. Because they were making money off selling the CDOs and the insurance against them they expanded into making synthetic CDOs by copying the terms of ones they already placed and selling insurance against those to pay the CDO buyer.

    When they realized that the guys they laughed at weren't so dumb after all they did everything they could to clean out their inventory of CDOs. I assume they also tried to square up their positions on the credit default swaps they wrote.

    Bear Sterns, Merrill Lynch, and Lehman Brothers didn't make it while Goldman Sachs barely did.

    Yeah, the average guy on the street would say intent. The brokerage hides behind the fact that the market changes all the time, companies and people lose income and go bankrupt all the time and bonds default all the time. They hide behind the fact that the mortgages looked "good" on paper. A judge would throw it out after the jury convicted and prosecutors know this.
  58. @dc.sunsets

    Here is an interesting paper on the upcoming financial armageddon: http://www.zerohedge.com/news/2017-02-06/which-assets-are-most-likely-survive-system-re-set: “…
     

    your skills, knowledge and and social capital will emerge unscathed on the other side of the re-set wormhole.
     
    Bullshit. If your skills are embedded in occupations for which demand has cratered, you're screwed. We have a labor economy characterized by high walls between occupations. If you qualify for one, you will have great difficulty jumping to another.

    Land and real property you own free and clear (no debt) is likely to remain in your possession, as long as you can pay soaring taxes/junk fees during the crisis phase.
     
    This. Visible wealth will be targeted, and during the Great Depression many people lost their property not to the bank forclosure but to tax foreclosure. Cash flows will likely be extremely difficult to maintain for most of us, and if your bank account gets gutted by bail-ins, how you going to pay your property taxes?

    Your financial assets held in centrally controlled institutions will not make it through unscathed; they are simply too easy for central authorities to expropriate.”
     
    Everyone's account depends on everyone else's account. Banks loaned out OVER 100% of deposits. When the cross-linked Jenga Tower of all this starts to fall, it all falls together. This is the real danger we all face in the financial world.

    Let's face it, when this party gets going, there's going to be Open Warfare between various factions trying to avoid the hardships & haircuts. Each faction will be arrayed against every other in the political realm, everyone trying to insure it's others who hold all these hand grenades as they detonate. What we do know for sure is that none of us is in the Country Club Set who will exercise the greatest influence over those in power. Unless Uncle Sam dissolves in the same factional fighting (a prospect that holds great promise and even greater chaos), we're the grass that will suffer while elephants battle.

    Each faction will be arrayed against every other in the political realm, everyone trying to insure it’s others who hold all these hand grenades as they detonate.

    I don’t think it’s so complicated.

    The $ Trillions of US government debt are either going to be paid back with interest or inflated away. They’re certainly not going to be paid back, so it just seems to be an inflation question of when and how fast.

    It’s true that real assets like office buildings don’t disappear in big inflations, but their ownership does change hands.

    Read More
    • Replies: @dc.sunsets
    I know it's fashionable to claim a debt can be inflated away, but I submit this is untrue now.

    Inflation is a monetary phenomenon. (I said so in comment #1.)

    Inflation occurs one of two ways: Banknote printing or Credit creation (which is borrowed into monetary existence.)

    Banknote printing is sticky. Cash exists in physical form, and unless it's burned, more notes simply accumulate, debasing the purchasing power of all existing notes.

    Credit inflation is NOT STICKY. (Please re-read that. NOT STICKY.)

    As long as the Groupthink Hivemind is in trust mode, every new bond acts like new cash. It's an ASSET similar to "Accounts Receivable." If interest rates are stable, it dilutes the money supply dollar for dollar (sort of, I imagine there's wealth effects, too.)

    If rates are dropping (1981 to August of 2016, or THIRTY-FIVE YEARS STRAIGHT) then old bonds actually GAIN in value, almost like having the Twenty Dollar Bills in your pocket adding a Five Dollar Bill once in a while.

    If rates are rising, however, the increase in interest rate reverberates through EVERY BOND IN EXISTENCE. The Fed could monetize $1 billion newly issued T-notes but if the interest rate rises, $1 Trillion worth of capital value could evaporate from the vast pool of pre-existing bonds. This is a very real illustration of the mathematics. It's just algebra.

    This is what the Fed faces. All Roads Lead To Deflation. They have led there for years, perhaps decades, but the show's not over until it's over. People have gone bankrupt betting it was over again, and again, yet here we are.

    Credit money (in the form of bond value) disappears once rates begin to rise in earnest. Just as rates worked lower for 35 years, once they establish an uptrend it will continue until it stops, not because some academic asshats in the Eccles Building wave their magic wands.

    Go to the St. Louis Fed's FRED website and look at Total Credit Market Debt. That's the tip of the iceberg, worldwide. The world is now like a huge business that has hundreds of trillions of dollars of assets in "ACCOUNTS RECEIVABLE" but its business model is based on VENDOR FINANCING, where the huge business lends its customers the money they need to buy its stuff.

    The entire world now looks like Enron with a Accounts Receivable the size of Mt. Vesuvius.
  59. @Astuteobservor II
    totally different cases bro.

    you were buying and selling.

    you are not an investment bank broker selling and betting against the very sub prime mortgage packages the broker was selling to the very people/customers who hired the broker.

    if that is not intent, I dunno what is :/ this is the crystal clear difference.

    Given their actions you might have a case for intent to the average person but not in any legal sense that would get past a judge who handles laws concerning securities.

    This my understanding.

    Initially Wall Street bought a lot of crap mortgage because they thought they could make AAA bonds out of them by prioritizing who got the cash from the income stream generated by those mortgages. The people at the lowest tranche had bonds that weren’t rated.

    Some people realized that it would only take a relatively few foreclosures on the underlying mortgages to make the lower tranches worthless. They asked the brokerages if they could bet against those tranches. The experts at the brokerages laughed their butts off that somebody could be so stupid and entered into those contracts. Because they were making money off selling the CDOs and the insurance against them they expanded into making synthetic CDOs by copying the terms of ones they already placed and selling insurance against those to pay the CDO buyer.

    When they realized that the guys they laughed at weren’t so dumb after all they did everything they could to clean out their inventory of CDOs. I assume they also tried to square up their positions on the credit default swaps they wrote.

    Bear Sterns, Merrill Lynch, and Lehman Brothers didn’t make it while Goldman Sachs barely did.

    Yeah, the average guy on the street would say intent. The brokerage hides behind the fact that the market changes all the time, companies and people lose income and go bankrupt all the time and bonds default all the time. They hide behind the fact that the mortgages looked “good” on paper. A judge would throw it out after the jury convicted and prosecutors know this.

    Read More
    • Replies: @Astuteobservor II

    Yeah, the average guy on the street would say intent. The brokerage hides behind the fact that the market changes all the time, companies and people lose income and go bankrupt all the time and bonds default all the time. They hide behind the fact that the mortgages looked “good” on paper. A judge would throw it out after the jury convicted and prosecutors know this.
     
    that is a pretty good argument. we know it is intent, but we can't prove it. damn.
  60. @MarkinLA
    Given their actions you might have a case for intent to the average person but not in any legal sense that would get past a judge who handles laws concerning securities.

    This my understanding.

    Initially Wall Street bought a lot of crap mortgage because they thought they could make AAA bonds out of them by prioritizing who got the cash from the income stream generated by those mortgages. The people at the lowest tranche had bonds that weren't rated.

