Our USD system is just about to collapse.

[jtabeb]

I sent this out to all my co-workers saying " this is the last time you will hear from me on this subject", same thing applies here on Itulip. This is the last time you will hear from me on this subject.

Isn't that refreshing? You won't have to hear me bleat and drone on about this subject anymore. (Lucky you guys). Oh, and I really mean it.

(Ash, this means you too.)

From Prudent Squirrel:

http://www.kitco.com/ind/Laird/may122009.html

"USD gradual fall or crash?
Our USD system is just about to collapse. Most people by far have absolutely no idea how imminent that is, which is a serious complication for us who do track this. Whether it is a gradual collapse, or a rapid one, is yet to be determined, but collapse is definitely the term to use. The rest of the world is rapidly following suit into bankrupting themselves fighting this relentless world financial deleveraging. Most people cannot imagine a USD collapse, and even we who research about it find it impossible to predict the many consequences.
But it’s the general lack of knowledge in the general population that concerns me. They are sitting ducks. If you have a single gold coin, you will likely buy a nice house with it, I am totally serious. I made a prediction about 2005 that if you have ten ounces of gold only, you will probably survive the period of transition from the USD (with careful planning). Even two ounces would make all the difference in the world. Of course that prediction does not take care of the confiscation issue, but hell, no one strategy can cover all risks.
In short, the world is right in the middle of total change and revolution in every way. Remember how things used to be 20 or 10 years ago? Well, take all that and put it out of your mind. Most of our usual things we take for granted in our ‘world’ are either gone already or the remnants rapidly going away before our eyes. As I am sure most of you already know, it is next to impossible to convince others of the dangers.
Cocktail parties
I talk to people in cocktail parties and learned a lesson about that – that this story is scaring the hell out of people and is a party killer. From now on, I will only briefly bring up these issues, having seen the previous cocktail discussions rapidly end in gloom after we get done discussing all this-to the extent the discussion is even tolerated. I find that I can talk to doctors, airline pilots, millionaire businessmen etc, and basically they have nothing to counter my concerns THEY bring up at the party, when they ask me to comment. Then what seems to happen is they tune out. You can see a haunted look in their eyes. I never get over the fact that with all their hard earned money, they are acting like sitting ducks. Denial seems to work for them initially.
Typically, one of these parties has a few doctors, a few rich businessmen, and such people, and your average 401k persons, and when they find out their world is ending, well, I can’t blame them for leaving the party. And me not being invited back. In fact, I’m not sure I even want to go to those parties either. Many of these people are hiding their heads in the sand, telling me they lost a lot of money and asking me what can they do, and then only having the stomach for a ten minute discussion before they wet their pants on what could happen if the USD fell– and cease discussing the situation. Maybe they are just giving in to fate. That is a very dangerous thing to do."

[vinoveri]

Re: Our USD system is just about to collapse.

jtabeb,

imagine a one world government - e.g., what exists now sort of in an elemental form - the 'haves' (and up and coming haves like China) and the 'have nots'

now imagine a one-world fiat currency (or like we have today a world full of fiat currencies of the "haves" that are working together, e.g., QE to maintain relative par) and stimulate local economic activity

Throw in some legal tender laws and some CONfidence propaganda, and it's not hard to imagine how a one-world currency (or a slew of individual currencies being managed together effectively) can keep population engaged with their "animal spirits" of fear and greed etc. There is no other game in town and you better make $ and spend or you will drown.

This is what's got me down ...

[globaleconomicollaps]

Re: Our USD system is just about to collapse.

Laird can be thorough when he wants to, but this piece just blows. What facts is he basing this opinion on? I'm sorry your cocktail party experiences have been unsatisfying, but that isn't even pertinent. Get a life Chris, and learn to spell.

[phirang]

Re: Our USD system is just about to collapse.

Soros expects Euro to depreciate against the USD.

That means the dollar death camp is retarded.

