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Z Man also suspects things are coming to a head:

The central banks remain the most important government institutions on earth and this is particularly true of the Federal Reserve. They control the global economy, because they control the supply of money and credit. This is why the massive intervention into the credit markets by the Federal Reserve recently should be front page news. Something very big is happening and no one seems to know why, but the Fed is responding to it with $500 billion in new money.

Now, they are not just printing up cash and throwing it out the window. Instead, they are intervening in the repo market to head-off a market crash. For those who don’t know, the repo market is not where repossessed items are sold. The word “repo” is slang for repurchase agreement. A repurchase agreement is a short-term funding mechanism where one party needing cash, sells an asset to a party for cash, with an agreement to repurchase the asset at an agreed upon price.

Since the financial system is like a watch with gears interlocking with gears, one gear seizing up has the potential to seize up all the other gears. A frozen repo market could result in a cash crunch for banks, which locks up business and retail lending. That locks up the Main Street economy and we’re looking at bread lines. The economy, as we understand it, relies on a steady supply of money and credit freely flowing through the system according to the rules established by central banks.

The Federal Reserve is cornered. It cannot go to nominally negative interest rates. Doing so will cause a global bank run on cash reserves. Those cash reserves do not exist. They’re nowhere close to existing. Not even one dollar in one-hundred exists. And they cannot exist without unfathomably massive dollar printing.

But the Fed can’t raise rates, either. As we saw in late 2018, even approaching 3% sends markets crashing. The Fed is stuck in the narrow range between just over 0% and just under 2%. The rate has to be kept nominally positive but negative in real terms. Any deviancy outside of the restrictive range and the system collapses.

This is why the Fed has been trying to move the goal posts on targeted inflation. The ceiling used to be 2%. Now 2% is the alleged target and the Fed is claiming the right to carry forward the difference from prior years when measured consumer price inflation was under 2%!

When I say the Fed has no more arrows in the quiver, no more tools in the toolkit, this is what I mean.

Even if the Fed wanted to raise rates and brace the economy for the subsequent financial pain, doing so will destroy the dollar. About 8% of the federal budget currently goes to interest on the national debt. Treble or quadruple the funds rate, and the percentage of the budget devoted to net interest skyrockets to one-quarter or one-third of all federal outlays. The same thing will happen at state and local levels. The illusion that treasury debt is the safest asset in the world will shatter and the dollar will, too.

 
• Category: Economics • Tags: Economics 
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  1. The privately-controlled Federal Reserve Bank must be NATIONALIZED NOW!

    • Replies: @Svevlad
    Even if you nationalize it and give it to omniscient AI, it won't save you.

    The entire world economy is FAKE. The bubble burst isn't even a real bubble it's just reseting everything back to where it should be
    , @MikeatMikedotMike
    And only Tulsi's mediocre looks can do it!

    FAPPING FOR TULSI 2020!

    https://www.sott.net/image/s26/521703/large/5cd59fa8fc7e93d4778b4584.jpg

    , @SFG
    So the Dems control it? You want Bernie Sanders in charge of the Fed?
  2. The most interesting alternative historical scenario that I can think of – that is if you could actually look through a portal and see – it is the rather hum-drum one of what the West would look like if it had never gotten off gold.

    • Replies: @for-the-record
    So what do you see in your crystal ball?
  3. Hmmmm . . . I would not locate my comments and references to this from about two weeks ago or maybe a week ago

    But this is not about the fed being cornered. it’;s about the huge deficits created by buy backs and the fed is bailing out the economy, quietly to avoid panic.

    Here’s that article again from Dec 12

    https://wallstreetonparade.com/2019/12/congress-held-a-hearing-on-the-feds-bailout-of-the-repo-market-heres-why-you-havent-heard-about-it/

  4. The federal government is already bankrupt. Whether it inflates away the debt or engages in a partial default it’s basically the same thing. I would do the partial default and tax stock profits to retrieve some of the ill gotten gains from the stock market bubble in order to pay off the rest of the debt. Raising interest rates would be deflationary which would decrease trade deficits. In 1990 the U.S. had very small trade deficits with Canada and Mexico. Twenty five years later it had huge trade deficits with Mexico but not Canada. If free trade and free trade agreements like NAFTA cause trade deficits, as protectionists claim, the U.S. would have had big trade deficits with both. The real cause of the trade deficits? Currency manipulation. Mexico trashed its currency. The exchange rate went from 3:1 to 20:1. This decreased Mexican labor costs compared to the United States. The Fed should have countered with deflation to lower American wages. The standard of living of Americans would not have dropped because domestic prices would have fallen too. The Fed didn’t follow this sensible policy because its inflationary policy benefitted Wall Street and older and wealthier people who owned lots of stocks. The Fed wanted a wealth transfer from poor to rich and a generational wealth transfer from young to old. The inflationary policy also allowed the government to borrow lots of money at low interest rates and then funnel it to the military-industrial complex and the health-education-welfare complex. We have been running trade deficits since 1971 when we dropped out of Bretton Woods and severed the last link to gold which then enabled inflation. Nixon wanted inflation to boost the economy and win the 1972 election and Trump is just Nixon 2.0 and wants the Fed to do the same thing to win his next election.

  5. @songbird
    The most interesting alternative historical scenario that I can think of - that is if you could actually look through a portal and see - it is the rather hum-drum one of what the West would look like if it had never gotten off gold.

    So what do you see in your crystal ball?

    • Replies: @songbird

    So what do you see in your crystal ball?
     
    In the alternative historical scenario, a lot less parasitism. Maybe, Europeans would even have a higher TFR because housing costs would probably be cheaper. Demographics would probably be quite different, though not likely the same as the 1950s.

    In the future of the current timeline? I don't know. The old saying is that "there is a lot of ruin in a country", but the longer I live, the more worrying signs I see.
  6. The Fed craziness has gone on far longer than many of us thought possible.

