Dow Theorist Richard Russell: Sell Everything Liquid, You Won't Recognize America By The End Of The Year

[jk]

Re: Dow Theorist Richard Russell: Sell Everything Liquid, You Won't Recognize America By The End Of The Year

i suspect there will be no "new world reserve currency" unless you mean redefined sdr's, with a basket of currencies and perhaps some commodities thrown in for good measure.

[gnk]

Re: Dow Theorist Richard Russell: Sell Everything Liquid, You Won't Recognize America By The End Of The Year

When I read reports from the BIS or IMF (if I manage to stay awake) then I find their warnings and analysis remarkably balanced and sensible, at least by way of comparison with what comes out of the mouths of my political "representatives" in Washington, DC.

One recent criticism of the European Economic Union is that it is a monetary union lacking political power.

One criticism of the financial reform bill that passed the U.S. Senate last week was that it gave yet more power to the Fed.

The "throw the bums out, a pox on both their houses" political movement seems to be gaining strength in the U.S.

EJ bemoans the shift of the driving force of the driving force in the economy to the political arena. This makes his work of anticipating economic changes harder.

... I am beginning to see a pattern here.

The power of respect is flowing toward some of the bankers, away from politicians and some other bankers.

I expect that most of the politicians but only some of the bankers will be discredited. Power will shift to the remaining bankers. I am long (in thought, not stock) JPMorgan, Rothschild, Rockefeller, IMF and BIS. I expect Goldman Sachs will be sacrificed as the arch-typical evil bankster on the altar of public revenge. I expect many politicians and many local and regional banks to be consumed in the crisis. I expect power to shift toward a stronger world monetary system, which will include bouts of crisis and counter-crisis, in the usual Hegelian dialectic. I expect a greater separation of political and monetary regimes. My hero Ron Paul will fail to "audit the Fed" in any meaningful fashion. Some more secondary financial crises in larger U.S. states (e.g. California) and secondary nations (e.g. the PIIGS) will continue to pile debt onto the U.S. (Fed, Treasury, GSE's, ...) until a world-wide financial crisis ushers in another Bretton Woods and a new world reserve currency.

This financial crisis will be a major element of our fourth turning crisis (though, unfortunately, probably not the only major crisis before us.)

The banksters won't win, at least not long term. They will self-destruct. They are actually facilitating their own destruction. No need to audit the Fed, to make TBTF smaller, to regulate... they're doing it to themselves. The fiat system is imploding. One thing that no one mentions is the endgame.

Does anyone really believe that the US (or any other Western indebted nation) will be able to manage its debt and senior citizen obligations thru a combination of taxation and future growth?

When the sovereign defaults hit, or hyperinflation, or when gold emerges, the banks, as we know them today, are done.

[ThePythonicCow]

Re: Dow Theorist Richard Russell: Sell Everything Liquid, You Won't Recognize America By The End Of The Year

i suspect there will be no "new world reserve currency" unless you mean redefined sdr's, with a basket of currencies and perhaps some commodities thrown in for good measure.

That's exactly what I mean: "redefined sdr's, ..."

[ThePythonicCow]

Re: Dow Theorist Richard Russell: Sell Everything Liquid, You Won't Recognize America By The End Of The Year

The banksters won't win, at least not long term. They will self-destruct. They are actually facilitating their own destruction. No need to audit the Fed, to make TBTF smaller, to regulate... they're doing it to themselves. The fiat system is imploding. One thing that no one mentions is the endgame.

Does anyone really believe that the US (or any other Western indebted nation) will be able to manage its debt and senior citizen obligations thru a combination of taxation and future growth?

When the sovereign defaults hit, or hyperinflation, or when gold emerges, the banks, as we know them today, are done.

Well, I'm with you in figuring that there is no way that the US or any other Western indebted nation can manage its debt and obligations through taxes and growth.