Depreciation w.r.t. commodities - perhaps.

COLLAPSE? HAH! They've YET begun to fight!

[hayekvindicated]

Re: Our USD system is just about to collapse.

Soros expects Euro to depreciate against the USD.

That means the dollar death camp is retarded.

Depreciation w.r.t. commodities - perhaps.

COLLAPSE? HAH! They've YET begun to fight!

Soros is a trader plain and simple. When he gets it wrong, he simply changes course 180 degrees in a matter of seconds - of course we won't have the benefit of his "opinion" when he does change course. All we'll find out some weeks later is that he made a few billion shorting this or that.

His recent statement to the press that the "green shoots" presage a "recovery" made me rub my eyes in disbelief. He also says that the Pound has bottomed out. Doesn't matter whether you are an inflationist or a deflationist - this is one thing we can all agree on; we are nowhere close to a "recovery". That's horsedung.

Soros doesn't have to be right to make money. He actually told Stanley Druckenmiller once that one only needs to be right 4 times out of ten to make a killing in the markets - assuming that one is nimble to cut losses when one gets it wrong.

He may well be right about the Euro - but what the heck, Euro, Dollar, Sterling, they're all crap currencies.

[phirang]

Re: Our USD system is just about to collapse.

Soros is a trader plain and simple. When he gets it wrong, he simply changes course 180 degrees in a matter of seconds - of course we won't have the benefit of his "opinion" when he does change course. All we'll find out some weeks later is that he made a few billion shorting this or that.

His recent statement to the press that the "green shoots" presage a "recovery" made me rub my eyes in disbelief. He also says that the Pound has bottomed out. Doesn't matter whether you are an inflationist or a deflationist - this is one thing we can all agree on; we are nowhere close to a "recovery". That's horsedung.

Soros doesn't have to be right to make money. He actually told Stanley Druckenmiller once that one only needs to be right 4 times out of ten to make a killing in the markets - assuming that one is nimble to cut losses when one gets it wrong.

He may well be right about the Euro - but what the heck, Euro, Dollar, Sterling, they're all crap currencies.

The US is raising taxes like crazy. This is "positive" for the dollar, fwiw.

[due_indigence]

Re: Our USD system is just about to collapse.

Of course 'One World Government' is one of those facile touchstones from the conspiracy nuts. By itself, it is merely a term or an idea, not necessarily a Pavlovian, de facto nightmare. Today there are 200-odd nations on the planet. How having one --versus 200-- is automatically more sinister requires some explication. Screaming 'one world government' over and over again just doesn't do it for me.

I'm not saying there isn't a valid fear embedded in the 'one world government' bumper sticker. But too often it gets away with not being adequately deconstructed.

[ASH]

Re: Our USD system is just about to collapse.

The US is raising taxes like crazy. This is "positive" for the dollar, fwiw.

The US might be raising tax rates like crazy... I wonder if it is going to raise tax revenue. I tend to buy the story that lower employment and lower corporate profits mean less tax revenue, which seems to be supported by the reports today on both general tax revenue and, effectively, FICA.

As far as personal income taxes go, I assume that the bottom of the income distribution is most vulnerable to unemployment, and it doesn't pay income tax, so I'd think that would blunt the direct impact of unemployment on personal income tax revenue. However, everybody pays payroll tax, regardless of income bracket (and, indeed, FICA is capped at the high end), so I'd expect a bigger impact on the revenue collected for entitlement programs. To the extent that corporate profits are falling and assets have plunged in value -- and some losses in these categories can be deducted over time -- it seems to me that revenue from corporate taxes and capital gains taxes will likely be off for quite a bit. So, the question is -- will casting a wider net for corporate taxes and raising individual income tax rates for the upper brackets actually bring in more revenue than is lost due to losses and unemployment?

[pwcmba]

Re: Our USD system is just about to collapse.