    It reminds me of the magic act where the magician keeps throwing more and more plates in the air and keeps catching them.

    At this point all world economies are so interconnected that we rise and fall together.

    If you hear a plate crash, get out of the cities!

    • Replies: @Audacious Epigone
    Additionally, be in a country that produces physical things.
  7. @Charles Pewitt
    The privately-controlled Federal Reserve Bank must be NATIONALIZED NOW!

    https://twitter.com/NorthmanTrader/status/1208398857937268737?s=20

    https://twitter.com/NorthmanTrader/status/1208398242599383040?s=20

    Even if you nationalize it and give it to omniscient AI, it won’t save you.

    The entire world economy is FAKE. The bubble burst isn’t even a real bubble it’s just reseting everything back to where it should be

  8. Can someone suggest a book I could read which would help me understand this subject? Note: I know nuttin’ ‘bout nuttin’ on this subject.

    • Replies: @Justvisiting
    This is my recommendation:

    https://www.amazon.com/Man-Economy-State-Market-Scholars/dp/1933550279/ref=dp_ob_title_bk

    These are two books in one, fourteen hundred pages of easy to read and easy to understand discussion of economics.

    Rothbard is a libertarian economist, but regardless of your political perspective--this is great stuff and will make you familiar with all of the basic economic issues as well as the more complex ones.

    He is the master communicator on the subject.
  9. The illusion that treasury debt is the safest asset in the world will shatter and the dollar will, too.

    REFCO on a global scale. Once the confidence goes and the bank run starts, there’s nothing to save it. But there’s a catch as to why it hasn’t happened yet, and it has less to do with Fed can-kicking than with this simple question: where’s everybody going to run to? A dead dollar sucks the entire world down the khazi (Chinese efforts notwithstanding), so everyone has a vested interest in keeping the plates spinning.

    For now, it would take a large “outside” event, a major war or serious upset in the world’s energy infrastructure to break the machine. Fake numbers can be faked as needs must as long as all the main players have reason to pretend to believe them, and who really wants the ride to stop during their watch?

    • Replies: @Audacious Epigone
    1.3 billion Chinese could demand a higher monetary standard of living.

    Commodities, real (and maybe virtual), is where I suspect it will go.

  10. No doubt that the Fed has problens. However, the U.S. Dollar is a sovereign currency so the Treasury can back the Fed and vice versa. This provides a significant number of options to keep the market liquid in a crisis.

    The Federal Reserve is cornered. It cannot go to nominally negative interest rates. Doing so will cause a global bank run on cash reserves.

    A run would have the change the USD into something else.

    What is the USD replacement?

    — The Euro is massively worse than the USD. The Frankfurt based ‘German Austerity’ Central Bank for the Euro is completely hamstrung and ineffective. It is so close to the brink, actual negative interest rates are being pushed down to personal accounts.

    — The Chinese Yuan/RMB is not trusted by anyone. Bank runs are not infrequent in China, bad loans are exploding, and the underlying asset base is shrinking (1).

    — There is not enough depth in conceptually stronger currencies (e.g. £ and ¥) to accept U.S. sized flows.

    — Physical commodities such as Gold have high overhead storage and handling costs, which are a functional negative interest rates. Plus, tungsten bar fraud is a serious problem especially in Far East gold storehouses. (2)
    ______

    One understands the reasons why the USD deserves the “1-800-RUN” treatment. But, there is nowhere to go. The fact that there are no viable alternatives means that a RUN OUT one door will almost immediately yield a CHARGE IN to the USD via another door.

    MERRY CHRISTMAS 🎄
    _________________

    (1) https://www.zerohedge.com/economics/china-quietly-bails-out-another-major-bank

    (2) From 2012 — https://www.zerohedge.com/news/2012-09-24/get-your-fake-tungsten-filled-gold-coins-here

    • Replies: @Passer by
    And yet JPmorgan says that the US Dollar will be going down in the medium and long run.

    https://privatebank.jpmorgan.com/gl/en/insights/investing/is-the-dollar-s-exorbitant-privilege-coming-to-an-end

    Statistics also show that the US dollar has declined both in global transations and in FX reserves during the last 4 years. Widespread policies of sanctioning half the world will not help it. Meanwhile, China, Russia and India are preparing a SWIFT payments system alternative.

    Mark Carney from the Bank of England says that a multipolar currency world is coming.

    The truth is:
    1. The US is one of the most indebted countries in the world.

    http://www.crfb.org/sites/default/files/fig%201%2075%20year.JPG

    Even this pic underestimates the real situation, since according to the latest data debt to GDP by 2050 will reach 165 % and not 155 %.

    Budget deficits by 2050 are estimated to be 10 % anually and growing. This means a hyperinflationary implosion of the United States.

    2. The US share in the global economy will continue to decline up to 2050 according to all forecasts out there. China is estimated to have an economy nearly 2 times bigger than the US in PPP terms, India to be bigger as well. The world is growing faster than the US and will keep doing that. The US importance in the global economy is constantly diminishing and it will keep diminishing up to 2050 and according to most estimates even up to 2100.

    Therefore the importance of the US dollar will continue to decline in the medium and long run no matter what. Americans will not get their promised pensions.

    There will be a multipolar currency world, where all types of other currencies together with gold and crypto will replace the dollar, and the US dollar will be one important currency, but no longer dominant. The US too will remain an important power, but it will be just one among many powers in a Multi Polar World.

  11. The Fed (and global central banks) are as of now fine; they have all the arrows in the world for the purpose of maintaining nominal stability. The Bank of Japan’s probably facing the most difficulties due to the asset shortage there. America doesn’t have any such asset shortage. The real big financial problem in the First World is government debt. Though high government debt does alleviate the asset shortage, it does so in a very harmful way that politicians find difficult to address (the Greek crisis is probably the best example of what could go wrong). Overly high government debt does make it more difficult (though far from impossible) to stop overly high nominal GDP growth.