But what I'm also figuring (with less confidence, admittedly) is that we don't collapse directly to gold. Rather I'm figuring "they" double down one more time. After U.S. Treasuries fail, then I expect a new world wide monetary agreement to reset the debt and establish a new world reserve currency based on some SDR like paper. Sooner or later that too will blow up, but that will likely be a while down the road, decades at least.

[gnk]

Re: Dow Theorist Richard Russell: Sell Everything Liquid, You Won't Recognize America By The End Of The Year

Well, I'm with you in figuring that there is no way that the US or any other Western indebted nation can manage its debt and obligations through taxes and growth.

But what I'm also figuring (with less confidence, admittedly) is that we don't collapse directly to gold. Rather I'm figuring "they" double down one more time. After U.S. Treasuries fail, then I expect a new world wide monetary agreement to reset the debt and establish a new world reserve currency based on some SDR like paper. Sooner or later that too will blow up, but that will likely be a while down the road, decades at least.

I agree that the SDR (if paper based) is a "double down" solution for the desperate banksters. But how will that facilitate the reset? All an SDR does is provide the global economy with a sounder currency to continue international trade. It does nothing for the defaulting/hyperinflating nations. And if/when the US dollar and Euro go thru massive inflation - what does that mean for the SDR, which I would assume, comprises a representative fraction of the US dollar and Euro?

It's over. But we're not talking about an Asian Crisis, the Russian crisis, or Argentina here... we're talking about the entire Western world. This is no hiccup, and there is no one left standing that is big enough to hang onto until we get our shyte together.

Does the West default? Does the West hyperinflate away? And if so, if you were India or China, wouldn't you be a little upset that the wealthy West got to write down their debts and still continue to consume oil and other resources more than the rest of the global population? No... pain has to be felt. Something has to be given up. Something of value.

I have said it before, and I'll say it again. The only thing the West has that the rest of the world does not, is a boatload of gold.

Gold will ultimately be revalued - well above the $2,500-$5,000 range EJ forecasts. And that value will be maintained. No bell curve price movement. Just up and then sideways.

That's my forecast... and from now on, I'm sticking to it!

[metalman]

Re: Dow Theorist Richard Russell: Sell Everything Liquid, You Won't Recognize America By The End Of The Year

usa 2010 = japan 1996 w/o the exports & with external debts. got it. thx.

[LargoWinch]

Re: Dow Theorist Richard Russell: Sell Everything Liquid, You Won't Recognize America By The End Of The Year

I agree that the SDR (if paper based) is a "double down" solution for the desperate banksters. But how will that facilitate the reset? All an SDR does is provide the global economy with a sounder currency to continue international trade. It does nothing for the defaulting/hyperinflating nations. And if/when the US dollar and Euro go thru massive inflation - what does that mean for the SDR, which I would assume, comprises a representative fraction of the US dollar and Euro?

It's over. But we're not talking about an Asian Crisis, the Russian crisis, or Argentina here... we're talking about the entire Western world. This is no hiccup, and there is no one left standing that is big enough to hang onto until we get our shyte together.

Does the West default? Does the West hyperinflate away? And if so, if you were India or China, wouldn't you be a little upset that the wealthy West got to write down their debts and still continue to consume oil and other resources more than the rest of the global population? No... pain has to be felt. Something has to be given up. Something of value.

I have said it before, and I'll say it again. The only thing the West has that the rest of the world does not, is a boatload of gold.

Gold will ultimately be revalued - well above the $2,500-$5,000 range EJ forecasts. And that value will be maintained. No bell curve price movement. Just up and then sideways.

That's my forecast... and from now on, I'm sticking to it!

That is a great post gnk.

I still think that the "West" may have a little problem with South Africa, Russia, Peru & Co. controlling the currency "printing" however:

2008 Gold Production


I think we are more likely to see "blue greenbacks" (or whatever next fiat they come up with) enforced via chaos and desperation than a gold standard.

[gnk]

Re: Dow Theorist Richard Russell: Sell Everything Liquid, You Won't Recognize America By The End Of The Year

That is a great post gnk.

