Talk of dollar devaluation getting stronger by the day.

[c1ue]

Re: Talk of dollar devaluation getting stronger by the day.

1. people run up debts that they can't pay back, and while doing so they support the inflation of the housing bubble AND the consumer driven economy, importing from and supporting China
2 debt bubble collapses; people walk away from their debts either willingly or unwillingly.
3 banks become insolvent b/c the debt is not/cannot be paid back, but government prints/borrows to make banks whole
4. banks are incentivized to lend with the now virtually explicit promise that they will always be bail-out should the banks bets (including conusmer loans) default.
5. the public is getting wind, that there is indeed a "reset" of the system going on, slowly, allowing one to default on debt (which ultimately goes on the public ledger), all for the purpose of enabling the same consumer to start buying with debt again. The society is deflating the debt by simply transferring it onto the public balance sheet, and hoping that nobody (U.S. public and U.S creditors) will really care.

The part which I am counting on is what Dr. Hudson has noted in his latest interview: that the banks are specifically counting on existing bad debts and the associated late fees and interest charges to be bought up by the government once the systemic default tipping point is reached.

Given this scenario - why bother with new credit? There's more than enough existing bad credit. The newer the credit extended, the less likely it will be covered by this government/Fed buyback and thus the more likely it will be eroded by incoming inflation.

So your points above are correct in every sense, but the Dr. Hudson scenario (and he's been 100% on the ball so far) shows how events can/will be skewed to the banker's advantage.

As for the banks being incentivized to lend - I won't believe that until the US also institutes a negative interest policy like Sweden. Certainly the lending statistics don't show any evidence of any incentives to lend - working.

[ThePythonicCow]

Re: Talk of dollar devaluation getting stronger by the day.

So your points above are correct in every sense, but the Dr. Hudson scenario (and he's been 100% on the ball so far) shows how events can/will be skewed to the banker's advantage.

A critical question in my view is what wins out over what.

In a steel cage death match between banks and government, if it's Argentina, the banks (empowered by the Anglo-American Banksters and their Federale Friends) seem to win. But what if it's those same Banksters going head-to-head with those same Federales? Then who wins? Do the Bankster parasites suck the U.S. Federale host dry, leaving its rotting corpse to a third world existence and moving on? If you've been a parasite on the biggest host in the world, are not all other alternative hosts rather a step down?

What about a steel cage death match between the dollar and treasuries? EJ says, if I understand correctly, that the dollar is devalued by printing as necessary to avoid defaulting treasuries. I'm not betting the farm on that. When inflation exceeds that of Carter years, I suspect that U.S. politicians will be forced to keep a floor under the dollar even if it means slamming treasuries, at least with Volcker like high rates, if not with more onerous conditions tantamount to a partial default. The essential basis of a currency's strength is political, and to some extent, vice versa. The majority of Congress will do whatever they have to do to avoid a guaranteed election loss.

What about a steel cage death match between the major stock indices and treasuries? The S&P 500 roughly doubled (in nominal value) between 1974 and 1981. Does it do that again, from some bottom this year or next, while treasuries get trashed? That's what I'd bet on if I was forced to place my bets today.

What about a favorite topic of this and many forums, that being gold versus (stocks, treasuries, or dollars)? I like what I read of Martin Armstrong's comments on this. Gold is the counterparty to the political power behind currencies. When the power fails, then the currency fails and gold perserveres (if I read Armstrong correctly.) Until then gold would be more volatile, rising in anticipation of the possibility of such a collapse.

The current steel cage death match, in these semi-final rounds, seems to between the dollar and dollar denominated assets (as Finster patiently reminds us now and then.) Many of us right now are figuring that the assets have just won a round, and now its the dollars turn to win a round.

