Debt-deflation Bear Market Update - Part I: First Bounce officially over - Eric Janszen

[raja]

Re: Debt-deflation Bear Market Update - Part I: First Bounce officially over (really)

The first time we posted these charts in How to make $301% in six years with low volatility January 2008, we were up 301%. Today: 417%.

There is no profit . . . until you sell it.

When you sell, will you be able to spend the dollars before they continue to inflate? What will you buy?

What about the possible 90% gold-profit tax you mentioned previously?

By the way, I got a good laugh out of this:

[Chris Coles]

Re: Debt-deflation Bear Market Update - Part I: First Bounce officially over (really)

The stock of money fell from $14.2 trillion to $13.9 trillion in the three months to April, amounting to an annual rate of contraction of 9.6pc. The assets of insitutional money market funds fell at a 37pc rate, the sharpest drop ever. .........


..... The US authorities have an entirely different explanation for the failure of stimulus measures to gain full traction. They are opting instead for yet further doses of Keynesian spending, despite warnings from the IMF that the gross public debt of the US will reach 97pc of GDP next year and 110pc by 2015.

Larry Summers, President Barack Obama’s top economic adviser, has asked Congress to "grit its teeth" and approve a fresh fiscal boost of $200bn to keep growth on track. "We are nearly 8m jobs short of normal employment. For millions of Americans the economic emergency grinds on," he said.

There are two problems highlighted here. The first is the idea that all asset prices always rise. But the one thing the people running "High Speed Trading" desks cannot prevent, is the simple fact that prices go down as well as up.

The second problem is equally simple, neither here in the UK, or, for that matter in the UK are we creating anything like enough new, private sector jobs. Here, I estimate that if we are going to tackle the problem at the roots of the economy, the micro company level where most employment is created, (even that which eventually become major employers), is the large number of new businesses we need to create. Regardless of which nation, the UK, US or even the likes of Greece, if we say that every new company will employ, say, five people in their first year, then for every 1 million new jobs, we need 200,000 new companies. In the case of the US figures, then you are looking at capitalising 8 million new jobs, and that is 1.6 million new companies. These are full on logistic exercises; we cannot "play" at these numbers, we have to have simple rules and a very clear plan to enable new job creation at such levels.

8 million new jobs, using criteria I have already set out in The Road Ahead from a Grass Roots Perspective www.chriscoles.com/page3.html and my proposals for The Capital Spillway Trust www.chriscoles.com/page4.html at, say, 25K per job equity capital plus 50K working capital means that someone has to find 200 billion equity capital and another 400 billion working capital.

That is 200 billion of savings re-invested as new equity capital into 8 million new jobs.

And another 400 billion taken from existing funds.

The upside is that instead of the money being immediately being given directly to the banking system, instead, it is given to the new job creator, who then deposit it into their new business bank account as Share Capital. Instant stability for the new company account, additional stability for the bank and thus the wider banking system.

The existing proposals for Quantitive Easing (QE), have not produced any significant new job creation and the economies of all effected nations continues to contract. So continuing with the existing solutions is not going to work. Everyone has to recognise the need to try something new.

So, why not?

[FRED]

Re: Debt-deflation Bear Market Update - Part I: First Bounce officially over (really)

There is no profit . . . until you sell it.

When you sell, will you be able to spend the dollars before they continue to inflate? What will you buy?

What about the possible 90% gold-profit tax you mentioned previously?

By the way, I got a good laugh out of this:

Did you all see the latest junk coverage of gold in the WSJ?

How the MSM covers gold:

• Stock investor with a record of beating the S&P500 by 20% over ten years: Stock investment expert

• Gold investor who invested 15% of net worth in 2001 with a record of 400% return over a ten year period when the S&P500 returned 18%, who invested in gold at $270 on the theory that gold was cheap and governments would re-inflate over-indebted economies via currency depreciation: Gold bug.

• Not invested in gold, ignored it until the price went up 200% to over $500 in 2004, then repeatedly mis-labeled gold a "bubble" at $600, $800, and $1000: Gold investment expert.