I still think that the "West" may have a little problem with South Africa, Russia, Peru & Co. controlling the currency "printing" however:

2008 Gold Production


I think we are more likely to see "blue greenbacks" (or whatever next fiat they come up with) enforced via chaos and desperation than a gold standard.

Whatever choice is ultimately made by the G20, or the EU and US individually - there will be winners and losers. There is no getting around that. I say congratulations Peru, S.A., Oz, and others... By the way, Australia taxing mining profits at 40% is a harbinger of things to come. They know the jig is up.

But remember, countries that also "win" under a gold standard include the US, China, and Russia. Those are rather influential countries, no? That's enough to make this viable. The rest will be free riders... oh well. Keep in mind that the US has 8K tons gold, and the EU combined has 10K tons gold. That makes individual country annual gold production, with China at 300[edit... 300, not 300K] tons per annum look miniscule.

A high valuation of gold will also coax privately held gold to re-enter the system, just like during the gold days. Gold jewelry will once again be something that is rare - there will be no such thing as "old unwanted gold" it will be passed down for generations, again, just like it used to be.

As for the creation of a new fiat currency, new fiat system does not discharge old debts - default or payment does. Here are the only methods the US and EU have for handling old debts and upcoming obligations.

A little game theory exercise:

1) Hyperinflate out of debt quickly - this kills the currency and the economy (gold wins)

2) Inflate over time - I don't see this working, there will be a point when the US bond market experiences a bad auction. Taxable revenues will not keep up, interest payments as a percentage of the government budget exceed 30% - Game over - (gold wins.)

3) Default- which would be highly unstable to the world economy, all debt based instruments suspect, market votes gold. (gold wins)

4) Revalue gold thru several methods - wind down paper gold markets, so as not to be too disruptive, gov't assigns a higher value to gold, and use the gold to re-balance the current global financial imbalances. You say that may be inflationary? I say no. If debts are paid off thru high valued gold, there is basically a wiping out of money (fiat debt) and a replacement of gold money. Net change - minimal. (gold wins)

Conclusion: All roads lead to gold. Gold valued at $10K - 20K + an oz.

But there is one other path. War. And no slapping around a third world country type of war, but a war that involves the big boys. Extremely destructive to say the least. Massive die-off.

As an optimist (yes, I am occasionally capable of experiencing optimistic episodes in this crisis), I see gold, not war being the final outcome.

Actually, if there were to be a major global war... gold wins again.

Funny that. (In a dark humor kind of way)

[jk]

Re: Dow Theorist Richard Russell: Sell Everything Liquid, You Won't Recognize America By The End Of The Year

as a thought experiment, let's imagine that all nominal prices double overnight, including wages [the price of labor], but that this is not recognized in official cpi statistics. suddenly the debt burden at all levels is mitigated. governments can afford to pay nominally fixed pensions. [medicare remains a problem for another day, however.] the bite of mortgage payments is cut in half. suddenly homeowners are no longer underwater, as their home prices have doubled. the losers are the holders of the bonds and mortgages. as soon as the banks have finished offloading their inventory to the pension funds that only need the nominal, not the real, value anyway, we can get this program underway.

[gnk]

Re: Dow Theorist Richard Russell: Sell Everything Liquid, You Won't Recognize America By The End Of The Year

as a thought experiment, let's imagine that all nominal prices double overnight, including wages [the price of labor], but that this is not recognized in official cpi statistics. suddenly the debt burden at all levels is mitigated. governments can afford to pay nominally fixed pensions. [medicare remains a problem for another day, however.] the bite of mortgage payments is cut in half. suddenly homeowners are no longer underwater, as their home prices have doubled. the losers are the holders of the bonds and mortgages. as soon as the banks have finished offloading their inventory to the pension funds that only need the nominal, not the real, value anyway, we can get this program underway.

I highlighted the relevant conclusion I am addressing.

There would be grave geopolitical consequences if one debtor-nation's asset values, wages, i.e. fiat was doubled to the detriment of creditors, including creditor nations. These consequences would initially be manifested in severe trade wars, massive disruption of global trade, oil flows... peaking in war.