    “It cannot go to nominally negative interest rates.”

    Sure it can; they’re a reality in some European countries.

    “One dollar in one-hundred does not exist.”

    One dollar in five exists:

    https://fred.stlouisfed.org/graph/?g=pLPT

    This figure rises when the Fed eases money.

    “Now 2% is the alleged target and the Fed is claiming the right to carry forward the difference from prior years when measured consumer price inflation was under 2%! ”

    There’s nothing wrong with that. The Fed has been undershooting its inflation target for years since it was announced in 2012. 2% was intended to be a long-run target, not a ceiling.

    Apparently(?) you’re back to that old late 2000s-early 2010s idea nominal gross domestic product growth might soon shoot out of control(?). This is extremely unlikely.

    Are you predicting out of control nominal gross domestic product expansion or contraction?

    • Replies: @Audacious Epigone
    The nominally negative interest rates are in large commercial banks, and they're only even nominally negative once storage fees and client relationships are taken into account. That's not globally scaleable and it's not going to happen in the US, no matter how much Trump keeps badgering Jerome Powell to do it.
    , @Audacious Epigone
    M2 is not the relevant measure in the case of a global bank run on dollars. Mutual funds, banking deposits, checking accounts, etc do not survive in an environment where negative nominal rates are the new normal.

    I could of course be wrong but I'm no permabear. That the markets were utterly incapable of handling a gentle, steady rise that was telegraphed way in advance means there will be no cushion when the next 2008 happens. That is what really spooked me. The fact that the Fed is pretending everything is fine while simultaneously kicking quantitative easing into overdrive suggests to me that things are coming to a head.
    , @animalogic
    "America doesn’t have any such asset shortage. The real big financial problem in the First World is government debt."
    Asset shortage? What does that mean?
    If you take the price of assets (equities) & then compare them to their fundamentals (ie price earnings debt) then there is a huge asset shortage. Simply -- most equities are vastly over priced. (of course this avoids the elephant in the room,
    that there's basically no real price discovery today). And that's on today's level of consumption. Depending on the commodity that market could be grossly overvalued (ie fracked gas etc).
    Government debt can become an issue depending on how it is denominated (ie in your own currency or another's) & who holds it (ie vulture fund?). Usually private debt is far more dangerous than public debt.
    "the Greek crisis is probably the best example of what could go wrong). "
    In the beginning Greek debt was manageable, given cooperative conditions. However, the Troika did the opposite & flogged Greece half to death as an encouragement to the other PIGS.
    The Fed & other central banks are a vital lunch pin in the systemic corruption known as "world (financial) markets."
    2008-10 offered the the same US/the West the opportunity for genuine reform, a complete reset, as with the great depression. The opportunity to send fraudulent bankers etc to jail... as an encouragement to the others.
    However, essentially governments (Iceland, I believe, was an exception) doubled down. Nothing was fixed. Nobody indicted.
    Our present problems are the inevitable outcome of our profoundly corrupt economies, societies & governments.
    It's an open question now whether reform will be even possible when the sh*t hits the fan again. Ten extra years of debt & ten extra years of climate chaos & world leadership competence at a kindergarten level....
    Anyway, happy Christmas to everyone.
  12. @Justvisiting
    The Fed craziness has gone on far longer than many of us thought possible.

    It reminds me of the magic act where the magician keeps throwing more and more plates in the air and keeps catching them.

    At this point all world economies are so interconnected that we rise and fall together.

    If you hear a plate crash, get out of the cities!

    Additionally, be in a country that produces physical things.

    • Agree: Achmed E. Newman
  13. @Oleaginous Outrager
    The illusion that treasury debt is the safest asset in the world will shatter and the dollar will, too.

    REFCO on a global scale. Once the confidence goes and the bank run starts, there's nothing to save it. But there's a catch as to why it hasn't happened yet, and it has less to do with Fed can-kicking than with this simple question: where's everybody going to run to? A dead dollar sucks the entire world down the khazi (Chinese efforts notwithstanding), so everyone has a vested interest in keeping the plates spinning.

    For now, it would take a large "outside" event, a major war or serious upset in the world's energy infrastructure to break the machine. Fake numbers can be faked as needs must as long as all the main players have reason to pretend to believe them, and who really wants the ride to stop during their watch?

    1.3 billion Chinese could demand a higher monetary standard of living.

    Commodities, real (and maybe virtual), is where I suspect it will go.

  14. @E. Harding
    The Fed (and global central banks) are as of now fine; they have all the arrows in the world for the purpose of maintaining nominal stability. The Bank of Japan's probably facing the most difficulties due to the asset shortage there. America doesn't have any such asset shortage. The real big financial problem in the First World is government debt. Though high government debt does alleviate the asset shortage, it does so in a very harmful way that politicians find difficult to address (the Greek crisis is probably the best example of what could go wrong). Overly high government debt does make it more difficult (though far from impossible) to stop overly high nominal GDP growth.

    "It cannot go to nominally negative interest rates."

    Sure it can; they're a reality in some European countries.

    "One dollar in one-hundred does not exist."

    One dollar in five exists:

    https://fred.stlouisfed.org/graph/?g=pLPT

    This figure rises when the Fed eases money.

    "Now 2% is the alleged target and the Fed is claiming the right to carry forward the difference from prior years when measured consumer price inflation was under 2%! "

    There's nothing wrong with that. The Fed has been undershooting its inflation target for years since it was announced in 2012. 2% was intended to be a long-run target, not a ceiling.