    Some people realized that it would only take a relatively few foreclosures on the underlying mortgages to make the lower tranches worthless. They asked the brokerages if they could bet against those tranches. The experts at the brokerages laughed their butts off that somebody could be so stupid and entered into those contracts. Because they were making money off selling the CDOs and the insurance against them they expanded into making synthetic CDOs by copying the terms of ones they already placed and selling insurance against those to pay the CDO buyer.

    When they realized that the guys they laughed at weren't so dumb after all they did everything they could to clean out their inventory of CDOs. I assume they also tried to square up their positions on the credit default swaps they wrote.

    Bear Sterns, Merrill Lynch, and Lehman Brothers didn't make it while Goldman Sachs barely did.

    Yeah, the average guy on the street would say intent. The brokerage hides behind the fact that the market changes all the time, companies and people lose income and go bankrupt all the time and bonds default all the time. They hide behind the fact that the mortgages looked "good" on paper. A judge would throw it out after the jury convicted and prosecutors know this.

    Yeah, the average guy on the street would say intent. The brokerage hides behind the fact that the market changes all the time, companies and people lose income and go bankrupt all the time and bonds default all the time. They hide behind the fact that the mortgages looked “good” on paper. A judge would throw it out after the jury convicted and prosecutors know this.

    that is a pretty good argument. we know it is intent, but we can’t prove it. damn.

    Read More
  61. @Astuteobservor II
    eh, money has been flowing upwards since 1980. that trickle down BS reagan fed the retards was like the floodgates being thrown open.

    1970s, thousands of bankers went to jail.

    2007, zero bankers went to jail. a big fat zero.

    adjusted for inflation, american wages hasn't grown at all in the last 50 years or so. while everything else has gone up in price. it is why our living standards went down.

    guys, save monies and do index funds if you don't how to invest yourself. help yourselves, the govt is out to fuck you over.

    Would you really want to go back to 1967? Things really weren’t as good as you think for most people at that time. My dad had a union job then, but we still had very few luxuries . One car, one phone, a small television, and a really a small house with one bathroom and no garage. My father had just purchased his first air conditioner, and I only had a few changes of clothes. We only went out to eat or out to the movies a few times a year. Vacation was a week at a very small cabin in Northern Wisconsin. We weren’t poor, but we were hardly very well off.

    Read More
    • Replies: @Astuteobservor II
    where did you get the idea that I want to go back to anywhere in time? I am confused.
  62. @dc.sunsets
    For Pete's sake, stop calling rising prices (or wages) inflation.

    Inflation is a monetary phenomenon; I thought this was the dictionary definition.

    Rising prices (and wages are the price for labor) are a common symptom of inflation, but as we've seen for decades, like an old person with pneumonia often doesn't run a fever, astronomical monetary inflation in the form of credit creation didn't produce rising prices for goods, services or labor.

    Why?

    Immigrant-invasion. Export of manufacturing to low-cost countries lead to the proliferation of lower-paying jobs in the USA and the WalMart-ization of consumer goods prices (everything made in China.) And a Federal Government freed of the need to first collect via taxation what its managers spent in creating an ostensibly private, but in reality bought-and-paid-for Political Patronage Army while showering debt-loot on campaign contributors.

    That credit inflation was the Biggest Feedback Loop in Monetary History. Borrowing created bonds, and bonds were deemed wealth. The more government, business and citizens borrowed, the RICHER EVERYONE FELT!

    As long as the bond market was in a secular bull phase (dating from 1981), owning someone's debt was like a license to print money. The "wealth effect" of filling a veritable OCEAN of bonds created mass-minded "liquidity" able to slosh from one sub-market to another, creating massive booms (and occasional busts) in stocks, real estate, farmland, the metals and commodities, one bull/bear after another for 35 straight years.

    It was collective faith (herding behavior) in the "good-as-gold" Bond Market that underpinned all of this.

    Rising CPI prices would have signaled an end to the Bond Bull, so either by design or as part of the larger mania, for decades we saw religious-like devotion to "free trade" (AKA ship them our factories and then buy their cheap crap to disguise collapsing living standards) and the rise of service jobs---including highly skilled, well-paying medical service jobs that only exist because Congress can (you guessed it) spend and spend and spend without having to TAX first.

    This looks like a virtuous feedback loop. It's not.

    When interest rates are high, the bond ocean will be but a small puddle. Changes in rates ripple across the surface, but have relatively little effect. But 35 years of relentlessly dropping interest rates, combined with FIAT money and a social mood mania for the record books, has filled a BOND OCEAN, and even small increases in rates have HIGHLY leveraged effects on that ocean's capital value. Rates on the 10 year T-note have literally DOUBLED since August, bleeding off unimaginable amounts of capital value from the existing debt.

    If the Bond Bull Market ended last summer (as all indicators suggest), the trend toward higher rates is going to utterly destroy tens, if not eventually hundreds of trillions of dollars of "wealth" people believe now resides in their bond holdings. We simply have no historical antecedent for what's coming and cannot possibly be prevented.

    What credit inflation gives, credit deflation inevitably will take away. The only relevant question all along was, "WHEN?"

    Credit inflation is a state of collective mind. Unlike banknote inflation, which produces paper notes that exist in the physical world, credit inflation creates "money" that can (and does and will) evaporate every time interest rates pop higher. The closest metaphor would be if the money in your wallet could literally evaporate overnight. Banknote inflation destroys purchasing power by producing more banknotes to compete with ever previously existing banknote. Credit inflation does the same thing on the way up, but once credit deflation begins, NO FORCE ON EARTH can reverse it because it's simply a collective state of mind.

    Buckle up. This roller-coaster has risen, and risen, and risen for a generation or two, and seems to be finally at the point where the first plunge is just beginning. It won't be thrilling for long.

    PS: Obama's administration was just an extreme version of what came before. The USA has been funding its Prosperity Illusion for 35 years by putting everything on the National Mastercard. Rising rates will be the signal that additional purchases are being declined.

    Like the author’s explanation much better. Whitney’s makes sense, and points directly at the perpetrators, who they are and how they were enriched, the reason why it happened, and what stands in the way of a political fix to the problem. Your explanation is a long winded rambling mess that goes nowhere; Austrian economic theory at its most annoying — Fault lies solely with government, and not the privately held “free market” banks, and therefore the answer lies in government austerity, which will adversely affect many in the 99%, and not in punishing, reforming, and regulating the criminal banks and the criminal bankers running them, which would adversely affect the 1% who are using this criminal banking system to rob us all blind. Yada, yada, yada…

    Read More
    • Replies: @dc.sunsets

    Your explanation is a long winded rambling mess that goes nowhere; Austrian economic theory at its most annoying — Fault lies solely with government, and not the privately held “free market” banks, and therefore the answer lies in government austerity, which will adversely affect many in the 99%, and not in punishing, reforming, and regulating the criminal banks and the criminal bankers running them, which would adversely affect the 1% who are using this criminal banking system to rob us all blind. Yada, yada, yada…
     
    Sounds like someone isn't tall enough for this ride.

    My explanation isn't based in Austrian Economics. How you conflate it with that is beyond me, and I must assume you're as ignorant about Austrian Econ as you appear unacquainted with logic.

    The key is inflation, it's a monetary thing, and the two kinds of events that characterize it.

    Whitney discusses macroeconomic effects, which rest on all sorts of causal relationships that are contradictory. If you don't get to the basis for why asset prices are sky high, why financialization appears beneficial, why wages are stagnant and why we've been treated to bull-bear phases in one market after another, then you're just wasting time.