Social Security and Medicare finances worsen

http://finance.yahoo.com/news/Social...-15219531.html

The need is immediate to raise social security tax too.:eek:

"The Congressional Budget Office recently projected that Social Security will collect just $3 billion more in 2010 than it will pay out in benefits. A year ago, the CBO had projected that Social Security would have a much higher $86 billion cash surplus for the 2010 budget year, which begins Oct. 1."

[ASH]

Re: Our USD system is just about to collapse.

(Ash, this means you too.)

So... you suggest moving on to the technological or foreign affairs topic du jour? Probably sound advice.

The date when revenue from surplus payroll taxes ceases to flow into the general fund, and reverses -- squeezing out discretionary spending -- is approaching faster in the aftermath of the burst credit bubble. As I remarked to c1ue previously, I used to wonder whether there would be a respit between the credit bubble and the fiscal crisis engendered by the entitlement programs, but have ceased to wonder. I think it fairly obvious that the one will roll right into the other. Budget crisis for sure; not sure about a dollar collapse, although I'm acting like I expect something of this variety is probable.

That said, Laird's article seems a bit over the top to me. If he's right, and one gold coin makes all the difference, then he gets a cookie. Aside from holding some wealth in a form that can be enjoyed without taxable financial transactions, I can't say that I have any better ideas with respect to crash insurance; I just wouldn't go quite so far with my gold-buggery .

Laird equivocates a bit about the speed of the "collapse", and it seems to me that a more gradual process might not be worthy of that word. No need to rehash in detail past points about the "least ugly contest", whether the market in gold has anything remotely like the depth required to fill the present functions of paper, the fact that the road to hyperinflation has many off ramps, etc... I'm acting like there is a credible risk of a sudden dollar collapse, but not like it's an actual certainty. I reserve certainty for the proposition that the wealthy will be called upon to pay more to support the government, while at the same time that which the government can promise and deliver to its citizens must decrease, and I believe that equilibrium lies in the direction of a lower American standard of living and a weaker dollar. How fast we get there, and which route we take, are not yet clear to me. If there isn't an actual dollar collapse -- and I hope there isn't -- the gold I own would still serve me well in a generally inflationary environment. However, owning just one or two coins probably wouldn't make a difference in my life.

[vinoveri]

Re: Our USD system is just about to collapse.

Of course 'One World Government' is one of those facile touchstones from the conspiracy nuts. By itself, it is merely a term or an idea, not necessarily a Pavlovian, de facto nightmare. Today there are 200-odd nations on the planet. How having one --versus 200-- is automatically more sinister requires some explication. Screaming 'one world government' over and over again just doesn't do it for me.

I'm not saying there isn't a valid fear embedded in the 'one world government' bumper sticker. But too often it gets away with not being adequately deconstructed.

I used to not be a conspiracy nut, but now I suppose I'm just a nut...

I don't think those orchestrating toward a cooperative (i.e., effectively universal) monetary system are conspiring at all.
I would suspect "they" think a world based on Keynesian economics, with one fiat currency that "they" can pump in whenever and wherever they choose to stimulate aggregate demand and maintain high employment is tantamount to a revolution in economics "saving the world".

As austrian economics and Friedman has taught us, inflating the money supply too much causes inflation and inflation is not a good thing IMHO, but the real injustice is that a certain class of the population gets to use the new money first, bidding up everything before the prices rise whereas the common man gets the money later after the prices have already risen.
This is prima facie inequitable, but hey maybe if everybody got the same amount of new money as it was created it might work?

[occdude]

Re: Our USD system is just about to collapse.

It absolutely astounds me that people aren't CONTINUOSLY talking about the impending shift in the world economy.

It's analogous I think, to someone heading towards a retaining wall moving very slowly but on impact they'll disintergrate. They don't want to see it, talk about it or especially think about it. But don't kid yourself, they know its coming. Subconciously, during commercial breaks on their flat screen TVs a little voice in their head says "you're screwed pal" right before dancing with the stars comes back on, then they relapese back into catatonia.