Here's how I would call these upcoming bouts:

1. Late 2008 to early 2009, it was dollar+treasuries up, dollar denominated stocks, corporate bonds and real estate down.
2. We're just now finishing a round where stocks, etc. are winning over the dollar+treasury team.
3. Next round reverses that, sending stocks, etc. to their final (nominal) low, once again firming up the dollar+treasury team.
4. Continuing massive government debt and increasing foreign revulsion to the dollar+treasury team send them down, much weakened. Nominal stocks and other dollar denominated asset classes rise. U.S. citizens complain of a repeat of Carter-like inflation. EJ says "I told you so -- POOM is undeniably here." Even the deflationists admit it (or refuse to discuss it anymore.)
5. U.S. Banksters and U.S. Congress turn on each other -- Banksters lose. We actually start to see congressional hearings, perp-walks of major financial players (not just side shows such as Madoff or Stanford) and substantial reforms.
6. Dollar and Treasuries go head to head -- Treasuries lose. Volcker's treasury rates are exceeded.
7. Foreign reject their remaining treasury holdings with extreme revulsion, further aggrevating inflation and further complicating the governments debt funding.
8. Major war or major domestic tyranny (governments never go gently into the night, and Americans are too soft for the third alternative - the Second American Revolution.)

P.S. - Observe there is no critical role for gold in this prediction. What I think might be a more important insurance measure is to (1) get a good criminal lawyer on retainer, and (2) tattoo his phone number to my hide. Even though I have led one of the most legally clean and low risk lives possible, a real straight arrow, for over sixty years, I expect that corruption and tyranny will rise sharply, in a manner resembling Russia, and should prepare for the day I wake up in a holding cell for no reason apparent to me.

[a warren]

Re: Talk of dollar devaluation getting stronger by the day.

A critical question in my view is what wins out over what.

In a steel cage death match between banks and government, if it's Argentina, the banks (empowered by the Anglo-American Banksters and their Federale Friends) seem to win. But what if it's those same Banksters going head-to-head with those same Federales? Then who wins? Do the Bankster parasites suck the U.S. Federale host dry, leaving its rotting corpse to a third world existence and moving on? If you've been a parasite on the biggest host in the world, are not all other alternative hosts rather a step down?

What about a steel cage death match between the dollar and treasuries? EJ says, if I understand correctly, that the dollar is devalued by printing as necessary to avoid defaulting treasuries. I'm not betting the farm on that. When inflation exceeds that of Carter years, I suspect that U.S. politicians will be forced to keep a floor under the dollar even if it means slamming treasuries, at least with Volcker like high rates, if not with more onerous conditions tantamount to a partial default. The essential basis of a currency's strength is political, and to some extent, vice versa. The majority of Congress will do whatever they have to do to avoid a guaranteed election loss.

What about a steel cage death match between the major stock indices and treasuries? The S&P 500 roughly doubled (in nominal value) between 1974 and 1981. Does it do that again, from some bottom this year or next, while treasuries get trashed? That's what I'd bet on if I was forced to place my bets today.

What about a favorite topic of this and many forums, that being gold versus (stocks, treasuries, or dollars)? I like what I read of Martin Armstrong's comments on this. Gold is the counterparty to the political power behind currencies. When the power fails, then the currency fails and gold perserveres (if I read Armstrong correctly.) Until then gold would be more volatile, rising in anticipation of the possibility of such a collapse.

The current steel cage death match, in these semi-final rounds, seems to between the dollar and dollar denominated assets (as Finster patiently reminds us now and then.) Many of us right now are figuring that the assets have just won a round, and now its the dollars turn to win a round.

Here's how I would call these upcoming bouts:

1. Late 2008 to early 2009, it was dollar+treasuries up, dollar denominated stocks, corporate bonds and real estate down.
2. We're just now finishing a round where stocks, etc. are winning over the dollar+treasury team.
3. Next round reverses that, sending stocks, etc. to their final (nominal) low, once again firming up the dollar+treasury team.
4. Continuing massive government debt and increasing foreign revulsion to the dollar+treasury team send them down, much weakened. Nominal stocks and other dollar denominated asset classes rise. U.S. citizens complain of a repeat of Carter-like inflation. EJ says "I told you so -- POOM is undeniably here." Even the deflationists admit it (or refuse to discuss it anymore.)
5. U.S. Banksters and U.S. Congress turn on each other -- Banksters lose. We actually start to see congressional hearings, perp-walks of major financial players (not just side shows such as Madoff or Stanford) and substantial reforms.
6. Dollar and Treasuries go head to head -- Treasuries lose. Volcker's treasury rates are exceeded.
7. Foreign reject their remaining treasury holdings with extreme revulsion, further aggrevating inflation and further complicating the governments debt funding.
8. Major war or major domestic tyranny (governments never go gently into the night, and Americans are too soft for the third alternative - the Second American Revolution.)