    Apparently(?) you're back to that old late 2000s-early 2010s idea nominal gross domestic product growth might soon shoot out of control(?). This is extremely unlikely.

    Are you predicting out of control nominal gross domestic product expansion or contraction?

    The nominally negative interest rates are in large commercial banks, and they’re only even nominally negative once storage fees and client relationships are taken into account. That’s not globally scaleable and it’s not going to happen in the US, no matter how much Trump keeps badgering Jerome Powell to do it.

  15. All very fine and dandy, except that …..:

    “If it were possible to calculate the future structure of the market, the future would not be uncertain. There would be neither entrepreneurial loss nor profit. What people expect from the economists is beyond the power of any mortal man.” Ludwig Von Mises

    “The very idea that the future is predictable, that some formulas could be substituted for the specific understanding which is the essence of entrepreneurial activity, and that familiarity with these formulas could make it possible for anybody to take over the conduct of business is, of course, an outgrowth of the whole complex of fallacies and misconceptions which are at the bottom of present-day anticapitalistic policies.” Ludwig Von Mises- “Human Action- a Treatise On Economics” page 867

    “In fact both the economists and the businessmen are fully aware of the uncertainty of the future. The businessmen realize that the economists do not dispense any reliable information about things to come and that all that they provide is interpretation of statistical data referring to the past. For the capitalists and entrepreneurs the economists’ opinions about the future count only as questionable conjectures. They are skeptical and not easily fooled.” Ludwig Von Mises-“Human Action- a Treatise On Economics” page 868

    Regards- Onebornfree

    • Replies: @Audacious Epigone
    There are plenty of actionable ways to match one's abstract understanding and attempted augury.
  16. @E. Harding
    The Fed (and global central banks) are as of now fine; they have all the arrows in the world for the purpose of maintaining nominal stability. The Bank of Japan's probably facing the most difficulties due to the asset shortage there. America doesn't have any such asset shortage. The real big financial problem in the First World is government debt. Though high government debt does alleviate the asset shortage, it does so in a very harmful way that politicians find difficult to address (the Greek crisis is probably the best example of what could go wrong). Overly high government debt does make it more difficult (though far from impossible) to stop overly high nominal GDP growth.

    "It cannot go to nominally negative interest rates."

    Sure it can; they're a reality in some European countries.

    "One dollar in one-hundred does not exist."

    One dollar in five exists:

    https://fred.stlouisfed.org/graph/?g=pLPT

    This figure rises when the Fed eases money.

    "Now 2% is the alleged target and the Fed is claiming the right to carry forward the difference from prior years when measured consumer price inflation was under 2%! "

    There's nothing wrong with that. The Fed has been undershooting its inflation target for years since it was announced in 2012. 2% was intended to be a long-run target, not a ceiling.

    Apparently(?) you're back to that old late 2000s-early 2010s idea nominal gross domestic product growth might soon shoot out of control(?). This is extremely unlikely.

    Are you predicting out of control nominal gross domestic product expansion or contraction?

    M2 is not the relevant measure in the case of a global bank run on dollars. Mutual funds, banking deposits, checking accounts, etc do not survive in an environment where negative nominal rates are the new normal.

    I could of course be wrong but I’m no permabear. That the markets were utterly incapable of handling a gentle, steady rise that was telegraphed way in advance means there will be no cushion when the next 2008 happens. That is what really spooked me. The fact that the Fed is pretending everything is fine while simultaneously kicking quantitative easing into overdrive suggests to me that things are coming to a head.

    • Agree: animalogic
  17. You are right that real interest rates are negative already. I know inflation is higher than those 1.5 to 2 % numbers the BLS comes out with.

    This is the reason Americans and Chinamen (along with probably plenty of people in other nations I don’t know about) invest lots of their money and sweat into their houses. It’s the only non-risky investment that gives a real return … until the next housing bubble crash.

  18. The Fed can issue whatever reserves are needed indefinitely. The only thing the world can do is demand the use of their own currencies in trade especially with the US . There is no single substitute for the dollar but there could be a lot of smaller alternatives.

    I assume that nations don’t demand use of their own currencies because of fear of sanctions and other threats from the US. That fear may be fading away….

  19. Since the financial system is like a watch with gears interlocking with gears, one gear seizing up has the potential to seize up all the other gears.

    One gear that’s been causing problems for some time is Deutsche Bank. It would be interesting to see the German public attitude to the cost of a bailout. They would need to do it themselves since I can’t see the US or the rest of the EU helping – even when they’re impacted. The US had enough problems organizing their own bailout.

  20. The US Dollar is already terminal.

    They are squeezing the last breaths and blood from the dollar, as They buy up real assets with worthless FRN.

    The Phoenicians will soon light a global funeral pyre to cremate the dollar empire, then arise once again, as a new empire built with the accumulated stolen wealth from the old empires.

    Maybe Climate Cooling/Warming/Change is only there to occupy the People until the slaughter to come. Keeps attention off the Central Banks actually destroying the World economy.

  21. Charles Pewitt,

    No! Do not nationalize the Federal Reserve! Those psychos keep dumping their debt onto America! No more! They dumped Fannie Mae, Freddie Mac, student loan debt all onto the country!

    Let the damn psychos pay their own debts!

    The government can create its own monetary system! It does not need to take on the debt of the hedonists at the Federal Reserve!

    The Federal Reserve is not a governmemt institution! it is a cabal of economic hetmen with the sole purpose of destroying America!

    If you wonder why they keep on messing the economy up, it is by design! That is their intention!

  22. The Federal Reserve is cornered. It cannot go to nominally negative interest rates. Doing so will cause a global bank run on cash reserves.

    This is not correct. Negative nominal rates did not cause cash hoarding in Europe or Japan. There is no need to withdraw cash from the bank when the bank will pay you to take out a loan.

