why Ben's helicopters are doomed

[*T*]

Re: why Ben's helicopters are doomed

So far, I am witnessing cash buy more and more and more.

Meat is getting cheaper. Chicken is cheaper. Bread is cheaper. Produce is cheaper and fresher.

Gasoline is cheaper.

Homes are cheaper.

The more the central banksters print, the more prices seem to fall. The stinkers seem to be caught in some kind of trap. (To hell with them.)

This is the most lovely thing I have ever seen in my life. No need to rush to buy anything.

The fed has been funding much of its monetisation so far by treasury issuance, which is in a sense deflationary (it redirects money into govt debt). This is your 'trap'. Pure QE where they just print money has yet to begin in earnest.
Internally, the US (UK etc) will have debt deflation with falling wages falling as will prices of produced good etc. Credit will continue to contract. However the currency will weaken causing price inflation in imported good and squeezing manufacturers. It will not help exports. This is the endgame. So enjoy it while you can.

[Chomsky]

Re: why Ben's helicopters are doomed

The fed has been funding much of its monetisation so far by treasury issuance, which is in a sense deflationary (it redirects money into govt debt). This is your 'trap'. Pure QE where they just print money has yet to begin in earnest.

I thought one of bart's recent graphs showed that there was in fact some direct monetization occurring, but it's only in its infancy.

[Pascal]

Re: why Ben's helicopters are doomed

I am confused about iTulip's position. If the expectation is that the Fed will pound the zero key until it melts, doesn't that imply Zimbabwe style inflation?

[FRED]

Re: why Ben's helicopters are doomed

I am confused about iTulip's position. If the expectation is that the Fed will pound the zero key until it melts, doesn't that imply Zimbabwe style inflation?

So far, so good. "Ka" of Ka-Poom as forecast, whether one prefers to call it deflation or disinflation, this is unmistakably that "Ka" part of the debt deflation process.

These are the pressing questions which answers bring us up to date with our current place in the process:

1) How much does unemployment need to rise before the government pulls out all the stops to create inflation, specifically, radical currency depreciation?
2) Will the US government once again succeed in creating monetary inflation to halt debt deflation by deflating the currency as in the 1930s?
3) As the US is a net debtor, will foreign creditors cause the currency devaluation and inflation on their own without the assistance of governments as in Russia and dozens of other nations since the 1930s?
4) Will the status of the dollar as a reserve currency prevent the US from devaluing the dollar?
5) What will other governments do in response to yet another unilateral US initiative to export deflation?
6) Does the US position as a net debtor prevent the US from making a first move?

Russian Style Ka-Poom: First allow the insiders to exit,
then allow the markets to crash the currency


US Style Ka-Poom: Take control of the US portion of the global monetary
money base (gold) and reprice it 70%.

[Starving Steve]

Re: why Ben's helicopters are doomed

To-day, 9Feb, long rates are going up on mortgages, not much, but up. That is a new trend, a reversal.

So maybe we are getting our answer. The stinkers at the Fed are caught in a debt trap, and if they print, the long rates go up. And if they buy their debt, the long rates go up. And if they devalue, the other central banksters devalue too. Then the long rates explode up worldwide.

This is the most beautiful thing I have ever seen.

Sticking my tongue out at economists: :p

[Pascal]

Re: why Ben's helicopters are doomed

Thanks again Fred. I guess I am having trouble getting my mind around the levels of printing that Keen argues would be required and the consequences of it. For example, in his paper his says:

"To make a serious dent in debt levels, and thus enable the increase in base money to affect the aggregate money stock and hence cause inflation, Bernanke would need to not merely double M0, but to increase it by a factor of, say, 25 from pre-intervention levels. That US$20 trillion truckload of greenbacks might enable Americans to repay, say, one quarter of outstanding debt with one half—thus reducing the debt to GDP ratio about 200% (roughly what it was during the DotCom bubble and, coincidentally, 1931)—and get back to some serious inflationary spending with the other (of course, in the context of a seriously depreciating currency). But with anything less than that, his attempts to reflate the American economy will sink in the ocean of debt created by America’s modern-day 'Roving Cavaliers of Credit'."

I am very much looking forward to the upcoming interview of Dr. Keen.

[LargoWinch]

Re: why Ben's helicopters are doomed

point is, it won't fail because governmetn is willing and able to borrow as much as is needed to get the ball rolling. There is a lot of inflation on the horizon but it is delayed maybe a year or two...but then horrific inflation...

GJ, I remember reading recently that you feel that a 1/3 Gold and 2/3 Cash allocation seems perhaps too conservative due to the upcoming massive inflation (that is also my view, especially given my long investment horizon i.e. losses now on inflation hedges will be wiped away during Poom).

As such, would you care to share your current allocation? If you do not wish to do so, no harm done, I will totally understand, but at least I will know that I asked!

For my part, I do report my allocation/returns/hit/misses every couple of months under Jim's thread "How one iTuliper is invested".

[grapejelly]

Re: why Ben's helicopters are doomed

GJ, I remember reading recently that you feel that a 1/3 Gold and 2/3 Cash allocation seems perhaps too conservative due to the upcoming massive inflation (that is also my view, especially given my long investment horizon i.e. losses now on inflation hedges will be wiped away during Poom).

As such, would you care to share your current allocation? If you do not wish to do so, no harm done, I will totally understand, but at least I will know that I asked!

