Crash Proof...How toprofit from the coming economic collapse

[Mega]

Just got a copy as an Xmas gift, i shall read it and report back.
Mega

[Mega]

Re: Crash Proof...How toprofit from the coming economic collapse

Ok, not bad up to page 60 so far. Peters laied the base talking about Nixon dropping the Gold stardard in 71 etc.
Mike

[metalman]

Re: Crash Proof...How toprofit from the coming economic collapse

Ok, not bad up to page 60 so far. Peters laied the base talking about Nixon dropping the Gold stardard in 71 etc.
Mike

how original. read that here in 1998.

so what does he say is gonna happen now? new currency system? what's going to look like?

[grapejelly]

Re: Crash Proof...How toprofit from the coming economic collapse

how original. read that here in 1998.

so what does he say is gonna happen now? new currency system? what's going to look like?

read that in '78

[Guest]

Re: Crash Proof...How toprofit from the coming economic collapse

I can tell Metalman's a big fan of Peter Schiff!

Indeed, Mr. Schiff did not necessarily "write the original book" on the trends we are observing. And it's entirely true that iTulip's theories have been far more deeply elaborated, and substantiated by those economists it can call upon of high caliber - but to be entirely objective, neither has iTulip been the sole proponent of the ka-poom theory, insofar as there are a few others around who as early as 2000 were already seeing the glimmerings of a world where "large inflationary forces, interspersed with sharp, ugly deflations" were going to be the major aspect of the decade.

Seems a surprisingly clear approximation of iTulip ka-poom theory.

Metalman, I'm one of the biggest fans of your trenchant, blunt style and your insights. But please don't forget that while iTulip is indeed "one of the very few" it is not "the only" beacon of light on these issues. I reject any heroicisation of either this community, or any of the (very few) others. And yes, E.J. does run circles around Mr. Schiff. And if Mr. Schiff wants to void my registration as a client of his company for offering up this faint praise, I will accept that with complete equanimity.

[Guest]

Re: Crash Proof...How toprofit from the coming economic collapse

Eminently hard headed, clear sighted and probing article by Mr. Schiff - not too dissimilar from iTulip's own positions!
___________________

NOT YOUR FATHER'S DEFLATION - by Peter Schiff
Euro Pacific Capital
December 21, 2007

Among those rational enough to perceive the looming economic downturn, a heated debate has arisen that centers on whether the slowdown will be accompanied by inflation or deflation.

Those in the deflation camp believe that money supply will collapse as a natural consequence of the implosion of the biggest credit bubble in U.S. history. As loans go bad, assets, which collateralize these loans, will be sold at fire sale prices to satisfy creditors. It is also argued that a recession will reduce consumer discretionary spending, causing retailers to slash prices to move their bloated inventories. This is the way the situation played out in the 1930's and this is how many expect it to happen today.

However there are several key differences between then and now, which argue against the classic deflationary scenario. In particular, the Fed's ability to pump liquidity into the market in the 1930's was limited by the gold backing requirements on U.S. currency. No such limitations exist today. This distinction is critical. When credit was destroyed after the Crash of 1929, the Fed was not able to simply replace it out of thin air.

Today however, the Fed will likely print as much money as necessary to prevent nominal prices from collapsing. In fact, in the infamous speech that spawned his “helicopter" sobriquet, Ben Bernanke explained how the printing press can be used to stop deflation dead in its tracks.

To fully understand the way inflation and deflation affect prices, we need to differentiate between assets, such as stocks and real estate, and consumer goods, such as shoes and potato chips. If we measure prices in gold, as we did during the 1930’s, both asset and consumer goods prices will fall, with the former falling faster than the latter. So in that sense the deflationist are correct. However, in terms of today’s paper dollars, this outcome is completely impossible.

During deflation, money gains value, so prices naturally fall as fewer monetary units are required to buy a given quantity of goods. In the coming deflation, real money (gold) will gain considerable value, so prices will therefore fall sharply in gold terms. Paper dollars however, which have no intrinsic value at all, will lose value, not only as the Fed increases their supply, but as global demand for the currency implodes.