Fiat debt needs to be truly extinguished, using something of value whose value is maintained after the transaction. Debtors are freed, Creditors are made whole. Only one thing needs to be (re)inflated, Gold.

The process you describe above is what the elites would prefer to do over time - gradually so. It won't work. Debt markets freeze, the dam eventually breaks.

[we_are_toast]

Re: Dow Theorist Richard Russell: Sell Everything Liquid, You Won't Recognize America By The End Of The Year

as a thought experiment, let's imagine that all nominal prices double overnight, including wages [the price of labor], but that this is not recognized in official cpi statistics. suddenly the debt burden at all levels is mitigated. governments can afford to pay nominally fixed pensions. [medicare remains a problem for another day, however.] the bite of mortgage payments is cut in half. suddenly homeowners are no longer underwater, as their home prices have doubled. the losers are the holders of the bonds and mortgages. as soon as the banks have finished offloading their inventory to the pension funds that only need the nominal, not the real, value anyway, we can get this program underway.

I'm not sure I understand. "governments can afford to pay nominally fixed pensions", are you suggesting pensions, unemployment, and social security payments would not double while the prices of everything would?

[metalman]

Re: Dow Theorist Richard Russell: Sell Everything Liquid, You Won't Recognize America By The End Of The Year

I'm not sure I understand. "governments can afford to pay nominally fixed pensions", are you suggesting pensions, unemployment, and social security payments would not double while the prices of everything would?

he's referring to this from dec. 2005...

Inflation is Dead! Long Live Inflation! - Janszen

Aug 14, 2006 ... Inflation is Dead! Long Live Inflation! The Five Year, 100% Inflation Scenario by Eric Janszen (from AlwaysOn Network, December 29, ...
www.itulip.com/.../showthread.php?326-Inflation-is-Dead!...Inflation!... - Cached

Five-Year 100% Inflation Scenario

A 100% inflation over five years might look as follows to a household that in Year Zero has an annual income of $100,000 and a fixed rate mortgage balance of $400,000 on a house valued at $500,000.

In the model, inflation peaks at 35% in Year Three. If 13% of income is paid annually toward the mortgage at the start of the period, at the end of five years the fixed mortgage cost falls to 6% of income and the mortgage balance represents 16% of the value of the home versus 80% at the start.

If the homeowner increases his annual payments to adjust to 13% of income over the five-year period as nominal income rises, the amount paid in increases such that at the end of Year Five the mortgage balance has been reduced from $400,000 to $171,692. That's many years of normal debt payoff condensed into a few years.

In this model both nominal income and home value double. In reality, since so much inflation has already happened in real estate and high interest rates will increase the real cost of borrowing, home prices are likely to rise more slowly, flatten out, or even decline.

[jpatter666]

Re: Dow Theorist Richard Russell: Sell Everything Liquid, You Won't Recognize America By The End Of The Year

My god, MM, do you have all this stuff memorized??

It's nice to have you available for this sort of answer, but wow....

[metalman]

Re: Dow Theorist Richard Russell: Sell Everything Liquid, You Won't Recognize America By The End Of The Year

My god, MM, do you have all this stuff memorized??

It's nice to have you available for this sort of answer, but wow....

all i needed to remember is that i 1st read the idea here... then my buddy google does the rest. itulip 'inflation scenario' hey, how hard is that? site:itulip.com inflation scenario

[jk]

Re: Dow Theorist Richard Russell: Sell Everything Liquid, You Won't Recognize America By The End Of The Year

I'm not sure I understand. "governments can afford to pay nominally fixed pensions", are you suggesting pensions, unemployment, and social security payments would not double while the prices of everything would?

that's exactly what i'm suggesting when i say that the inflation is not recognized in the official cpi statistics. that's what's already happened. according to john williams' shadowstats, social security payments would be 70% higher NOW without the "improvements" in how cpi is calculated made since 1980 or so.