For my part, I do report my allocation/returns/hit/misses every couple of months under Jim's thread "How one iTuliper is invested".

I am about 65% gold and 35% PM/oil/uranium equities and cash.

[icm63]

Re: why Ben's helicopters are doomed

Itulip is long GOLD

Is Steve Keen long GOLD..

[Down Under]

Re: why Ben's helicopters are doomed

Itulip is long GOLD

Is Steve Keen long GOLD..

I believe Steve Keen is 100% cash; he makes the statement in one of his replys on his blog but I don't have the link.

[LargoWinch]

Re: why Ben's helicopters are doomed

I am about 65% gold and 35% PM/oil/uranium equities and cash.

Thanks GJ; you are indeed ready for Poom! ;)

[sunskyfan]

Re: why Ben's helicopters are doomed

Being 100% cash would make sense from his thesis IMO. Essentially he is arguing that the validation arm of the economy (the Banks) is invalid. In the extreme, all transactions that require validations are/will be difficult to impossible. Witness the credit markets now. Anything that smells of "proxy" has got a problem. It is ultimately becomes the mother of all liquidity crisis to the point where even the ability to TRADE gold will have problems.

As a thought experiment. Name an entity, espcially a bank, that if it wrote you a check for $10k in cash and they asked you to wait to cash it who would you trust to be there in say 3 months and what premium would you want in return?

Ultimately the question is validity and liquitidity. To a finer point ... I would rather own a minted gold coin than gold bullion or (even worse) a certificate to own gold (or even worse) a stock in a gold mine or a gallon of gas than a barrel of oil or a $100 bill than a check for a $104. When you will take that $104 check is when we have it the bottom of the crisis and then once you take the check then we can worry about the POOM part of Ka-Poom.

[grapejelly]

Re: why Ben's helicopters are doomed

Cash is garbage in the run. I don't care about the short run all that much.

Keen underestimates the ability of government to increase prices at the margin, I think. He says that to print enough money so as to make debts easy enough to pay back, would require way too much printing than is practical.

But if the government nationalizes everything, as it is doing, and buys this and buys that, then it will drive up prices of assets ultimately.

That is why there is going to be the worst kind of inflation our country has ever seen outside of wartime, and probably not since the War of Northern Aggression.

The government is crowding out all private lending and will through direct buying force the prices of assets up come hell or high water.

That will not do anything to the real economy. What is necessary is honest writedowns and bankruptcies. What we will get instead is simply a transfer of all private debts onto the government, with no net reduction, coupled with madly printing money in order to buy up assets and drive up their values.

Marc Faber says central banks can print money but can't allocate that money.

The governments can buy up assets, but what happens to the money they spend to buy the assets...where will that money go?

I think it will go into tangibles, into oil and gas and gold and silver and commodities. Not immediately but over the next year or two, when it becomes evident that today's currencies are destined for the scrapheap.

[LargoWinch]

Re: why Ben's helicopters are doomed

I think it will go into tangibles, into oil and gas and gold and silver and commodities. Not immediately but over the next year or two, when it becomes evident that today's currencies are destined for the scrapheap.

Agreed and bought some more Long Crude Oil 2X ETF today.

Anyway, Faber is also pointing out in his latest GDB, that in real terms industrial commodities are far more oversold than equities.

He interestingly noted (a while ago, can't remember) that during the 70s, the market advance was due essentially to oil gold stocks and other similar inflation sensitive producers.

[Starving Steve]

Re: why Ben's helicopters are doomed

Cash is garbage in the run. I don't care about the short run all that much.

Keen underestimates the ability of government to increase prices at the margin, I think. He says that to print enough money so as to make debts easy enough to pay back, would require way too much printing than is practical.

But if the government nationalizes everything, as it is doing, and buys this and buys that, then it will drive up prices of assets ultimately.

That is why there is going to be the worst kind of inflation our country has ever seen outside of wartime, and probably not since the War of Northern Aggression.

The government is crowding out all private lending and will through direct buying force the prices of assets up come hell or high water.

That will not do anything to the real economy. What is necessary is honest writedowns and bankruptcies. What we will get instead is simply a transfer of all private debts onto the government, with no net reduction, coupled with madly printing money in order to buy up assets and drive up their values.

Marc Faber says central banks can print money but can't allocate that money.

The governments can buy up assets, but what happens to the money they spend to buy the assets...where will that money go?

I think it will go into tangibles, into oil and gas and gold and silver and commodities. Not immediately but over the next year or two, when it becomes evident that today's currencies are destined for the scrapheap.

I have various projects here at my log cabin: a new two car garage, new rustic stone around my woodstove to match my gas fireplace stone, a new roof coming-up ahead of time, double code insulation to go into my roof, more rustic trim for the interior of the house. This is my answer to the crisis in paper money: to construct tangible things of real useful value at my house.

This endless construction might remind the casual reader here of the Sarah Winchester Mystery House in San Jose, California. www.winchestermysteryhouse.com Old Sarah W. feared thunderstorms, so she moved to the Santa Clara Valley because it gets only one or two thunderstorms per year. She thought that if she kept building on her house, she would keep living. So she had carpenters build endlessly at her house. She ended-up with 165 rooms and a haunted house.

Sarah Winchester feared thunderstorms, and she feared death. I fear inflation, devaluation, paper money, and economic turmoil.