    Interest rates, even the seemingly common sense-defying negative interest rates, are basically irrelevant outside the canyons of Wall Street and the other great bourses of the world. They do not affect the lives, behavior, or psychology of ordinary people at all.

    The problem is the slow and steady erosion, depreciation, liquidation, and redistribution of the capital base which is currently being accomplished using the weapon of artificially low rates, but which, being essentially a political rather than an economic process, is capable of foregoing these means in favor of others, e.g. expropriation by force.

    Interest rates only give you information when you have a market in the first place. Right now we have an incipient class war maquerading as a market, which isn’t the same thing.

    • Replies: @Audacious Epigone
    An interest rate of -0.1% is effectively zero for large institutional investors once storage and maintenance costs are taken into account, and the yen isn't the global reserve currency. The situation will not be the same if the Fed drops US interest rates to something like -1.5%.
  23. Don’t fall for the repo con! The Fed creates money out of thin air simply by issuing loans! If someone hands over an asset, with the Fed and banks controlling the money supply, the individual or entity will not have the funds required to repay them! Oh, we don’t have any money in our accounts! Oh, because we won’t lend it to anyone! Duh!

    Abolish the Fed!

  24. @E. Harding
    The Fed (and global central banks) are as of now fine; they have all the arrows in the world for the purpose of maintaining nominal stability. The Bank of Japan's probably facing the most difficulties due to the asset shortage there. America doesn't have any such asset shortage. The real big financial problem in the First World is government debt. Though high government debt does alleviate the asset shortage, it does so in a very harmful way that politicians find difficult to address (the Greek crisis is probably the best example of what could go wrong). Overly high government debt does make it more difficult (though far from impossible) to stop overly high nominal GDP growth.

    "It cannot go to nominally negative interest rates."

    Sure it can; they're a reality in some European countries.

    "One dollar in one-hundred does not exist."

    One dollar in five exists:

    https://fred.stlouisfed.org/graph/?g=pLPT

    This figure rises when the Fed eases money.

    "Now 2% is the alleged target and the Fed is claiming the right to carry forward the difference from prior years when measured consumer price inflation was under 2%! "

    There's nothing wrong with that. The Fed has been undershooting its inflation target for years since it was announced in 2012. 2% was intended to be a long-run target, not a ceiling.

    Apparently(?) you're back to that old late 2000s-early 2010s idea nominal gross domestic product growth might soon shoot out of control(?). This is extremely unlikely.

    Are you predicting out of control nominal gross domestic product expansion or contraction?

    “America doesn’t have any such asset shortage. The real big financial problem in the First World is government debt.”
    Asset shortage? What does that mean?
    If you take the price of assets (equities) & then compare them to their fundamentals (ie price earnings debt) then there is a huge asset shortage. Simply — most equities are vastly over priced. (of course this avoids the elephant in the room,
    that there’s basically no real price discovery today). And that’s on today’s level of consumption. Depending on the commodity that market could be grossly overvalued (ie fracked gas etc).
    Government debt can become an issue depending on how it is denominated (ie in your own currency or another’s) & who holds it (ie vulture fund?). Usually private debt is far more dangerous than public debt.
    “the Greek crisis is probably the best example of what could go wrong). ”
    In the beginning Greek debt was manageable, given cooperative conditions. However, the Troika did the opposite & flogged Greece half to death as an encouragement to the other PIGS.
    The Fed & other central banks are a vital lunch pin in the systemic corruption known as “world (financial) markets.”
    2008-10 offered the the same US/the West the opportunity for genuine reform, a complete reset, as with the great depression. The opportunity to send fraudulent bankers etc to jail… as an encouragement to the others.
    However, essentially governments (Iceland, I believe, was an exception) doubled down. Nothing was fixed. Nobody indicted.
    Our present problems are the inevitable outcome of our profoundly corrupt economies, societies & governments.
    It’s an open question now whether reform will be even possible when the sh*t hits the fan again. Ten extra years of debt & ten extra years of climate chaos & world leadership competence at a kindergarten level….
    Anyway, happy Christmas to everyone.

  25. Don’t be a dope and fall for the repo con! yes, they will soon be reposing whatever it was! The Fed and banks create money out of thin air, simply by issuing a loan! The readon that they are short on cash is bacause they are not lending money!

    The Fed is full of economic hitmen! The economy is regularly suffering BY DESIGN for the purpose of a transfer of assets! Robinhood in reverse!

    No! Do not nationalize the Federal Reserve, where the Federal Governmemt would suddenly take on whatever the hundreds of trillions of dollars in derivatives, that the high rolling hedonists on Wall Street gambled!

    The Fed already dumped TARP, QE, Fannie Mae, Freddie Mac, and student loan debt onto the Federal Government!

    The Federal government should just abolish the Fed and create its own currency, an interest free government greenback, simlar to the Pennsylvania Pound.

    Let the damn psychos pay their own debts! F the Fed! Don’t bail out the treasonous psychopathic, hedonistic, high rolling, economic hitmen! Off with their heads!!

  26. Don’t be a dope and fall for the repo con! yes, they will soon be reposing whatever it was! The Fed and banks create money out of thin air, simply by issuing a loan! The readon that they are short on cash is bacause they are not lending money! 

    The Fed is full of economic hitmen! The economy is regularly suffering BY DESIGN for the purpose of a transfer of assets! Robinhood in reverse! 

    No! Do not nationalize the Federal Reserve, where the Federal Governmemt would suddenly take on whatever the hundreds of trillions of dollars in derivatives, that the high rolling hedonists on Wall Street gambled! 

    The Fed already dumped TARP, QE, Fannie Mae, Freddie Mac, and student loan debt onto the Federal Government! 

    The Federal government should just abolish the Fed and create its own currency, an interest free government greenback, simlar to the Pennsylvania Pound.