    Sorry I lost you. Concrete thinkers have no hope of grasping my thesis. The whole point is to correctly diagnose the cause, so one can properly position for safety during the denouement. I consider Mr. Whitney's thesis too shallow for utility. Good thing neither you nor I needs to be constrained by the other's insights (or lack thereof.)

    NUKE THE FED!

  63. @Mark F.
    Would you really want to go back to 1967? Things really weren't as good as you think for most people at that time. My dad had a union job then, but we still had very few luxuries . One car, one phone, a small television, and a really a small house with one bathroom and no garage. My father had just purchased his first air conditioner, and I only had a few changes of clothes. We only went out to eat or out to the movies a few times a year. Vacation was a week at a very small cabin in Northern Wisconsin. We weren't poor, but we were hardly very well off.

    where did you get the idea that I want to go back to anywhere in time? I am confused.

    Read More
  64. @Miro23

    Each faction will be arrayed against every other in the political realm, everyone trying to insure it’s others who hold all these hand grenades as they detonate.
     
    I don't think it's so complicated.

    The $ Trillions of US government debt are either going to be paid back with interest or inflated away. They're certainly not going to be paid back, so it just seems to be an inflation question of when and how fast.

    It's true that real assets like office buildings don't disappear in big inflations, but their ownership does change hands.

    I know it’s fashionable to claim a debt can be inflated away, but I submit this is untrue now.

    Inflation is a monetary phenomenon. (I said so in comment #1.)

    Inflation occurs one of two ways: Banknote printing or Credit creation (which is borrowed into monetary existence.)

    Banknote printing is sticky. Cash exists in physical form, and unless it’s burned, more notes simply accumulate, debasing the purchasing power of all existing notes.

    Credit inflation is NOT STICKY. (Please re-read that. NOT STICKY.)

    As long as the Groupthink Hivemind is in trust mode, every new bond acts like new cash. It’s an ASSET similar to “Accounts Receivable.” If interest rates are stable, it dilutes the money supply dollar for dollar (sort of, I imagine there’s wealth effects, too.)

    If rates are dropping (1981 to August of 2016, or THIRTY-FIVE YEARS STRAIGHT) then old bonds actually GAIN in value, almost like having the Twenty Dollar Bills in your pocket adding a Five Dollar Bill once in a while.

    If rates are rising, however, the increase in interest rate reverberates through EVERY BOND IN EXISTENCE. The Fed could monetize $1 billion newly issued T-notes but if the interest rate rises, $1 Trillion worth of capital value could evaporate from the vast pool of pre-existing bonds. This is a very real illustration of the mathematics. It’s just algebra.

    This is what the Fed faces. All Roads Lead To Deflation. They have led there for years, perhaps decades, but the show’s not over until it’s over. People have gone bankrupt betting it was over again, and again, yet here we are.

    Credit money (in the form of bond value) disappears once rates begin to rise in earnest. Just as rates worked lower for 35 years, once they establish an uptrend it will continue until it stops, not because some academic asshats in the Eccles Building wave their magic wands.

    Go to the St. Louis Fed’s FRED website and look at Total Credit Market Debt. That’s the tip of the iceberg, worldwide. The world is now like a huge business that has hundreds of trillions of dollars of assets in “ACCOUNTS RECEIVABLE” but its business model is based on VENDOR FINANCING, where the huge business lends its customers the money they need to buy its stuff.

    The entire world now looks like Enron with a Accounts Receivable the size of Mt. Vesuvius.

    Read More
    • Replies: @Miro23

    The entire world now looks like Enron with a Accounts Receivable the size of Mt. Vesuvius.
     
    I wouldn't disagree with that. The US has spent decades off shoring US employment /US incomes with credit filling the demand gap.

    But QE credit is really aimed at providing cheap money to the US financial/corporate sector. They welcome it and put it straight into their leveraged stocks, bonds and share buybacks = most of it goes to them.

    If it's really the end of the game what are they going to do?

    At the moment they 're sitting on $Trillions of stock and bond profits so logically, 1) they need to realize these profits = sell the financial assets and buy real assets 2) get inflation going to drive up the price of real assets.

    Getting a good (non- stock market) inflation is not so difficult. The FED/Treasury/Government could direct a QE at the public. Just credit every American's bank account with a $10.000 "stimulus" loan and see how spending/inflation takes off - and they'll all be shouting for more.
    , @jag37777
    "Inflation occurs one of two ways: Banknote printing or Credit creation (which is borrowed into monetary existence.)"

    This is the neoclassical (and Austrian) view. It is unsupported by logic or empirical data. Inflation occurs when demand outstrips supply i.e. spending vs real goods and services.
  65. @Clearpoint
    Like the author's explanation much better. Whitney's makes sense, and points directly at the perpetrators, who they are and how they were enriched, the reason why it happened, and what stands in the way of a political fix to the problem. Your explanation is a long winded rambling mess that goes nowhere; Austrian economic theory at its most annoying --- Fault lies solely with government, and not the privately held "free market" banks, and therefore the answer lies in government austerity, which will adversely affect many in the 99%, and not in punishing, reforming, and regulating the criminal banks and the criminal bankers running them, which would adversely affect the 1% who are using this criminal banking system to rob us all blind. Yada, yada, yada...

    Your explanation is a long winded rambling mess that goes nowhere; Austrian economic theory at its most annoying — Fault lies solely with government, and not the privately held “free market” banks, and therefore the answer lies in government austerity, which will adversely affect many in the 99%, and not in punishing, reforming, and regulating the criminal banks and the criminal bankers running them, which would adversely affect the 1% who are using this criminal banking system to rob us all blind. Yada, yada, yada…

    Sounds like someone isn’t tall enough for this ride.

    My explanation isn’t based in Austrian Economics. How you conflate it with that is beyond me, and I must assume you’re as ignorant about Austrian Econ as you appear unacquainted with logic.

    The key is inflation, it’s a monetary thing, and the two kinds of events that characterize it.

    Whitney discusses macroeconomic effects, which rest on all sorts of causal relationships that are contradictory. If you don’t get to the basis for why asset prices are sky high, why financialization appears beneficial, why wages are stagnant and why we’ve been treated to bull-bear phases in one market after another, then you’re just wasting time.

    Sorry I lost you. Concrete thinkers have no hope of grasping my thesis. The whole point is to correctly diagnose the cause, so one can properly position for safety during the denouement. I consider Mr. Whitney’s thesis too shallow for utility. Good thing neither you nor I needs to be constrained by the other’s insights (or lack thereof.)

    NUKE THE FED!

    Read More
  66. @dc.sunsets
    I know it's fashionable to claim a debt can be inflated away, but I submit this is untrue now.

    Inflation is a monetary phenomenon. (I said so in comment #1.)

    Inflation occurs one of two ways: Banknote printing or Credit creation (which is borrowed into monetary existence.)

    Banknote printing is sticky. Cash exists in physical form, and unless it's burned, more notes simply accumulate, debasing the purchasing power of all existing notes.

    Credit inflation is NOT STICKY. (Please re-read that. NOT STICKY.)

    As long as the Groupthink Hivemind is in trust mode, every new bond acts like new cash. It's an ASSET similar to "Accounts Receivable." If interest rates are stable, it dilutes the money supply dollar for dollar (sort of, I imagine there's wealth effects, too.)