The way I see it there are only two possible scenarios. The more benign outcome would we be one where asset prices fall, even in terms of paper dollars, but consumer goods prices continue to rise. This would be the stagflation scenario. The more catastrophic scenario is one where asset prices hold steady or even resume their ascent, while consumer goods prices rise even faster. This of course is the hyper-inflation scenario, and is the worst possible outcome. I see no possible scenario where consumer goods prices fall in term of paper dollars.

Many mistakenly believe that when the U.S. economy falls into recession, reduced domestic demand will lead to falling consumer prices. However, what is often overlooked is the fact that as the dollar loses value, the rising relative values of foreign currencies will increase consumer demand abroad. As fewer foreign-made products are imported and more domestic-made products are exported, the result will be far fewer products available for Americans to consume. So even if the domestic money supply were to contract, the supply of goods for sale would contract even faster. Shrinking supply will be a major factor in pushing consumer prices higher in America.

In addition, since trillions of dollars now reside with our foreign creditors, even if many of these dollars are lost due to defaulted loans, those that are not will be used to buy up American consumer goods and assets. As a result of this huge influx of foreign-held dollars, the domestic dollar supply will likely rise even if the Fed were to allow the global supply of dollars to contract, forcing consumer prices even higher. In fact, a contraction in the domestic supply of consumer goods will likely coincide with an expansion of the domestic supply of money. The result will be much higher consumer prices despite the recession. So even though Americans will consume much less, they will pay much more for the privilege.

The real risk of course is that the Fed gets more aggressive as it realizes that the additional credit it is supplying is not flowing where it wants. If the Fed drops enough money from helicopters it will eventually reverse the nominal declines in asset prices. Unfortunately, that road leads to hyper-inflation and disaster. No matter what, even if the Fed succeeds in propping up nominal asset prices, they can do nothing to sustain their real values. Consumer goods prices will always rise faster, leaving the owners of those assets poorer no matter how high their nominal values climb.

The big problem politically is that hyper-inflation may superficially appear to be the lesser evil. If asset prices are allowed to collapse, ownership of those assets will pass to our creditors. If instead we repay our debts with debased currency, we retain ownership of our assets and shift the losses to our creditors. Since American debtors can vote in U.S. elections and foreign creditors can not, the choice seems obvious. Of course there are some American creditors as well, but since they comprise such a small percentage of the electorate, my guess is that their losses will be seen as acceptable collateral damage.

© 2007 Peter Schiff
Editorial Archive

[Mega]

Re: Crash Proof...How toprofit from the coming economic collapse

I do notice that most of the charts etc are from Prudent Bear..........i am now at page 173, were Peter will lay out HOW to BEAT THE FED (or BOE in my case).

Mike

[metalman]

Re: Crash Proof...How toprofit from the coming economic collapse

Eminently hard headed, clear sighted and probing article by Mr. Schiff - not too dissimilar from iTulip's own positions!
___________________

NOT YOUR FATHER'S DEFLATION - by Peter Schiff
Euro Pacific Capital
December 21, 2007

Among those rational enough to perceive the looming economic downturn, a heated debate has arisen that centers on whether the slowdown will be accompanied by inflation or deflation.

Those in the deflation camp believe that money supply will collapse as a natural consequence of the implosion of the biggest credit bubble in U.S. history. As loans go bad, assets, which collateralize these loans, will be sold at fire sale prices to satisfy creditors. It is also argued that a recession will reduce consumer discretionary spending, causing retailers to slash prices to move their bloated inventories. This is the way the situation played out in the 1930's and this is how many expect it to happen today.

However there are several key differences between then and now, which argue against the classic deflationary scenario. In particular, the Fed's ability to pump liquidity into the market in the 1930's was limited by the gold backing requirements on U.S. currency. No such limitations exist today. This distinction is critical. When credit was destroyed after the Crash of 1929, the Fed was not able to simply replace it out of thin air.

Today however, the Fed will likely print as much money as necessary to prevent nominal prices from collapsing. In fact, in the infamous speech that spawned his “helicopter" sobriquet, Ben Bernanke explained how the printing press can be used to stop deflation dead in its tracks.

To fully understand the way inflation and deflation affect prices, we need to differentiate between assets, such as stocks and real estate, and consumer goods, such as shoes and potato chips. If we measure prices in gold, as we did during the 1930’s, both asset and consumer goods prices will fall, with the former falling faster than the latter. So in that sense the deflationist are correct. However, in terms of today’s paper dollars, this outcome is completely impossible.