And the business media wonder why independent sites like iTulip.com are growing while their audience is dropping off.

[Ben]

Re: Debt-deflation Bear Market Update - Part I: First Bounce officially over (really)

Bart, what does this mean? Where is it going?

[Munger]

Re: Debt-deflation Bear Market Update - Part I: First Bounce officially over (really)

Hypothetical: what if the world achieved ~100% productivity due to full roboticization. Further, the means of production were owned by 1 person. That would mean ~100% of the population is unemployed, and ~100% of the population cannot afford the goods being produced. Thus 100% efficiency has lead to 100% unemployment. Yet there is clearly an abundance of goods -- the robots could endlessly produce all that humanity needed, tend to the retail stores, wait tables, and no one would have to work.

I don't want to hear how this is not realistic; I have already said it's a hypothetical. I just want to know how greater efficiency would solve this problem, but redistribution would not.

[Fiat Currency]

Re: Debt-deflation Bear Market Update - Part I: First Bounce officially over (really)

... And the business media wonder why independent sites like iTulip.com are growing while their audience is dropping off.

I don't think they actually do "wonder why".

I think they just do their "duty" - knowing full well that they'll be on the other end of TARP-II or some other self-appointed form of malfeasance.

Money Safe.gif

[flintlock]

Re: Debt-deflation Bear Market Update - Part I: First Bounce officially over (really)

That's a good question. There is obviously more to the problem than productivity. There must be an incentive to become productive. If you force that one owner to give it all away, why would he trouble himself to produce anything? It's obvious we have too much wealth today concentrated in too few hands. The real question is how do we achieve a balance that keeps everyone happy( and productive)

I think another way to look at it is that people are becoming more and more irrelevant. In your scenario, what do the robots need us humans for? So we can keep marching forward in the quest for "progress", or we can somehow find a level that is sustainable for humans, not robots. We need to slow down, take the time to fix the problems that we have been ignoring for decades, and try to work towards a solution that raises the quality of life in a sustainable manner.

[Chris Coles]

Re: Debt-deflation Bear Market Update - Part I: First Bounce officially over (really)

Hypothetical: what if the world achieved ~100% productivity due to full roboticization. Further, the means of production were owned by 1 person. That would mean ~100% of the population is unemployed, and ~100% of the population cannot afford the goods being produced. Thus 100% efficiency has lead to 100% unemployment. Yet there is clearly an abundance of goods -- the robots could endlessly produce all that humanity needed, tend to the retail stores, wait tables, and no one would have to work.

I don't want to hear how this is not realistic; I have already said it's a hypothetical. I just want to know how greater efficiency would solve this problem, but redistribution would not.

You have hit the proverbial nail right dead centre, on the head. The present economy is built upon the idea that everyone wants ever cheaper products to buy in an ever smaller number of outlets without understanding the implications of thus regularly reducing the employment of the people.

We get a good example of the new philosophy with the way the young believe that they do not have to pay for anything they find on the web. Somehow the general population has been trained to believe that everything is going to arrive at their local Walmart, eventually, for free....

But when I was a child, each local community had a butcher, a baker and candlestick maker. You could find every skill within a short distance. Every child in every community had some idea of what they could do, as a part of the local community, to sustain their community over the long term. But today, we are a very long way away from such.

The change is obvious, we must return to basics and create new employment, using every skill, to design and manufacture high value products to suite the needs of each local community. Over time, we have to return to many suppliers and thus many more involved with the long term development of successful communities.

The age of the robotic manufacture is over; it is an illusion.

[bart]

Re: Debt-deflation Bear Market Update - Part I: First Bounce officially over (really)

Bart, what does this mean? Where is it going?

Two ways to answer:


1. Every time since 1868 (when M3 started) that M3 goes below 0% growth rate, a recession or depression has always followed, complete with much lower stock prices etc.

Here's a shorter period, and with a 13 week change rate in light blue(to see possible changes faster). As you can see with the 13 week RoC, although M3 is still shrinking, it not only has bottomed but has climbed up significantly.