    Let the damn psychos pay their own debts! F the Fed! Don’t bail out the treasonous psychopathic, hedonistic, high rolling, economic hitmen! Off with their heads!

    • Replies: @Audacious Epigone
    So that's what the whole "rebel yell" thing is? Now I get it!

    Are you a greenbacker?
  27. This is just ridiculous.

    Fiat money can be put into or taken out of circulation at the central bank’s discretion.
    The Fed was never out of ammo, it just didn’t want to do it.

    The rest is just bullshit.

    Now, of course, you might wonder why we allow a bunch of Chosenites absolute control over the money supply.
    But such questions are antisemetic.

  28. Don’t be a dope and fall for the repo con! yes, they will soon be reposing whatever it was! The Fed and banks create money out of thin air, simply by issuing a loan! The reason that they are short on cash is bacause they are not lending money! 

    The Fed is full of economic hitmen! The economy is regularly suffering BY DESIGN for the purpose of a transfer of assets! Robinhood in reverse! 

    No! Do not nationalize the Federal Reserve, where the Federal Governmemt would suddenly take on whatever the hundreds of trillions of dollars in derivatives, that the high rolling hedonists on Wall Street gambled! 

    The Fed already dumped TARP, QE, Fannie Mae, Freddie Mac, and student loan debt onto the Federal Government! 

    The Federal government should just abolish the Fed and create its own currency, an interest free government greenback, simlar to the Pennsylvania Pound.

    Let the damn psychos pay their own debts! F the Fed! Don’t bail out the treasonous psychopathic, hedonistic, high rolling, economic hitmen! Off with their heads!

  29. @Charles Pewitt
    The privately-controlled Federal Reserve Bank must be NATIONALIZED NOW!

    https://twitter.com/NorthmanTrader/status/1208398857937268737?s=20

    https://twitter.com/NorthmanTrader/status/1208398242599383040?s=20

    And only Tulsi’s mediocre looks can do it!

    FAPPING FOR TULSI 2020!

    • LOL: Achmed E. Newman
  30. @Anonymous
    Can someone suggest a book I could read which would help me understand this subject? Note: I know nuttin’ ‘bout nuttin’ on this subject.

    This is my recommendation:

    These are two books in one, fourteen hundred pages of easy to read and easy to understand discussion of economics.

    Rothbard is a libertarian economist, but regardless of your political perspective–this is great stuff and will make you familiar with all of the basic economic issues as well as the more complex ones.

    He is the master communicator on the subject.

    • Replies: @Audacious Epigone
    For a less intimidating treatment (Rothbard is a lot more accessible than Mises as Justvisiting alludes to, but it is long) of many of the same things, there's Tom Woods' book Meltdown. It's dense in content but not in language and there is no fluff.
  31. @A123
    No doubt that the Fed has problens. However, the U.S. Dollar is a sovereign currency so the Treasury can back the Fed and vice versa. This provides a significant number of options to keep the market liquid in a crisis.

    The Federal Reserve is cornered. It cannot go to nominally negative interest rates. Doing so will cause a global bank run on cash reserves.
     
    A run would have the change the USD into something else.

    What is the USD replacement?

    -- The Euro is massively worse than the USD. The Frankfurt based 'German Austerity' Central Bank for the Euro is completely hamstrung and ineffective. It is so close to the brink, actual negative interest rates are being pushed down to personal accounts.

    -- The Chinese Yuan/RMB is not trusted by anyone. Bank runs are not infrequent in China, bad loans are exploding, and the underlying asset base is shrinking (1).

    https://www.zerohedge.com/s3/files/inline-images/4%20largest%20china%20banks.jpg

    -- There is not enough depth in conceptually stronger currencies (e.g. £ and ¥) to accept U.S. sized flows.

    -- Physical commodities such as Gold have high overhead storage and handling costs, which are a functional negative interest rates. Plus, tungsten bar fraud is a serious problem especially in Far East gold storehouses. (2)
    ______

    One understands the reasons why the USD deserves the "1-800-RUN" treatment. But, there is nowhere to go. The fact that there are no viable alternatives means that a RUN OUT one door will almost immediately yield a CHARGE IN to the USD via another door.

    MERRY CHRISTMAS 🎄
    _________________

    (1) https://www.zerohedge.com/economics/china-quietly-bails-out-another-major-bank

    (2) From 2012 -- https://www.zerohedge.com/news/2012-09-24/get-your-fake-tungsten-filled-gold-coins-here

    And yet JPmorgan says that the US Dollar will be going down in the medium and long run.

    https://privatebank.jpmorgan.com/gl/en/insights/investing/is-the-dollar-s-exorbitant-privilege-coming-to-an-end

    Statistics also show that the US dollar has declined both in global transations and in FX reserves during the last 4 years. Widespread policies of sanctioning half the world will not help it. Meanwhile, China, Russia and India are preparing a SWIFT payments system alternative.

    Mark Carney from the Bank of England says that a multipolar currency world is coming.

    The truth is:
    1. The US is one of the most indebted countries in the world.

    Even this pic underestimates the real situation, since according to the latest data debt to GDP by 2050 will reach 165 % and not 155 %.

    Budget deficits by 2050 are estimated to be 10 % anually and growing. This means a hyperinflationary implosion of the United States.

    2. The US share in the global economy will continue to decline up to 2050 according to all forecasts out there. China is estimated to have an economy nearly 2 times bigger than the US in PPP terms, India to be bigger as well. The world is growing faster than the US and will keep doing that. The US importance in the global economy is constantly diminishing and it will keep diminishing up to 2050 and according to most estimates even up to 2100.

    Therefore the importance of the US dollar will continue to decline in the medium and long run no matter what. Americans will not get their promised pensions.