    If rates are dropping (1981 to August of 2016, or THIRTY-FIVE YEARS STRAIGHT) then old bonds actually GAIN in value, almost like having the Twenty Dollar Bills in your pocket adding a Five Dollar Bill once in a while.

    If rates are rising, however, the increase in interest rate reverberates through EVERY BOND IN EXISTENCE. The Fed could monetize $1 billion newly issued T-notes but if the interest rate rises, $1 Trillion worth of capital value could evaporate from the vast pool of pre-existing bonds. This is a very real illustration of the mathematics. It's just algebra.

    This is what the Fed faces. All Roads Lead To Deflation. They have led there for years, perhaps decades, but the show's not over until it's over. People have gone bankrupt betting it was over again, and again, yet here we are.

    Credit money (in the form of bond value) disappears once rates begin to rise in earnest. Just as rates worked lower for 35 years, once they establish an uptrend it will continue until it stops, not because some academic asshats in the Eccles Building wave their magic wands.

    Go to the St. Louis Fed's FRED website and look at Total Credit Market Debt. That's the tip of the iceberg, worldwide. The world is now like a huge business that has hundreds of trillions of dollars of assets in "ACCOUNTS RECEIVABLE" but its business model is based on VENDOR FINANCING, where the huge business lends its customers the money they need to buy its stuff.

    The entire world now looks like Enron with a Accounts Receivable the size of Mt. Vesuvius.

    The entire world now looks like Enron with a Accounts Receivable the size of Mt. Vesuvius.

    I wouldn’t disagree with that. The US has spent decades off shoring US employment /US incomes with credit filling the demand gap.

    But QE credit is really aimed at providing cheap money to the US financial/corporate sector. They welcome it and put it straight into their leveraged stocks, bonds and share buybacks = most of it goes to them.

    If it’s really the end of the game what are they going to do?

    At the moment they ‘re sitting on $Trillions of stock and bond profits so logically, 1) they need to realize these profits = sell the financial assets and buy real assets 2) get inflation going to drive up the price of real assets.

    Getting a good (non- stock market) inflation is not so difficult. The FED/Treasury/Government could direct a QE at the public. Just credit every American’s bank account with a $10.000 “stimulus” loan and see how spending/inflation takes off – and they’ll all be shouting for more.

    Read More
  67. Getting a good (non- stock market) inflation is not so difficult. The FED/Treasury/Government could direct a QE at the public. Just credit every American’s bank account with a $10.000 “stimulus” loan and see how spending/inflation takes off – and they’ll all be shouting for more.

    They might be stupid enough to try it, but since when does doubling the money in the Game of Monopoly(tm) produce anything other than higher prices?

    At the moment they ‘re sitting on $Trillions of stock and bond profits so logically, 1) they need to realize these profits

    Now you see the problem I see. If everything in the monetary system is really a debt, and debt starts to fall like dominoes, how do you get off this ride? It’s simply not possible for one class of people to simply exit the game. They’re all trapped, and the hilarious part is, the richer they are, the more they cannot withdraw. What are they going to do, sell a few office buildings, a nine-figure portfolio and a billion in bonds and convert it to………$100 bills? Or gold, which in relation to bonds is a fly-spec of a market that in a credit collapse may be in its own entertaining bear market?

    So Warren Buffett “cashes out.” TO WHAT? An account at Bank of America? The whole point is that when this volcano blows, the banks will be at the epicenter. A bank account is still just another loan, and it’s a loan to a firm that reloaned out all of those proceeds to people who can’t pay up. Best case scenario is the banks end up owning a whole lot of real estate whose value has gone into the dirt.

    Bail-ins are simply accounting recognition that depositors’ funds were lent out and cannot be recovered. This is true for Joe Sixpack’s $500 and Warren Buffet’s $50,000,000,000.00 Yes, I’m aware that Buffet can buy himself a few Congressmen and may get special treatment, but in principle this all applies.

    We haven’t seen anything like this before. This is truly uncharted territory, as there has never before been a 35 year bond bull market during a period of FIAT money.

    As I said, almost all wealth is now actually an asset in the form of receivables, but those receivables depend on endless counterparties being able to pay when the time comes, and all THEIR wealth is also in the form of those receivables. If it sounds like circular logic, that’s because it is. This is why I laugh when the “cash position” of corporations is discussed; it’s not like they’re sitting on piles of $100′s. They hold debt, a lot of it is each other’s debt. It makes my eyes cross, laughing about it.

    As long as cash-outs are few and small, no one notices that there’s literally no way to make all this work. It is the very definition of a Pyramid Scheme, disguised as a monetary system. It was viable only as long as the bond bull market lasted. People got filthy rich, and it warped economic activity and even politics. But it’s not viable forever.

    Maybe I’m wrong, but I do not think the largest single market in the world, the debt market, is under the control of any group of men anywhere. Markets rise and markets fall, and collusion where it occurs only lasts for brief periods. In the end, Mr. Market is a product of mass psychology and last I looked, people aren’t becoming LESS collectively crazy.

    Read More
    • Replies: @Miro23

    They might be stupid enough to try it, but since when does doubling the money in the Game of Monopoly(tm) produce anything other than higher prices?
     
    Increase the money 2x and you increase prices 2x but the interesting part is that the public doesn't see it at first.

    They just see that yesterday they had $0 in their account and today they have $10.000, so they immediately go out and spend it = a surge in real economic activity as businesses of every kind are flooded with orders and hire more staff.

    Such a success that QE Public needs to be repeated, but like QE Banking it has its limits.

    It's still debt, and the test for a loan/debt is the same as it has always been: "Has the money been invested in a viable project that can pay back the loan with interest?" The answer is NO (QE Banking and QE Public), so it's BAD DEBT that collapses in value through one route or another.

    The traditional way would be to inflate it away with a worthless dollar so that the government could at least pretend to honour its welfare payments, government salaries etc.
  68. http://www.globalresearch.ca/neoliberalism-and-the-new-world-order-imf-world-bank-reforms/5572157

    “Why is Wall Street or the United States against a nation’s sovereignty?”
    Michel Chossudovsky: “That’s a very important question and it really has to do with monetary policy. Monetary policy really defines the sovereignty of a country. It’s the ability of a country to actually finance its own development through lending to the private sector, the building of public infrastructure and so on. To do that, you have to be able to increase the levels of internal debt. We do it in the United States and Canada and so on. We use debt operations to fund the infrastructure, roads, schools and hospitals.
    But what is at stake in developing countries is that the currency is dollarized and in currency markets it’s upheld by dollar-denominated debts, which have to be incurred to support the currency. So that when you start expanding the money supply to finance development – it’s a difficult and complex mechanism – you really have to borrow in dollars, and really what it means is that your currency really is a proxy. It’s a dollarized currency, so that each time you want to build a road or a bridge or a hydroelectric complex using your domestic resources, you have to increase your indebtedness in dollar terms. In other words, the internal debt becomes a foreign debt. That is ultimately what happened in Brazil “

    Read More
  69. @animalogic
    What you say is very thought provoking.
    "By 1964 people were so besotted with rising living standards and such (much of it an artifact of being the only modern economy not bombed into the Stone Age by WW2) that Utopian Fantasies and the Jungian archetype of flight took hold."
    Now I won't excuse average "besotted" people -- but, did the average voter choose neo-liberalism or were they tricked ?
    Capitalism (& neoliberalism especially) is a system which best gives play to people's baser instincts. As we have clearly seen our current system is one that is a celebration of corruption: GFC, QE, NIRP etc etc. Corruption is, of course, not merely an ethical issue, it's also an indicator of systemic "health".
    Were average people duped ? Or were they so self absorbed that they didn't care as their countries went down the sluice ? Consider just how well Elites market themselves -- the MSM is their TOOL. Why did Christians & progressives embrace every lesser issue rather than the # 1 issue: economic justice ?
    But, some countries embraced neoliberalism more than others. Why ? Culture ? Preexisting material advantages ?
    I simply don't know.