2. In extreme tinfoil hat mode, the sheople need to be kept very scared and M3 shrinking at a high rate is one of many ways to do that... and then a sudden and hugelky unexpected turn up allows more "capital growth" at various banks, etc.

[Ben]

Re: Debt-deflation Bear Market Update - Part I: First Bounce officially over (really)

Sorry - all I have are lots of questions

How many recessions have there been?
How many were preceeded by M3 shrinkage?

It's seems like money supply shrinkage didn't predict the last recession. It only started shrinking in May 09.

What happened to M3 during Japan's lost decade?

To me it seems to suggest that QE isn't working => apply more QE (as is already being talked about) => buy gold

What's your take?

[bart]

Re: Debt-deflation Bear Market Update - Part I: First Bounce officially over (really)

Sorry - all I have are lots of questions

How many recessions have there been?
How many were preceded by M3 shrinkage?

It's seems like money supply shrinkage didn't predict the last recession. It only started shrinking in May 09.

M3 is not a reliable item for predicting inflation - except when its annual change rate goes below zero and stays there for a while.

1875, 1893, 1920, 1930 and 1947 are all examples of when M3 went below zero growth and stayed there for a while, and all were followed by a recession or depression.

What happened to M3 during Japan's lost decade?

To me it seems to suggest that QE isn't working => apply more QE (as is already being talked about) => buy gold

Here's a shorter term look at M3:




QE is working fine for the banks and most of the upper 5% net worth folk.

And it depends on how one defines money supply whether it helped predict the last recession, but in general there are better ways to reliably predict recessions - one of which includes the 10 year minus 3 month yield curve.

What's your take?

Not sure what you're asking?

The S will increasingly HTF over the next few years, with lots of volatility, fear & greed, behind the scenes intervention, bouts of relative inflation & deflation but boiling down to significant stagflation, hard assets will do better by far than paper based ones, "social unrest" will spread around the world, the chances of war aren't low, etc.

[flintlock]

Re: Debt-deflation Bear Market Update - Part I: First Bounce officially over (really)

Anyone who has watched one of those shows on TV that shows how things are manufactured can tell you that people are going to become less and less relevant when it comes to making things. They have robotics and precision manufacturing down to a science. An amazing ability to pump out products at lighting speed. The problem now is going to be finding anyone who still has a job so they can afford the stuff . Sure, we need engineers, designers, etc to plan the production. But past that its a handful of employees who can turn out what thousands used to. Or will we all just sell each other non-essential products and services? Entertainment. Vacations and Day Spa packages. I really don't see an easy answer. I think the growth of government employment is, in part, a response to this problem.

[EJ]

Re: Debt-deflation Bear Market Update - Part I: First Bounce officially over (really)

This is a scan of three of many 50 peso gold coins I inherited from my father when he passed away in 1991. He paid $79 in 1973.

Today the price is $1500.

That represents a compound annual growth rate of 8% over 37 years.

Looking for an investment that has done better. What do you have for me?

[c1ue]

Re: Debt-deflation Bear Market Update - Part I: First Bounce officially over (really)

Looking for an investment that has done better. What do you have for me?

Well, there IS Berkshire Hathaway, but then again that would be going to the 'Dark Side' of the force.

Sir Warren has done a fine job of growing his investments even as he fed the FIRE monster.

[raja]

Re: Debt-deflation Bear Market Update - Part I: First Bounce officially over (really)

This is a scan of three of many 50 peso gold coins I inherited from my father when he passed away in 1991. He paid $79 in 1973.

Today the price is $1500.

That represents a compound annual growth rate of 8% over 37 years.

Looking for an investment that has done better. What do you have for me?

Should the government institute a 90% "collectibles" tax on gold profit before you sell the coins, if you sell them for $1500 you will have earned $142 after-tax profit. Thus, you will have doubled your money in 37 years . . . but considering inflation over that time period, that profit would be worth considerably less in 1972 dollars.

Don't get me wrong . . . I'm a gold owner, too . . . but the investment is far from bullet-proof.