During deflation, money gains value, so prices naturally fall as fewer monetary units are required to buy a given quantity of goods. In the coming deflation, real money (gold) will gain considerable value, so prices will therefore fall sharply in gold terms. Paper dollars however, which have no intrinsic value at all, will lose value, not only as the Fed increases their supply, but as global demand for the currency implodes.

The way I see it there are only two possible scenarios. The more benign outcome would we be one where asset prices fall, even in terms of paper dollars, but consumer goods prices continue to rise. This would be the stagflation scenario. The more catastrophic scenario is one where asset prices hold steady or even resume their ascent, while consumer goods prices rise even faster. This of course is the hyper-inflation scenario, and is the worst possible outcome. I see no possible scenario where consumer goods prices fall in term of paper dollars.

Many mistakenly believe that when the U.S. economy falls into recession, reduced domestic demand will lead to falling consumer prices. However, what is often overlooked is the fact that as the dollar loses value, the rising relative values of foreign currencies will increase consumer demand abroad. As fewer foreign-made products are imported and more domestic-made products are exported, the result will be far fewer products available for Americans to consume. So even if the domestic money supply were to contract, the supply of goods for sale would contract even faster. Shrinking supply will be a major factor in pushing consumer prices higher in America.

In addition, since trillions of dollars now reside with our foreign creditors, even if many of these dollars are lost due to defaulted loans, those that are not will be used to buy up American consumer goods and assets. As a result of this huge influx of foreign-held dollars, the domestic dollar supply will likely rise even if the Fed were to allow the global supply of dollars to contract, forcing consumer prices even higher. In fact, a contraction in the domestic supply of consumer goods will likely coincide with an expansion of the domestic supply of money. The result will be much higher consumer prices despite the recession. So even though Americans will consume much less, they will pay much more for the privilege.

The real risk of course is that the Fed gets more aggressive as it realizes that the additional credit it is supplying is not flowing where it wants. If the Fed drops enough money from helicopters it will eventually reverse the nominal declines in asset prices. Unfortunately, that road leads to hyper-inflation and disaster. No matter what, even if the Fed succeeds in propping up nominal asset prices, they can do nothing to sustain their real values. Consumer goods prices will always rise faster, leaving the owners of those assets poorer no matter how high their nominal values climb.

The big problem politically is that hyper-inflation may superficially appear to be the lesser evil. If asset prices are allowed to collapse, ownership of those assets will pass to our creditors. If instead we repay our debts with debased currency, we retain ownership of our assets and shift the losses to our creditors. Since American debtors can vote in U.S. elections and foreign creditors can not, the choice seems obvious. Of course there are some American creditors as well, but since they comprise such a small percentage of the electorate, my guess is that their losses will be seen as acceptable collateral damage.

© 2007 Peter Schiff
Editorial Archive

what matters is who says it first. everything above is an ripoff of something ej said long ago. there's not even one original phrase in here never mind an original idea. the whole explanation about how the fed can inflation now no matter what because of no gold standard and on and on.

i'd like confirmation that ej is publishing harper's... as i guessed. for over 100 years they only publish original writers and original thinkers. that settles it as far as i'm concerned as to who is first and original and all that. one of the freds? ej? can you confirm?

of course there are other ka-poom believers now... now that it's happened once after ej said it would, in 2001. but i'm still worried about whether it will happening again and how. a debt deflation is a whole different ballgame.

i'm not sure stagflation is real. as one guy said on another forum "it's is the temporary transition state between debt origination liquidity expansion and debt default and redemption liquidity contraction" and "The holding of that money and reluctance to circulate, out of fear, is what brings the velocity to zero."

how do we have inflation when V = 0?

[Guest]

Re: Crash Proof...How toprofit from the coming economic collapse

Metalman -

<< How do we have inflation when velocity = zero? >>

Maybe we don't then have (some technical definition of) inflation, when velocity has declined to zero - but with regard to owning precius metal in this scenario, I have a hard time believing the smart money is going to be flooding into treasuries this time around. The fiat paper denominated debt instruments are fatally compromised. If so, what does that spell, when there is a "run to safety"?