    There will be a multipolar currency world, where all types of other currencies together with gold and crypto will replace the dollar, and the US dollar will be one important currency, but no longer dominant. The US too will remain an important power, but it will be just one among many powers in a Multi Polar World.

    • Replies: @A123

    Therefore the importance of the US dollar will continue to decline in the medium and long run no matter what.
     
    A falling dollar hurts anti-Christian, Globlist elites.

    However, a declining USD *helps* Main Street, U.S. Citizens. Right now Exports carry a penalty and Imports a subsidy due to over-valuation of the dollar. Eliminating the 'reserve currency' premium will create U.S. jobs, especially in higher wage manufacturing. So, I hope you are correct.

    Seasons Greetings to a USD valuation that undercuts China's trade abuses.

    MERRY CHRISTMAS 🎄
  32. @for-the-record
    So what do you see in your crystal ball?

    So what do you see in your crystal ball?

    In the alternative historical scenario, a lot less parasitism. Maybe, Europeans would even have a higher TFR because housing costs would probably be cheaper. Demographics would probably be quite different, though not likely the same as the 1950s.

    In the future of the current timeline? I don’t know. The old saying is that “there is a lot of ruin in a country”, but the longer I live, the more worrying signs I see.

  33. @Charles Pewitt
    The privately-controlled Federal Reserve Bank must be NATIONALIZED NOW!

    https://twitter.com/NorthmanTrader/status/1208398857937268737?s=20

    https://twitter.com/NorthmanTrader/status/1208398242599383040?s=20

    So the Dems control it? You want Bernie Sanders in charge of the Fed?

  34. @Passer by
    And yet JPmorgan says that the US Dollar will be going down in the medium and long run.

    https://privatebank.jpmorgan.com/gl/en/insights/investing/is-the-dollar-s-exorbitant-privilege-coming-to-an-end

    Statistics also show that the US dollar has declined both in global transations and in FX reserves during the last 4 years. Widespread policies of sanctioning half the world will not help it. Meanwhile, China, Russia and India are preparing a SWIFT payments system alternative.

    Mark Carney from the Bank of England says that a multipolar currency world is coming.

    The truth is:
    1. The US is one of the most indebted countries in the world.

    http://www.crfb.org/sites/default/files/fig%201%2075%20year.JPG

    Even this pic underestimates the real situation, since according to the latest data debt to GDP by 2050 will reach 165 % and not 155 %.

    Budget deficits by 2050 are estimated to be 10 % anually and growing. This means a hyperinflationary implosion of the United States.

    2. The US share in the global economy will continue to decline up to 2050 according to all forecasts out there. China is estimated to have an economy nearly 2 times bigger than the US in PPP terms, India to be bigger as well. The world is growing faster than the US and will keep doing that. The US importance in the global economy is constantly diminishing and it will keep diminishing up to 2050 and according to most estimates even up to 2100.

    Therefore the importance of the US dollar will continue to decline in the medium and long run no matter what. Americans will not get their promised pensions.

    There will be a multipolar currency world, where all types of other currencies together with gold and crypto will replace the dollar, and the US dollar will be one important currency, but no longer dominant. The US too will remain an important power, but it will be just one among many powers in a Multi Polar World.

    Therefore the importance of the US dollar will continue to decline in the medium and long run no matter what.

    A falling dollar hurts anti-Christian, Globlist elites.

    However, a declining USD *helps* Main Street, U.S. Citizens. Right now Exports carry a penalty and Imports a subsidy due to over-valuation of the dollar. Eliminating the ‘reserve currency’ premium will create U.S. jobs, especially in higher wage manufacturing. So, I hope you are correct.

    Seasons Greetings to a USD valuation that undercuts China’s trade abuses.

    MERRY CHRISTMAS 🎄

    • Replies: @SFG
    Doesn't a declining dollar also mean American citizens' savings are worth less?
    , @Audacious Epigone
    Uh, it doesn't help them take bi-annual excursions to Eurasia now, does it?!
  35. The debt is too damn high. Hyperinflation is now inevitable. The bankers won’t do a debt jubilee to reset the system. They’ll tale a drastic haircut instead. Maybe down to their necks…

  36. @A123

    Therefore the importance of the US dollar will continue to decline in the medium and long run no matter what.
     
    A falling dollar hurts anti-Christian, Globlist elites.

    However, a declining USD *helps* Main Street, U.S. Citizens. Right now Exports carry a penalty and Imports a subsidy due to over-valuation of the dollar. Eliminating the 'reserve currency' premium will create U.S. jobs, especially in higher wage manufacturing. So, I hope you are correct.

    Seasons Greetings to a USD valuation that undercuts China's trade abuses.

    MERRY CHRISTMAS 🎄

    Doesn’t a declining dollar also mean American citizens’ savings are worth less?

    • Replies: @A123

    Doesn’t a declining dollar also mean American citizens’ savings are worth less?
     
    It is not that one dimensional. One has to look at the situation as a whole.

    -- A majority of Americans also have debt. A USD decline makes those debts less burdensome.

    -- Due to Money Market Funds the typical American with savings is not 100% cash. On net, this means savers have mixed results during a currency slide.

    -- More employment at higher wages moves the economy in favor of citizen workers. This is a win for everyone.

    MERRY CHRISTMAS 🎄
  37. “One dollar in one-hundred does not exist. “

    Didn’t you mean to write something like, “Ninety-Nine dollars in one hundred do not exist.”

    • Replies: @Audacious Epigone
    Yes, or I at least intended to communicate to that effect. Fixed it, thanks.
  38. People need to drink unpoisoned water, eat unpoisoned food, have shelter against the elements and have energy to heat there shelters in some climates. Invest your lifestyle in these, and at least survive the next financial crash.

  39. The fact that interest rates are low in other developed economies implies that low interest rates are simply the new normal.