[hayekvindicated]

Re: Our USD system is just about to collapse.

The US is raising taxes like crazy. This is "positive" for the dollar, fwiw.

No it isn't. Higher taxes will kill whatever is left of the economy which will wreck tax revenues.

If we apply that yardstick, Britain should be on its road to solvency with Darling's absurd tax increases. But even the hiking of the marginal tax rates to 50 percent only raises an additional £1 Billion (even by the Government's very optimistic estimates).

[jtabeb]

Re: Our USD system is just about to collapse.

So... you suggest moving on to the technological or foreign affairs topic du jour? Probably sound advice.

The date when revenue from surplus payroll taxes ceases to flow into the general fund, and reverses -- squeezing out discretionary spending -- is approaching faster in the aftermath of the burst credit bubble. As I remarked to c1ue previously, I used to wonder whether there would be a respit between the credit bubble and the fiscal crisis engendered by the entitlement programs, but have ceased to wonder. I think it fairly obvious that the one will roll right into the other. Budget crisis for sure; not sure about a dollar collapse, although I'm acting like I expect something of this variety is probable.

That said, Laird's article seems a bit over the top to me. If he's right, and one gold coin makes all the difference, then he gets a cookie. Aside from holding some wealth in a form that can be enjoyed without taxable financial transactions, I can't say that I have any better ideas with respect to crash insurance; I just wouldn't go quite so far with my gold-buggery .

Laird equivocates a bit about the speed of the "collapse", and it seems to me that a more gradual process might not be worthy of that word. No need to rehash in detail past points about the "least ugly contest", whether the market in gold has anything remotely like the depth required to fill the present functions of paper, the fact that the road to hyperinflation has many off ramps, etc... I'm acting like there is a credible risk of a sudden dollar collapse, but not like it's an actual certainty. I reserve certainty for the proposition that the wealthy will be called upon to pay more to support the government, while at the same time that which the government can promise and deliver to its citizens must decrease, and I believe that equilibrium lies in the direction of a lower American standard of living and a weaker dollar. How fast we get there, and which route we take, are not yet clear to me. If there isn't an actual dollar collapse -- and I hope there isn't -- the gold I own would still serve me well in a generally inflationary environment. However, owning just one or two coins probably wouldn't make a difference in my life.

He DIDN'T SAY DOLLAR COLLAPSE AND NEITHER DID I. And that is a VERY important DISTINCTION.

SYSTEM SYSTEM SYSTEM. Not CURRENCY.

Think pension SYSTEM, public education SYSTEM, think market SYSTEM, governance SYSTEM, military SYSTEM, Economic SYSTEM, real estate market SYSTEM.

You all dig? SYSTEM! or should I say NO SYSTEM.

I personally think that the dollar strengthens in the next round of Dis-un-non-de-inflation (okay that was tortured, in the next round of DEFLATION) there I said it okay.

Think about debt liquidations and think about currency printing. I have doubts that there will be a currency event BUT have no doubts about an approaching SYSTEMATIC collapse (there's that nuance again). And as long as there is MASSIVE LEVERAGE and DEBT outstanding, the dollar can catch MANY bids, (even if it is limited to domestic market debt de-leveraging).

Just think of the unrealized losses that WERE not revealed by the stress tests and you see what I'm talking about.

Call me MISH, SELF SUSTAINING DEFLATION due to debt overhang (until POOM, but not until poom) That is not until the powers that be CHOOSE to destroy the system via hyper-inflation (and I'm not convinced that they will, because you can't maintain control over people in hyper-inflation, BUT YOU SURE AS HELL CAN DURING A DEFLATION).

People seek independence and self reliance during hyperinflation, people become INCREASINGLY DEPENDENT ON THE SYSTEM DURING DEFLATION, and that brings A LOT of power to those running the system.