[rabot10]

Re: Crash Proof...How toprofit from the coming economic collapse

Metalman -

<< How do we have inflation when velocity = zero? >>

Maybe we don't then have (some technical definition of) inflation, when velocity has declined to zero - but with regard to owning precius metal in this scenario, I have a hard time believing the smart money is going to be flooding into treasuries this time around. The fiat paper denominated debt instruments are fatally compromised. If so, what does that spell, when there is a "run to safety"?

Peter sorry Lukester - would you ask your friends at Euro Pacific why my stocks are down 8% in the last 30 days?

[FRED]

Re: Crash Proof...How toprofit from the coming economic collapse

what matters is who says it first. everything above is an ripoff of something ej said long ago. there's not even one original phrase in here never mind an original idea. the whole explanation about how the fed can inflation now no matter what because of no gold standard and on and on.

i'd like confirmation that ej is publishing harper's... as i guessed. for over 100 years they only publish original writers and original thinkers. that settles it as far as i'm concerned as to who is first and original and all that. one of the freds? ej? can you confirm?

of course there are other ka-poom believers now... now that it's happened once after ej said it would, in 2001. but i'm still worried about whether it will happening again and how. a debt deflation is a whole different ballgame.

i'm not sure stagflation is real. as one guy said on another forum "it's is the temporary transition state between debt origination liquidity expansion and debt default and redemption liquidity contraction" and "The holding of that money and reluctance to circulate, out of fear, is what brings the velocity to zero."

how do we have inflation when V = 0?

The answer is "yes" and in fact it's the cover article of the February issue of Harper's Magazine. You can look for it on the stands in early January. We're still working out the details but can say now that iTulip Select subscribers who have a one year subscription will receive a copy in the mail for free, and an iTulip T-Shirt, too.

Shot of the cover and 1st page of the seven page report, below.

[Spartacus]

Re: Crash Proof...How toprofit from the coming economic collapse

Peter sorry Lukester - would you ask your friends at Euro Pacific why my stocks are down 8% in the last 30 days?

we need an update to the old Fred Schwed joke - 2 guys were at the waterfront

that yacht belongs to the guy who sold yachts to the brokers
that yacht belongs to the CDO broker
that yacht belongs to the homebuilder insider executive
that yacht belongs to the broker who sold shares to the bulls (preyed on their greed and pollyanna attitudes)
that yacht belongs to the broker who sold shares to the pigs (preyed on their hoarding instincts by selling high churn funds to be held "forever")


that yacht over there belongs to the broker who sold shares to the bears (preyed on their fear, paranoia, doomer instincts and FED hatred)

[Spartacus]

Re: Crash Proof...How toprofit from the coming economic collapse

Peter sorry Lukester - would you ask your friends at Euro Pacific why my stocks are down 8% in the last 30 days?

Think you have something to complain about? 8% in 30 days?

I guess you weren't in Silver at $15, huh?

[Mega]

Re: Crash Proof...How toprofit from the coming economic collapse

Theres some bits of general info, i always wondered where the term "Ponzi scam" came from......Charles Ponzi!
Mike

[FRED]

Re: Crash Proof...How toprofit from the coming economic collapse

we need an update to the old Fred Schwed joke - 2 guys were at the waterfront

that yacht belongs to the guy who sold yachts to the brokers
that yacht belongs to the CDO broker
that yacht belongs to the homebuilder insider executive
that yacht belongs to the broker who sold shares to the bulls (preyed on their greed and pollyanna attitudes)
that yacht belongs to the broker who sold shares to the pigs (preyed on their hoarding instincts by selling high churn funds to be held "forever")


that yacht over there belongs to the broker who sold shares to the bears (preyed on their fear, paranoia, doomer instincts and FED hatred)

Depends on how far back you want to go. The post South Sea Bubble (1720) illustrations below are from Harvard's collection.

The first depicts the fate of the "stock jobbers" after the collapse of the South Sea bubble: the characters dead on the ground.

For anyone who is tempted to think of this global speculative game as "new" here's a South Sea Bubble illustration that depicts the various global players in the racket: banks, brokers, press, politicians, etc.

Last but not least, an illustration of John Law being run out of town on a ass.

Our modern day version is still on the book circuit, but then this last speculative bubble still has a long way to go, and if we get another then we may not see this happen–Greenspan won't live that long.