    • Replies: @Audacious Epigone
    Or that the rest of the world is orbiting the US as it heads straight into the sun.
  40. @SFG
    Doesn't a declining dollar also mean American citizens' savings are worth less?

    Doesn’t a declining dollar also mean American citizens’ savings are worth less?

    It is not that one dimensional. One has to look at the situation as a whole.

    — A majority of Americans also have debt. A USD decline makes those debts less burdensome.

    — Due to Money Market Funds the typical American with savings is not 100% cash. On net, this means savers have mixed results during a currency slide.

    — More employment at higher wages moves the economy in favor of citizen workers. This is a win for everyone.

    MERRY CHRISTMAS 🎄

  41. @Onebornfree
    All very fine and dandy, except that .....:

    “If it were possible to calculate the future structure of the market, the future would not be uncertain. There would be neither entrepreneurial loss nor profit. What people expect from the economists is beyond the power of any mortal man." Ludwig Von Mises

    “The very idea that the future is predictable, that some formulas could be substituted for the specific understanding which is the essence of entrepreneurial activity, and that familiarity with these formulas could make it possible for anybody to take over the conduct of business is, of course, an outgrowth of the whole complex of fallacies and misconceptions which are at the bottom of present-day anticapitalistic policies." Ludwig Von Mises- “Human Action- a Treatise On Economics" page 867

    "In fact both the economists and the businessmen are fully aware of the uncertainty of the future. The businessmen realize that the economists do not dispense any reliable information about things to come and that all that they provide is interpretation of statistical data referring to the past. For the capitalists and entrepreneurs the economists' opinions about the future count only as questionable conjectures. They are skeptical and not easily fooled." Ludwig Von Mises-"Human Action- a Treatise On Economics" page 868


    Regards- Onebornfree

    There are plenty of actionable ways to match one’s abstract understanding and attempted augury.

  42. @Intelligent Dasein

    The Federal Reserve is cornered. It cannot go to nominally negative interest rates. Doing so will cause a global bank run on cash reserves.
     
    This is not correct. Negative nominal rates did not cause cash hoarding in Europe or Japan. There is no need to withdraw cash from the bank when the bank will pay you to take out a loan.

    Interest rates, even the seemingly common sense-defying negative interest rates, are basically irrelevant outside the canyons of Wall Street and the other great bourses of the world. They do not affect the lives, behavior, or psychology of ordinary people at all.

    The problem is the slow and steady erosion, depreciation, liquidation, and redistribution of the capital base which is currently being accomplished using the weapon of artificially low rates, but which, being essentially a political rather than an economic process, is capable of foregoing these means in favor of others, e.g. expropriation by force.

    Interest rates only give you information when you have a market in the first place. Right now we have an incipient class war maquerading as a market, which isn't the same thing.

    An interest rate of -0.1% is effectively zero for large institutional investors once storage and maintenance costs are taken into account, and the yen isn’t the global reserve currency. The situation will not be the same if the Fed drops US interest rates to something like -1.5%.

  43. @Rebel0007
    Don't be a dope and fall for the repo con! yes, they will soon be reposing whatever it was! The Fed and banks create money out of thin air, simply by issuing a loan! The readon that they are short on cash is bacause they are not lending money! 

    The Fed is full of economic hitmen! The economy is regularly suffering BY DESIGN for the purpose of a transfer of assets! Robinhood in reverse! 

    No! Do not nationalize the Federal Reserve, where the Federal Governmemt would suddenly take on whatever the hundreds of trillions of dollars in derivatives, that the high rolling hedonists on Wall Street gambled! 

    The Fed already dumped TARP, QE, Fannie Mae, Freddie Mac, and student loan debt onto the Federal Government! 

    The Federal government should just abolish the Fed and create its own currency, an interest free government greenback, simlar to the Pennsylvania Pound.

    Let the damn psychos pay their own debts! F the Fed! Don't bail out the treasonous psychopathic, hedonistic, high rolling, economic hitmen! Off with their heads!

    So that’s what the whole “rebel yell” thing is? Now I get it!

    Are you a greenbacker?

  44. @Justvisiting
    This is my recommendation:

    https://www.amazon.com/Man-Economy-State-Market-Scholars/dp/1933550279/ref=dp_ob_title_bk

    These are two books in one, fourteen hundred pages of easy to read and easy to understand discussion of economics.

    Rothbard is a libertarian economist, but regardless of your political perspective--this is great stuff and will make you familiar with all of the basic economic issues as well as the more complex ones.

    He is the master communicator on the subject.

    For a less intimidating treatment (Rothbard is a lot more accessible than Mises as Justvisiting alludes to, but it is long) of many of the same things, there’s Tom Woods’ book Meltdown. It’s dense in content but not in language and there is no fluff.

  45. @A123

    Therefore the importance of the US dollar will continue to decline in the medium and long run no matter what.
     
    A falling dollar hurts anti-Christian, Globlist elites.

    However, a declining USD *helps* Main Street, U.S. Citizens. Right now Exports carry a penalty and Imports a subsidy due to over-valuation of the dollar. Eliminating the 'reserve currency' premium will create U.S. jobs, especially in higher wage manufacturing. So, I hope you are correct.

    Seasons Greetings to a USD valuation that undercuts China's trade abuses.

    MERRY CHRISTMAS 🎄

    Uh, it doesn’t help them take bi-annual excursions to Eurasia now, does it?!

  46. @Jus' Sayin'...

    "One dollar in one-hundred does not exist. "
     
    Didn't you mean to write something like, "Ninety-Nine dollars in one hundred do not exist."

    Yes, or I at least intended to communicate to that effect. Fixed it, thanks.

  47. @Alexander Turok
    The fact that interest rates are low in other developed economies implies that low interest rates are simply the new normal.

    Or that the rest of the world is orbiting the US as it heads straight into the sun.

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