    “Were average people duped ? Or were they so self absorbed that they didn’t care as their countries went down the sluice ?”

    There is nothing “neo” in the neoliberalism. Marx and Dickens would recognize neoliberalism right away. They’d rather be surprised by the period when capitalism was constrained by regulations and trade unions. But this was just the phase. Thatcher and then Reagan started reclaiming back the freedom for capitalism. Unions were busted, worker wages were liberated and corporations were shut down and moved to places with lower wages. In the US Rust Belt was first transferred to Southern states and later to Mexico and then Asia. And yes, people were duped. In this a prominent role was played by libertarian ideology particularly among young who were the most susceptible to it. Any social paradigm shift always hinges on the masses of useful idiots. Now some of them are waking up. But it is too late.

    Read More
  70. @dc.sunsets

    Getting a good (non- stock market) inflation is not so difficult. The FED/Treasury/Government could direct a QE at the public. Just credit every American’s bank account with a $10.000 “stimulus” loan and see how spending/inflation takes off – and they’ll all be shouting for more.
     
    They might be stupid enough to try it, but since when does doubling the money in the Game of Monopoly(tm) produce anything other than higher prices?


    At the moment they ‘re sitting on $Trillions of stock and bond profits so logically, 1) they need to realize these profits
     
    Now you see the problem I see. If everything in the monetary system is really a debt, and debt starts to fall like dominoes, how do you get off this ride? It's simply not possible for one class of people to simply exit the game. They're all trapped, and the hilarious part is, the richer they are, the more they cannot withdraw. What are they going to do, sell a few office buildings, a nine-figure portfolio and a billion in bonds and convert it to.........$100 bills? Or gold, which in relation to bonds is a fly-spec of a market that in a credit collapse may be in its own entertaining bear market?

    So Warren Buffett "cashes out." TO WHAT? An account at Bank of America? The whole point is that when this volcano blows, the banks will be at the epicenter. A bank account is still just another loan, and it's a loan to a firm that reloaned out all of those proceeds to people who can't pay up. Best case scenario is the banks end up owning a whole lot of real estate whose value has gone into the dirt.

    Bail-ins are simply accounting recognition that depositors' funds were lent out and cannot be recovered. This is true for Joe Sixpack's $500 and Warren Buffet's $50,000,000,000.00 Yes, I'm aware that Buffet can buy himself a few Congressmen and may get special treatment, but in principle this all applies.

    We haven't seen anything like this before. This is truly uncharted territory, as there has never before been a 35 year bond bull market during a period of FIAT money.

    As I said, almost all wealth is now actually an asset in the form of receivables, but those receivables depend on endless counterparties being able to pay when the time comes, and all THEIR wealth is also in the form of those receivables. If it sounds like circular logic, that's because it is. This is why I laugh when the "cash position" of corporations is discussed; it's not like they're sitting on piles of $100's. They hold debt, a lot of it is each other's debt. It makes my eyes cross, laughing about it.

    As long as cash-outs are few and small, no one notices that there's literally no way to make all this work. It is the very definition of a Pyramid Scheme, disguised as a monetary system. It was viable only as long as the bond bull market lasted. People got filthy rich, and it warped economic activity and even politics. But it's not viable forever.

    Maybe I'm wrong, but I do not think the largest single market in the world, the debt market, is under the control of any group of men anywhere. Markets rise and markets fall, and collusion where it occurs only lasts for brief periods. In the end, Mr. Market is a product of mass psychology and last I looked, people aren't becoming LESS collectively crazy.

    They might be stupid enough to try it, but since when does doubling the money in the Game of Monopoly(tm) produce anything other than higher prices?

    Increase the money 2x and you increase prices 2x but the interesting part is that the public doesn’t see it at first.

    They just see that yesterday they had $0 in their account and today they have $10.000, so they immediately go out and spend it = a surge in real economic activity as businesses of every kind are flooded with orders and hire more staff.

    Such a success that QE Public needs to be repeated, but like QE Banking it has its limits.

    It’s still debt, and the test for a loan/debt is the same as it has always been: “Has the money been invested in a viable project that can pay back the loan with interest?” The answer is NO (QE Banking and QE Public), so it’s BAD DEBT that collapses in value through one route or another.

    The traditional way would be to inflate it away with a worthless dollar so that the government could at least pretend to honour its welfare payments, government salaries etc.

    Read More
    • Replies: @dc.sunsets
    I agree. You and I both say the same thing: the Debt Delusion has so warped the capital structure of production that all QE or "helicopter money" does is worsen capital consumption.

    I liken it to a large farm. When money was honest (prior to 1964, frankly) if the farmer hosted a party, people showed up, cooked some pigs intended for market, baked some bread made from grain intended for market, drank some beer brewed from....you guess it....and then at midnight everyone went home because they were tired and all the food, drink, etc., intended for consumption was used up.

    The farm continued as before.

    With FIAT and Debt, the party-goers started to tire at 11 PM but the Fed came in and spiked the punchbowl with methamphetamines. The party kept going and going and going. Eventually people slaughtered and cooked the breeding stock, consumed the seed corn, and the party is now going on so long that they're breaking up the barn and the farmhouse for kindling to keep the bonfires burning.

    When this vast delusion finally ends, party-goers, the Fed and the farmer wake up and realize there's NO FARM LEFT to supply tomorrow's meat, tomorrow's bread or tomorrow's beer.

    Say's Law is inviolate. This debt-orgy isn't "consuming the future," because the future has not yet been produced. You can't eat eggs the chicken hasn't laid.

    This debt-orgy is "consuming the NOW." It is consuming the seed corn and the breeding stock, the very capital on which future production depends, because this debt-orgy is fueling consumption, not capital formation.

    I really, truly don't understand why this is not self-evident.

    [The USA famously spends vastly more $$$ on medical services than anyone else. This is the Poster Child for a consumption-obsessed economy. 50 years of pushing more "investment" into pure consumptive industries is exactly what I mean by the farm metaphor.]

  71. @Miro23

    They might be stupid enough to try it, but since when does doubling the money in the Game of Monopoly(tm) produce anything other than higher prices?
     
    Increase the money 2x and you increase prices 2x but the interesting part is that the public doesn't see it at first.

    They just see that yesterday they had $0 in their account and today they have $10.000, so they immediately go out and spend it = a surge in real economic activity as businesses of every kind are flooded with orders and hire more staff.

    Such a success that QE Public needs to be repeated, but like QE Banking it has its limits.

    It's still debt, and the test for a loan/debt is the same as it has always been: "Has the money been invested in a viable project that can pay back the loan with interest?" The answer is NO (QE Banking and QE Public), so it's BAD DEBT that collapses in value through one route or another.

    The traditional way would be to inflate it away with a worthless dollar so that the government could at least pretend to honour its welfare payments, government salaries etc.

    I agree. You and I both say the same thing: the Debt Delusion has so warped the capital structure of production that all QE or “helicopter money” does is worsen capital consumption.

