Not a crisis, an epiphany: the FIRE Economy is not coming back

[c1ue]

Re: Not a crisis, an epiphany: the FIRE Economy is not coming back

Don't forget the true nuclear option:

Adding an extra 0 to the dollar.

Cut our debts by 90%. Then add capital back into financial sector.

FIRE can resume.

Of course savers get screwed bad.

[kartius919]

Re: Not a crisis, an epiphany: the FIRE Economy is not coming back

That is the same as creating the "Amero," but the exchange rate may be much higher than when the time is right. I think they will just string this along and maintain/plunder? the broken system as long as possible. If it breaks down, then it breaks down and they will unveil the new currency. I'm sure every head of state is discussing such an option with their Bretton Woods redux.

I am seriously considering transferring my cash position into consumer staples, energy, and mining in the near future. Keeping cash is becoming a scarier proposition.

[kingcopper]

Re: Not a crisis, an epiphany: the FIRE Economy is not coming back

sadly, I believe capitalism's problems arise out of the greed of the very elite that find comfort from the system itself. I know many great people with great ideas and motivation but Wallsheep and Washington neuter their hope with the outright dishonesty. Innovation is stalled by the very system set up by are great mothers and fathers.

[phirang]

Re: Not a crisis, an epiphany: the FIRE Economy is not coming back

sadly, I believe capitalism's problems arise out of the greed of the very elite that find comfort from the system itself. I know many great people with great ideas and motivation but Wallsheep and Washington neuter their hope with the outright dishonesty. Innovation is stalled by the very system set up by are great mothers and fathers.

Life is tough. Overcome or make do...

[mlg120856]

Re: Not a crisis, an epiphany: the FIRE Economy is not coming back

How about killing the FIRE economy (bankers and brokers) so the patient can live. FIRE cannot survive if it kills the patient; so far, the bailouts are producing the death of the patient and FIRE seems to be sitting back like vultures waiting to swoop in on the dead patients assets.

How can FIRE survive if the patient is dead?

MARK TO MARKET and let FIRE go belly up.

[Jay]

Re: Not a crisis, an epiphany: the FIRE Economy is not coming back

This thread is here to elicit feedback. In our view, Ka-Poom Theory holds that there are not many options on the menu.

1. Depreciate the dollar, a natural result of capital outflows as foreign central banks run out of money to send to the US. That part of Ka-Poom Theory appears to be happening.

2. That means all of the "fixed" expenses that foreign governments used to fund in the US now have to be funded by the US, with negative implications for the US fiscal position, which wasn't so hot to begin with.

FRED, I know this is probably evident and basic for most, but 1) does this graph include US Treasury purchases as foreign assets and 2) does it include only foreign private money or sovereign purchases also? Thanks.

[FRED]

Re: Not a crisis, an epiphany: the FIRE Economy is not coming back

FRED, I know this is probably evident and basic for most, but 1) does this graph include US Treasury purchases as foreign assets and 2) does it include only foreign private money or sovereign purchases also? Thanks.

This chart includes all foreign assets, official and private, invested in all US securities, that is, total net inflows.

[donalds]

Re: Not a crisis, an epiphany: the FIRE Economy is not coming back

Eric,

Guess I'm missing something here, but I recall in a very recent post a comment you made (perhaps I'm mistaken, and it wasn't you), that the dollar should not be expected to depreciate vs. other currencies, but rather vs. commodities.

Oil has plunged significantly from its 2008 highs, and the dollar has appreciated considerably. If the dollar should be expected to weaken dramatically against commodities, such as oil . . . what's going to drive up the price of these commodities, such as oil?

You mention that government attempts to re-inflate are starting from, among other things, a deficit rather than from a surplus. MY question: where it the public financing/taxpayers subsidized build up of infrastructure and alternative energy going to come from?

[joebob]

Re: Not a crisis, an epiphany: the FIRE Economy is not coming back

My personal answer on what to do to get ready for the Poom is to buy a well built aluminum sailboat. Secured down low in sailboat PM makes great ballast.

Any thoughts?

Your aluminum hull will be the anode if you put PM in the bilge.

[grapejelly]

Re: Not a crisis, an epiphany: the FIRE Economy is not coming back

Eric,

Guess I'm missing something here, but I recall in a very recent post a comment you made (perhaps I'm mistaken, and it wasn't you), that the dollar should not be expected to depreciate vs. other currencies, but rather vs. commodities.

Oil has plunged significantly from its 2008 highs, and the dollar has appreciated considerably. If the dollar should be expected to weaken dramatically against commodities, such as oil . . . what's going to drive up the price of these commodities, such as oil?