Go read "Dude, Where's the Dharma?" This isn't deductive reasoning, this is INDUCTIVE reasoning, and it's part of the reason (I think) why people who can only think DEDUCTIVELY can't see what the people who can only think INDUCTIVELY are seeing. (Sure you can use different forms of logic, just talking about preferred method of reasoning).

I couldn't code for shit in LISP using iteration, but I set the curve on the test (97%) for coding using recursion. That's how I think, I'm a inductive or recursive thinker. I think the "Dude" is too and I'm pretty sure Chris Laird is as well. So listen to the message, understand how the messenger comes to conclusions (inductively, not deductively) and then poke holes. But please understand what's really being said first.

I have noticed that people that think in similar ways can get the perspective of each others writings. And that the converse is frequently not true. So think inductively. That's all I'm saying.

Mish has one thing correct, to hyperinflate is to voluntarily give up CONTROL on the system and the powerbase that one has established. DEFLATION is the exact opposite, IT PRESERVES the powerbase that already exists (and expands it through increasing dependance).

Final thought, if hyper-inflation was really around the corner, you'd all be out there buying real-estate, right? Real Estate is not comming back due to all the debt leverage that went into supporting asset prices. (And I think derivatives provided a similar support to the equity markets).

There are two things are not reconcileable, you can't have impending hyper-inflation with a bear market in inflation hedges, can't happen.

And no, I still wouldn't short the UST, and I know I hold all PM's so how do I reconcile the conflict. I don't see it as a conflict. Gold is the BEST MONEY you can save in(in deflation you want to save money, right?) Well, I'm saving, not investing and not speculating.

Debt leverage is SO PERVASIVE, that's what I think people miss. It's the case with government, private individuals, state and local govs, corperations, all of them have exposure to excessive debt leverage. Now I know most of the people here have little or no debt, but think of EVERY THING ELSE THAT DOES.

I just watched NOVA about the Shuttle Discovery disaster. It's the same mind set. The risks are known, and they are known to be catastophic but the risk is accepted over and over and when a big piece of foam hits the wing, well "so what, it's just foam, it can't do any damage EVEN if it hit with 2000+ ft/lbs of energy (same as a 7.62 nato round measured at the muzzle).

I have no doubt that supply constraints will cause prices to rise, and I have no doubts that debt leverage will continue to put much negative pressure on asset prices. I see this causing the failure of social and political institutions and government agencies, I see supply contracting, and scarcity, but I don't see hyperinflation because "they" don't appreciate the problem posed by leveraged debt. It will always just be enough behind the power cure that they don't get in front of it. They will always be lagging and I don't think we get to the POOM at the end because everyone and everything is in the same boat. (All coordinated policies in all participating countries lead to the same systematic collapse).

THE SYTEM FAILS before the choice to POOM is made, that's what I (and I think Chris Laird) are saying.



Okay, got to go to bed because I'm totally rambling now, will edit this later so it actually makes some sense (hopefully).

[medved]

Re: Our USD system is just about to collapse.

Final thought, if hyper-inflation was really around the corner, you'd all be out there buying real-estate, right? Real Estate is not comming back due to all the debt leverage that went into supporting asset prices. (And I think derivatives provided a similar support to the equity markets).

There are two things are not reconcileable, you can't have impending hyper-inflation with a bear market in inflation hedges, can't happen.

Real estate was the asset to create the previous wave of inflation, so it got ahead of anything else. Since the RE–induced inflation collapsed, nothing else could be used for inflation EXCEPT the gov’t printing press. I think, this will continue for LONG TIME without collapsing, just getting progressively worse by the year. Real estate is not always an inflation hedge. 2006-2008 gave us a good example, when gas and commodities went up and real estate down. We will have another wave of this process (commodities up, RE down), so nothing contradictory here. I don't have time to dig for details, but, probably, metalman can find something along these lines in the old iTulip threads ;)