    I liken it to a large farm. When money was honest (prior to 1964, frankly) if the farmer hosted a party, people showed up, cooked some pigs intended for market, baked some bread made from grain intended for market, drank some beer brewed from….you guess it….and then at midnight everyone went home because they were tired and all the food, drink, etc., intended for consumption was used up.

    The farm continued as before.

    With FIAT and Debt, the party-goers started to tire at 11 PM but the Fed came in and spiked the punchbowl with methamphetamines. The party kept going and going and going. Eventually people slaughtered and cooked the breeding stock, consumed the seed corn, and the party is now going on so long that they’re breaking up the barn and the farmhouse for kindling to keep the bonfires burning.

    When this vast delusion finally ends, party-goers, the Fed and the farmer wake up and realize there’s NO FARM LEFT to supply tomorrow’s meat, tomorrow’s bread or tomorrow’s beer.

    Say’s Law is inviolate. This debt-orgy isn’t “consuming the future,” because the future has not yet been produced. You can’t eat eggs the chicken hasn’t laid.

    This debt-orgy is “consuming the NOW.” It is consuming the seed corn and the breeding stock, the very capital on which future production depends, because this debt-orgy is fueling consumption, not capital formation.

    I really, truly don’t understand why this is not self-evident.

    [The USA famously spends vastly more $$$ on medical services than anyone else. This is the Poster Child for a consumption-obsessed economy. 50 years of pushing more "investment" into pure consumptive industries is exactly what I mean by the farm metaphor.]

    Read More
    • Replies: @jag37777
    QE is not 'helicopter money'. QE merely swaps bonds for reserves i.e. no new money created. Helicopter money referred to marking up deposit accounts in the private sector i.e. fiscal stimulus.
  72. Anon says:     Show CommentNext New Comment
    @dc.sunsets
    For Pete's sake, stop calling rising prices (or wages) inflation.

    Inflation is a monetary phenomenon; I thought this was the dictionary definition.

    Rising prices (and wages are the price for labor) are a common symptom of inflation, but as we've seen for decades, like an old person with pneumonia often doesn't run a fever, astronomical monetary inflation in the form of credit creation didn't produce rising prices for goods, services or labor.

    Why?

    Immigrant-invasion. Export of manufacturing to low-cost countries lead to the proliferation of lower-paying jobs in the USA and the WalMart-ization of consumer goods prices (everything made in China.) And a Federal Government freed of the need to first collect via taxation what its managers spent in creating an ostensibly private, but in reality bought-and-paid-for Political Patronage Army while showering debt-loot on campaign contributors.

    That credit inflation was the Biggest Feedback Loop in Monetary History. Borrowing created bonds, and bonds were deemed wealth. The more government, business and citizens borrowed, the RICHER EVERYONE FELT!

    As long as the bond market was in a secular bull phase (dating from 1981), owning someone's debt was like a license to print money. The "wealth effect" of filling a veritable OCEAN of bonds created mass-minded "liquidity" able to slosh from one sub-market to another, creating massive booms (and occasional busts) in stocks, real estate, farmland, the metals and commodities, one bull/bear after another for 35 straight years.

    It was collective faith (herding behavior) in the "good-as-gold" Bond Market that underpinned all of this.

    Rising CPI prices would have signaled an end to the Bond Bull, so either by design or as part of the larger mania, for decades we saw religious-like devotion to "free trade" (AKA ship them our factories and then buy their cheap crap to disguise collapsing living standards) and the rise of service jobs---including highly skilled, well-paying medical service jobs that only exist because Congress can (you guessed it) spend and spend and spend without having to TAX first.

    This looks like a virtuous feedback loop. It's not.

    When interest rates are high, the bond ocean will be but a small puddle. Changes in rates ripple across the surface, but have relatively little effect. But 35 years of relentlessly dropping interest rates, combined with FIAT money and a social mood mania for the record books, has filled a BOND OCEAN, and even small increases in rates have HIGHLY leveraged effects on that ocean's capital value. Rates on the 10 year T-note have literally DOUBLED since August, bleeding off unimaginable amounts of capital value from the existing debt.

    If the Bond Bull Market ended last summer (as all indicators suggest), the trend toward higher rates is going to utterly destroy tens, if not eventually hundreds of trillions of dollars of "wealth" people believe now resides in their bond holdings. We simply have no historical antecedent for what's coming and cannot possibly be prevented.

    What credit inflation gives, credit deflation inevitably will take away. The only relevant question all along was, "WHEN?"

    Credit inflation is a state of collective mind. Unlike banknote inflation, which produces paper notes that exist in the physical world, credit inflation creates "money" that can (and does and will) evaporate every time interest rates pop higher. The closest metaphor would be if the money in your wallet could literally evaporate overnight. Banknote inflation destroys purchasing power by producing more banknotes to compete with ever previously existing banknote. Credit inflation does the same thing on the way up, but once credit deflation begins, NO FORCE ON EARTH can reverse it because it's simply a collective state of mind.

    Buckle up. This roller-coaster has risen, and risen, and risen for a generation or two, and seems to be finally at the point where the first plunge is just beginning. It won't be thrilling for long.

    PS: Obama's administration was just an extreme version of what came before. The USA has been funding its Prosperity Illusion for 35 years by putting everything on the National Mastercard. Rising rates will be the signal that additional purchases are being declined.

    Merriam-Webster on inflation: “a continuing rise in the general price level” (def. 2)

    Read More
    • Replies: @dc.sunsets
    Goes to show you that stupid is everywhere.

    Is rising altitude of boats a tide? Or is it a movement of water?

    /Facedesk

    FTR, do you concur with the dictionary people, and that absent a rise in the general price level (normally assumed to apply only to consumer or producer goods, i.e., CPI & PPI), a vast increase in the supply of money flowing into asset prices is NOT an inflationary event?
  73. @Anon
    Merriam-Webster on inflation: "a continuing rise in the general price level" (def. 2)

    Goes to show you that stupid is everywhere.

    Is rising altitude of boats a tide? Or is it a movement of water?

    /Facedesk

    FTR, do you concur with the dictionary people, and that absent a rise in the general price level (normally assumed to apply only to consumer or producer goods, i.e., CPI & PPI), a vast increase in the supply of money flowing into asset prices is NOT an inflationary event?

    Read More
    • Replies: @Anon
    Well M-W does say that inflation is

    usually attributed to an increase in the volume of money and credit relative to available goods and services
     
    I think the whole thing is an is-a-whale-a-fish kind of question, there being one name for too many things. Isn't what you describe also sometimes referred to as credit expansion?

    https://mises.org/library/credit-expansion-vs-simple-inflation : maybe why the other guy bizarrely referred to you as an Austrian, I don't know.

    I'm not an economist, and I gave up halfway through Ricardo, so I claim no expertise, but aren't you and Whitney and Miro saying much the same thing? The government is taking extraordinary (and harmful) measures to prevent the price inflation that would be the normal result of this massive and unsustainable debt expansion? So that rather than wages (and consequently prices) rising, the actual value of work performed is going down?

  74. Anon says:     Show CommentNext New Comment
    @dc.sunsets
    Goes to show you that stupid is everywhere.

    Is rising altitude of boats a tide? Or is it a movement of water?

    /Facedesk

    FTR, do you concur with the dictionary people, and that absent a rise in the general price level (normally assumed to apply only to consumer or producer goods, i.e., CPI & PPI), a vast increase in the supply of money flowing into asset prices is NOT an inflationary event?