You mention that government attempts to re-inflate are starting from, among other things, a deficit rather than from a surplus. MY question: where it the public financing/taxpayers subsidized build up of infrastructure and alternative energy going to come from?

it isn't going to come from anything. It seems that the system is going to collapse before the next bubble can start. Things are way, way out of hand right now. The USD has gone parabolic against every currency but the Yen. Financial assets are collapsing.

Very soon we will start seeing massive outright printing of trillions of USD as the only thing left. The helicoptors.

[Guest]

Re: Not a crisis, an epiphany: the FIRE Economy is not coming back

Grapejelly -

Just got flash mails from Arch Crawford and Robert McHugh (McHugh is really good) that we are right smack at the potential tradeable low. $675 gold and $8.80 silver, IF IT TURNS HERE. Otherwise it's gone. If it turns they are plotting it as a very stiff rally, 50% plus retracement potential into early January, then a the final plunge down past even these lows into the final corrective low with the DOW somewhere around 6K.

The second low going into February March is billed as so earthshattering that it's got potential for "regime change" and the loss of the democratic system (or the remnants rather). Arch Crawford s not one to bet against on the really big calls. Bottom line however is if we wake up tomorrow morning and this thing is still plowing south the entire script just got torn up and we are going straight into depression.

How do you like them apples?

it isn't going to come from anything. It seems that the system is going to collapse before the next bubble can start. Things are way, way out of hand right now. The USD has gone parabolic against every currency but the Yen. Financial assets are collapsing.

Very soon we will start seeing massive outright printing of trillions of USD as the only thing left. The helicoptors.

Monetary Base Rocket

October 23rd, 2008


Today we got news that the U.S. monetary base consisting of bank reserves and currency in circulation has skyrocketed to $1.15 trillion from $850 billion a mere 6 weeks ago, which is an increase of 35%, or 300% annualized. Meanwhile, the Adjusted Monetary Base tracked by the St. Louis Fed (which calculates the monetary base using bi-weekly averages) clocked in at $1.19 trillion. Here is how it looks on a chart:



Click Chart to Enlarge

The Fed has added as much to the monetary base in 6 weeks as it has added in any prior 10 year period going back to the early 1980s. Indeed, the rate of increase appears to be about $100 billion every two weeks and yet the logjam in the credit markets still has not been cleared.

So, is this the fabled helicopter drop? Yessirreee! There is, however, a slight matter that deserves some mention. The money dropped from the helicopter has not reached the ground yet. In other words, most of this money is still being held by the banks in the form of Reserve Balances. Put another way, it has not yet started to work its way down through the fractional-reserve lending process to the credit-strapped private sector.

The reason these funds are being held and not loaned out by the banks is simple. The Fed is actually paying banks to hold the funds in reserves. Indeed, the Fed has just today increasing the rate it is paying by 40 basis points.

Some of you may know that the Fed was originally going to start paying banks for excess Reserve Balances starting in 2011 but the recent emergency bailout legislation moved that date up so that Reserve Balances would start to earn interest immediately.

The Fed’s intent is to try to keep the massive increases in Reserve Balances close to the heart so that these funds serve mainly to shore up the banks’ balance sheets but don’t create a tsunami of “unnecessary liquidity” in the money supply. Remember what I said earlier about jumping out of a burning building. In helicopter lingo, the $300 billion has been dropped but it is fluttering in midair due to an updraft created by the rotor.

I suspect, however, that the Fed will have to dispense with its “gradualism” before too long and fly the helicopter to open airspace in order to avoid a crash.

Even if the Fed has no intention of moving clear, the longer the money stays out there fluttering in midair, the more difficult it will be to keep it aloft. Moreover, once the dropped money has cleared the updraft from the helicopter’s rotor, it can no longer be reclaimed by the Fed without consequences, especially while the global economy remains on an unsure footing. Thus I suspect most of the dropped money will eventually flutter to the ground.

What I think we should watch for in particular is an increase in M1, which includes circulating currency (Federal Reserve Notes) and demand deposits. The latest data only goes up to October 13, but that data actually shows weekly average M1 shrinking by as much as $100 billion since the end of September.

If and when we see M1 reverse sharply upwards, we could start to suspect that the first batches of the monetary drop are starting to reach the ground and that a “hyperinflationary event” will not be very far behind. How long could this take? I give it 6 to 18 months although others say it could be literally weeks from now. Jim Sinclair claims something big will happen in 13 to 88 days, which is the timeframe between the U.S. elections and the inauguration of the next President.

G'mornin' Chris Coles. I see you are up. I'm turning in (wee hours of the morning here - and it's an ugly day dawning).

[Chris Coles]

Re: Not a crisis, an epiphany: the FIRE Economy is not coming back

I listened to a BBC Radio 4 report this morning from a Hedge Fund Conference in London and the interviewee sounded frightened.
http://news.bbc.co.uk/today/hi/today...00/7688225.stm

Later, Washington Post put up a report about AIG running out of the money loaned. http://www.washingtonpost.com/wp-dyn...src=newsletter

I have posted that.

The FIRE economy has no option but to run out of money. Their wonderful idea of leveraging everything to the nth degree has come right back and bit them hard. The bubble was not in mortgages, it was in leveraged bonds being printed by the hedge funds and investment banks. But the losers are all the very wealthy that used the short term money these funds could provide to go out and buy up other assets. The loans must now be called in for the lending institutions to survive.

The real losers are the very wealthy whose inclination for more..... of anything they thought they could lay their hands on, because someone would lend them the money... short term... no problem.

http://www.timesonline.co.uk/tol/new...MC-Bltn=KQUFQ9

[ST]

Re: Not a crisis, an epiphany: the FIRE Economy is not coming back

Lukester et al,

What is that 'big event' when the money hits the ground in M1?

Do we first see bond yields rise? Do we first see a recovery in broad markets indices?

Then commodities prices rise rapidly to higher highs than previously (in other words all currencies fall)? Then that brings on an inflationary mindset? Then a flock to assets that are deemed to be inflation hedges? and an accompanying rout in the bond market?

In other words, what is the sequence of 'POOM'? and how exactly does wage inflation NOT take shape UNLESS price inflation only moves up gradually and marginally in the U.S.? If inflation took hold in consumer prices across the board in a big way, I would expect at the very least the public sector unions will strike, followed by others.

[Guest]

Re: Not a crisis, an epiphany: the FIRE Economy is not coming back

Steve - no, if you don't see markets pull up here into the beginnings of a very large rally in the next two, three days or a week at the very outside, we are looking at the "deflationary blue screen of death. Seriously, the technical picture is screaming for a relief rally, with no parallels going back 150 years for the uninterrupted extent of this plunge.

Hyperinflating money coming down like rain, but for a good long while, no inflation - just plunging deflationary conditions. I have no idea of how the poom manifests thereafter, but this market is way, way overstretched into a single downleg. If it does not rebound here it breaks 300 year record books for plunge.

Apparently there has never been an instance in history of a huge deflation in a world governed by fiat money - but the very fact that it appears to be so is broadcasting that one should own and hang onto a very solid position in gold. Anyone here venturing into a what *appeared* to be a runaway deflation that is occurring in a 100% fiat money world, and who is only owning fiat paper notes or treasuries, is nuts, or foolish, or reckless, or all of those.

They will put the Federal Reserve Note into an incinerator trying to combat this thing.

In preliminary terms if markets don't now correct sharply that would NOT be inflationary. You'd of course see all commodites and dollar hedge assets temporarily decimated far more than they are already. The hyperinflation comes later, after everyone in the commodities had been turned into hamburger patties. G'night.

Lukester et al,

What is that 'big event' when the money hits the ground in M1?

Do we first see bond yields rise? Do we first see a recovery in broad markets indices?

Then commodities prices rise rapidly to higher highs than previously (in other words all currencies fall)? Then that brings on an inflationary mindset? Then a flock to assets that are deemed to be inflation hedges? and an accompanying rout in the bond market?

In other words, what is the sequence of 'POOM'? and how exactly does wage inflation NOT take shape UNLESS price inflation only moves up gradually and marginally in the U.S.? If inflation took hold in consumer prices across the board in a big way, I would expect at the very least the public sector unions will strike, followed by others.

And BTW, two or three of the newsletters I read are now calling for the long presumed top in bonds to not materialize! They call them to bottom out shortly and then bond prices go up again!

[Charles Mackay]

Bernanke Alert!

I don't know if any of you listened to Bernanke's speech to the Economic Club of New York? After the speech he took a Q&A where Martin Feldstein asked him what he had learned from his studies of the Great Depression that he could apply now. Bernanke said that the two good things that FDR did were firstly to "relieve" the country from the constraints of the gold standard and secondly to declare a bank holiday in which banks couldn't reopen until they were sound.

Well folks... there you heard it from the horse's mouth! The two "good things" were confiscating the citizens gold under threat of a $10,000 fine and imprisonment, and also closing your bank! These are the "GOOD THINGS" that FDR did!!! I guess he didn't have the guts to say devaluing the dollar by 75% after buying the people's gold was a "good thing" also!!!

Folks, you must keep your gold outside the U.S.. Keep it in Switzerland or at least in Canada. GoldMoney.Com is good or The Central Fund of Canada (CEF) or Perth Mint Certificates in Australia. Or open up your own safe box offshore.

Here is the Q&A video:
http://www.cnbc.com/id/15840232?video=891160288&play=1