    Well M-W does say that inflation is

    usually attributed to an increase in the volume of money and credit relative to available goods and services

    I think the whole thing is an is-a-whale-a-fish kind of question, there being one name for too many things. Isn’t what you describe also sometimes referred to as credit expansion?

    https://mises.org/library/credit-expansion-vs-simple-inflation : maybe why the other guy bizarrely referred to you as an Austrian, I don’t know.

    I’m not an economist, and I gave up halfway through Ricardo, so I claim no expertise, but aren’t you and Whitney and Miro saying much the same thing? The government is taking extraordinary (and harmful) measures to prevent the price inflation that would be the normal result of this massive and unsustainable debt expansion? So that rather than wages (and consequently prices) rising, the actual value of work performed is going down?

    Read More
    • Replies: @dc.sunsets
    You may be right.

    I really don't know if CPI & PPI "inflation" is actively being suppressed or if there are simply larger, endogenous forces involved. My thesis is that conditions these past 30+ years are highly unusual, probably unprecedented.

    Frankly, my rants about all this arise from the terror of economic insecurity. I can't get any yield on savings, I see signs of extraordinary risk in stocks & debt securities and I see nothing but arithmetic impossibility in my accounts receivable (pensions.)

    I doubt work is less valuable. The share of gdp going to wages is in free fall, with it being diverted to corporate bottom lines as a consequence of the financialization game.

    In the end, I think this debt bubble is simply a consequence of manic trust, itself a product of a mass social mania. I think it will end, and end badly.

    , @dc.sunsets
    BTW, absolutely what I decry is a credit expansion. It's the mother of all credit expansions. But I submit it's more, and worse than that.

    All debt currently behaves like an accounts receivable asset, valued at nearly 100 cents on the dollar. This has the bizarre effect of making the borowing of money for any purpose, including just pumping stock prices via share buybacks as tantamount to creating wealth.

    Logically, that's absurd. Yet it has worked for over a generation. I can't be the only person who looks at this and wonders what consequences must follow.
  75. @Anon
    Well M-W does say that inflation is

    usually attributed to an increase in the volume of money and credit relative to available goods and services
     
    I think the whole thing is an is-a-whale-a-fish kind of question, there being one name for too many things. Isn't what you describe also sometimes referred to as credit expansion?

    https://mises.org/library/credit-expansion-vs-simple-inflation : maybe why the other guy bizarrely referred to you as an Austrian, I don't know.

    I'm not an economist, and I gave up halfway through Ricardo, so I claim no expertise, but aren't you and Whitney and Miro saying much the same thing? The government is taking extraordinary (and harmful) measures to prevent the price inflation that would be the normal result of this massive and unsustainable debt expansion? So that rather than wages (and consequently prices) rising, the actual value of work performed is going down?

    You may be right.

    I really don’t know if CPI & PPI “inflation” is actively being suppressed or if there are simply larger, endogenous forces involved. My thesis is that conditions these past 30+ years are highly unusual, probably unprecedented.

    Frankly, my rants about all this arise from the terror of economic insecurity. I can’t get any yield on savings, I see signs of extraordinary risk in stocks & debt securities and I see nothing but arithmetic impossibility in my accounts receivable (pensions.)

    I doubt work is less valuable. The share of gdp going to wages is in free fall, with it being diverted to corporate bottom lines as a consequence of the financialization game.

    In the end, I think this debt bubble is simply a consequence of manic trust, itself a product of a mass social mania. I think it will end, and end badly.

    Read More
  76. @Anon
    Well M-W does say that inflation is

    usually attributed to an increase in the volume of money and credit relative to available goods and services
     
    I think the whole thing is an is-a-whale-a-fish kind of question, there being one name for too many things. Isn't what you describe also sometimes referred to as credit expansion?

    https://mises.org/library/credit-expansion-vs-simple-inflation : maybe why the other guy bizarrely referred to you as an Austrian, I don't know.

    I'm not an economist, and I gave up halfway through Ricardo, so I claim no expertise, but aren't you and Whitney and Miro saying much the same thing? The government is taking extraordinary (and harmful) measures to prevent the price inflation that would be the normal result of this massive and unsustainable debt expansion? So that rather than wages (and consequently prices) rising, the actual value of work performed is going down?

    BTW, absolutely what I decry is a credit expansion. It’s the mother of all credit expansions. But I submit it’s more, and worse than that.

    All debt currently behaves like an accounts receivable asset, valued at nearly 100 cents on the dollar. This has the bizarre effect of making the borowing of money for any purpose, including just pumping stock prices via share buybacks as tantamount to creating wealth.

    Logically, that’s absurd. Yet it has worked for over a generation. I can’t be the only person who looks at this and wonders what consequences must follow.

    Read More
  77. @dc.sunsets
    For Pete's sake, stop calling rising prices (or wages) inflation.

    Inflation is a monetary phenomenon; I thought this was the dictionary definition.

    Rising prices (and wages are the price for labor) are a common symptom of inflation, but as we've seen for decades, like an old person with pneumonia often doesn't run a fever, astronomical monetary inflation in the form of credit creation didn't produce rising prices for goods, services or labor.

    Why?

    Immigrant-invasion. Export of manufacturing to low-cost countries lead to the proliferation of lower-paying jobs in the USA and the WalMart-ization of consumer goods prices (everything made in China.) And a Federal Government freed of the need to first collect via taxation what its managers spent in creating an ostensibly private, but in reality bought-and-paid-for Political Patronage Army while showering debt-loot on campaign contributors.

    That credit inflation was the Biggest Feedback Loop in Monetary History. Borrowing created bonds, and bonds were deemed wealth. The more government, business and citizens borrowed, the RICHER EVERYONE FELT!

    As long as the bond market was in a secular bull phase (dating from 1981), owning someone's debt was like a license to print money. The "wealth effect" of filling a veritable OCEAN of bonds created mass-minded "liquidity" able to slosh from one sub-market to another, creating massive booms (and occasional busts) in stocks, real estate, farmland, the metals and commodities, one bull/bear after another for 35 straight years.

    It was collective faith (herding behavior) in the "good-as-gold" Bond Market that underpinned all of this.

    Rising CPI prices would have signaled an end to the Bond Bull, so either by design or as part of the larger mania, for decades we saw religious-like devotion to "free trade" (AKA ship them our factories and then buy their cheap crap to disguise collapsing living standards) and the rise of service jobs---including highly skilled, well-paying medical service jobs that only exist because Congress can (you guessed it) spend and spend and spend without having to TAX first.

    This looks like a virtuous feedback loop. It's not.

    When interest rates are high, the bond ocean will be but a small puddle. Changes in rates ripple across the surface, but have relatively little effect. But 35 years of relentlessly dropping interest rates, combined with FIAT money and a social mood mania for the record books, has filled a BOND OCEAN, and even small increases in rates have HIGHLY leveraged effects on that ocean's capital value. Rates on the 10 year T-note have literally DOUBLED since August, bleeding off unimaginable amounts of capital value from the existing debt.

    If the Bond Bull Market ended last summer (as all indicators suggest), the trend toward higher rates is going to utterly destroy tens, if not eventually hundreds of trillions of dollars of "wealth" people believe now resides in their bond holdings. We simply have no historical antecedent for what's coming and cannot possibly be prevented.

    What credit inflation gives, credit deflation inevitably will take away. The only relevant question all along was, "WHEN?"

    Credit inflation is a state of collective mind. Unlike banknote inflation, which produces paper notes that exist in the physical world, credit inflation creates "money" that can (and does and will) evaporate every time interest rates pop higher. The closest metaphor would be if the money in your wallet could literally evaporate overnight. Banknote inflation destroys purchasing power by producing more banknotes to compete with ever previously existing banknote. Credit inflation does the same thing on the way up, but once credit deflation begins, NO FORCE ON EARTH can reverse it because it's simply a collective state of mind.

    Buckle up. This roller-coaster has risen, and risen, and risen for a generation or two, and seems to be finally at the point where the first plunge is just beginning. It won't be thrilling for long.

    PS: Obama's administration was just an extreme version of what came before. The USA has been funding its Prosperity Illusion for 35 years by putting everything on the National Mastercard. Rising rates will be the signal that additional purchases are being declined.

    Thank You.

    Read More
  78. @dc.sunsets
    I agree. You and I both say the same thing: the Debt Delusion has so warped the capital structure of production that all QE or "helicopter money" does is worsen capital consumption.

    I liken it to a large farm. When money was honest (prior to 1964, frankly) if the farmer hosted a party, people showed up, cooked some pigs intended for market, baked some bread made from grain intended for market, drank some beer brewed from....you guess it....and then at midnight everyone went home because they were tired and all the food, drink, etc., intended for consumption was used up.

    The farm continued as before.

    With FIAT and Debt, the party-goers started to tire at 11 PM but the Fed came in and spiked the punchbowl with methamphetamines. The party kept going and going and going. Eventually people slaughtered and cooked the breeding stock, consumed the seed corn, and the party is now going on so long that they're breaking up the barn and the farmhouse for kindling to keep the bonfires burning.

    When this vast delusion finally ends, party-goers, the Fed and the farmer wake up and realize there's NO FARM LEFT to supply tomorrow's meat, tomorrow's bread or tomorrow's beer.

    Say's Law is inviolate. This debt-orgy isn't "consuming the future," because the future has not yet been produced. You can't eat eggs the chicken hasn't laid.

    This debt-orgy is "consuming the NOW." It is consuming the seed corn and the breeding stock, the very capital on which future production depends, because this debt-orgy is fueling consumption, not capital formation.

    I really, truly don't understand why this is not self-evident.

    [The USA famously spends vastly more $$$ on medical services than anyone else. This is the Poster Child for a consumption-obsessed economy. 50 years of pushing more "investment" into pure consumptive industries is exactly what I mean by the farm metaphor.]

    QE is not ‘helicopter money’. QE merely swaps bonds for reserves i.e. no new money created. Helicopter money referred to marking up deposit accounts in the private sector i.e. fiscal stimulus.

    Read More
    • Replies: @dc.sunsets
    Bull. QE is swapping one debt for another. Reserves are what? Exactly? Land? Gold? Oil? No. The central bank's reserves are Treasuries. AKA bonds, AKA IOUs, AKA debt.

    Talk about a house of cards. The USSR lived almost 70 years beyond when Mises irrefutably proved the impossibility of economic calculation without factor prices. This 50 year trip up a blind alley in monetary theory will also prove no less a mirage than the once widely believed Soviet miracle. Popular Delusion indeed.
  79. @dc.sunsets
    I know it's fashionable to claim a debt can be inflated away, but I submit this is untrue now.

    Inflation is a monetary phenomenon. (I said so in comment #1.)

    Inflation occurs one of two ways: Banknote printing or Credit creation (which is borrowed into monetary existence.)

    Banknote printing is sticky. Cash exists in physical form, and unless it's burned, more notes simply accumulate, debasing the purchasing power of all existing notes.

    Credit inflation is NOT STICKY. (Please re-read that. NOT STICKY.)

    As long as the Groupthink Hivemind is in trust mode, every new bond acts like new cash. It's an ASSET similar to "Accounts Receivable." If interest rates are stable, it dilutes the money supply dollar for dollar (sort of, I imagine there's wealth effects, too.)

    If rates are dropping (1981 to August of 2016, or THIRTY-FIVE YEARS STRAIGHT) then old bonds actually GAIN in value, almost like having the Twenty Dollar Bills in your pocket adding a Five Dollar Bill once in a while.

    If rates are rising, however, the increase in interest rate reverberates through EVERY BOND IN EXISTENCE. The Fed could monetize $1 billion newly issued T-notes but if the interest rate rises, $1 Trillion worth of capital value could evaporate from the vast pool of pre-existing bonds. This is a very real illustration of the mathematics. It's just algebra.

    This is what the Fed faces. All Roads Lead To Deflation. They have led there for years, perhaps decades, but the show's not over until it's over. People have gone bankrupt betting it was over again, and again, yet here we are.

    Credit money (in the form of bond value) disappears once rates begin to rise in earnest. Just as rates worked lower for 35 years, once they establish an uptrend it will continue until it stops, not because some academic asshats in the Eccles Building wave their magic wands.

    Go to the St. Louis Fed's FRED website and look at Total Credit Market Debt. That's the tip of the iceberg, worldwide. The world is now like a huge business that has hundreds of trillions of dollars of assets in "ACCOUNTS RECEIVABLE" but its business model is based on VENDOR FINANCING, where the huge business lends its customers the money they need to buy its stuff.

    The entire world now looks like Enron with a Accounts Receivable the size of Mt. Vesuvius.

    “Inflation occurs one of two ways: Banknote printing or Credit creation (which is borrowed into monetary existence.)”

    This is the neoclassical (and Austrian) view. It is unsupported by logic or empirical data. Inflation occurs when demand outstrips supply i.e. spending vs real goods and services.

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    • Replies: @dc.sunsets
    When you explain how demand can outstrip supply absent an increase in currency or credit, get back to me.

    Are you positing Say's Law is wrong? Are you claiming production need not precede consumption? How does one enter the market without having prior product to exchange, borrowing someone else's product---or fraud, aka using script created out of thin air by the monetary authority?

    The only way demand can outstrip supply is if "money" is increased without regard to production...which is exactly what I said.

    Modern macroeconomic theory is a beautiful, labyrinthine construct of absurdity.
  80. @jag37777
    "Inflation occurs one of two ways: Banknote printing or Credit creation (which is borrowed into monetary existence.)"

    This is the neoclassical (and Austrian) view. It is unsupported by logic or empirical data. Inflation occurs when demand outstrips supply i.e. spending vs real goods and services.

    When you explain how demand can outstrip supply absent an increase in currency or credit, get back to me.

    Are you positing Say’s Law is wrong? Are you claiming production need not precede consumption? How does one enter the market without having prior product to exchange, borrowing someone else’s product—or fraud, aka using script created out of thin air by the monetary authority?

    The only way demand can outstrip supply is if “money” is increased without regard to production…which is exactly what I said.

    Modern macroeconomic theory is a beautiful, labyrinthine construct of absurdity.

    Read More
  81. @jag37777
    QE is not 'helicopter money'. QE merely swaps bonds for reserves i.e. no new money created. Helicopter money referred to marking up deposit accounts in the private sector i.e. fiscal stimulus.

    Bull. QE is swapping one debt for another. Reserves are what? Exactly? Land? Gold? Oil? No. The central bank’s reserves are Treasuries. AKA bonds, AKA IOUs, AKA debt.

    Talk about a house of cards. The USSR lived almost 70 years beyond when Mises irrefutably proved the impossibility of economic calculation without factor prices. This 50 year trip up a blind alley in monetary theory will also prove no less a mirage than the once widely believed Soviet miracle. Popular Delusion indeed.

    Read More
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