P.S. - Observe there is no critical role for gold in this prediction. What I think might be a more important insurance measure is to (1) get a good criminal lawyer on retainer, and (2) tattoo his phone number to my hide. Even though I have led one of the most legally clean and low risk lives possible, a real straight arrow, for over sixty years, I expect that corruption and tyranny will rise sharply, in a manner resembling Russia, and should prepare for the day I wake up in a holding cell for no reason apparent to me.

I know a reason. That G W Bush bumper sticker. Quick, go scrape it off!

[ThePythonicCow]

Re: Talk of dollar devaluation getting stronger by the day.

I know a reason. That G W Bush bumper sticker. Quick, go scrape it off!

Dang, dude . How did you know I had W stickers (more than one) on my car?

Double dang -- I live perhaps 30 miles from W's new Dallas home. If a W sticker gets me jailed here, things are worse than I thought :eek:.

On the other hand, now that I've changed from being a Bush-bot to being a 9/11 truther who suspects Cheney was field commander for both sides of the 9/11 attacks, I should take my W sticker off anyway. The problem is, short of a paint job, the only way to deal with bumper sticker rejects is to put something else over them. I can't figure out what to put over my W stickers.

Ah ha - got it. A Texas flag and other such Texas rah-rah stuff. Texas is one of those states (unlike some of the big liberal states) where state patriotism is still strong.

Thanks for the (provocation leading to the) idea!

[swannmex]

Re: Talk of dollar devaluation getting stronger by the day.

"Dollar and Treasuries go head to head -- Treasuries lose. Volcker's treasury rates are exceeded." What is the annual interest on 15 TRILLION dollar at 17% ?? How do we export ANYTHING if the dollar gets stronger?? Somehow I don't think the outcome you describe would be acceptable to the powers that be or for that matter doable.

[ThePythonicCow]

Re: Talk of dollar devaluation getting stronger by the day.

"Dollar and Treasuries go head to head -- Treasuries lose. Volcker's treasury rates are exceeded." What is the annual interest on 15 TRILLION dollar at 17% ?? How do we export ANYTHING if the dollar gets stronger?? Somehow I don't think the outcome you describe would be acceptable to the powers that be or for that matter doable.

Jacking up treasury rates doesn't change the interest rates on outstanding treasuries, rather just on new ones. Existing treasuries have their market value hammered down. Tough toenails for the Saudi's, Japanese and Chinese.

Exports would be the least of Congress's problems by this point. Heck, exports aren't even a big issue now.

The primary problem for Congress by this point will be Carter-like inflation or worse causing the peasants to want to throw all the bums out of office. The "solution" for Congress will be first to blame it all on the Banksters, and then to convince us we need to take our bitter tasting medicine of temporary high treasury rates to cut the inflation, as in a repeat of Volcker.

More people vote based on their dollar still being worth something than vote on their Treasuries being worth something.

When push comes to shove, one must always figure out who will get the last push, which way they will push, and who they will blame for the pain.

I am predicting at this point in the process that: (1) Congress will get the last word, (2) Congress will put a brake on inflation, and (3) Congress will blame some Banksters in highly publicized hearings leading to jail time.

P.S. The Dollar won't really be strong at this point. It will be weaker than now, and Congress will move to slow (pretend to halt) the rate of the dollars decline.

[swannmex]

Re: Talk of dollar devaluation getting stronger by the day.

They have crammed a ton of it into the short end.

http://wallstreetpit.com/9118-size-a...r-nations-debt

U.S. Treasury: More Borrowing, Less Short-Term

By Donald Marron|Aug 4, 2009, 1:11 AM|Author's Website

The Treasury released its quarterly update on its borrowing needs yesterday. The headline is that Treasury expects to borrow $406 billion during July, August, and September. That’s a gigantic figure, but it is down from the roughly $530 billion that Treasury borrowed during those three months last year.

When combined with $1.4 trillion in borrowing during the previous nine months, the $406 billion will bring total borrowing to $1.8 trillion during this fiscal year (Oct. 2008 to Sept. 2009).

The Treasury release includes a number of fascinating charts about the size and composition of our nation’s debt. One that particularly caught my eye was this chart showing the percentage of outstanding debt that is scheduled to mature in the next 12, 24, or 36 months:

As you can see, Treasury has relied heavily on very short-term maturities to finance the recent burst of borrowing. Most notably, the fraction of debt that matures within 12 months (the blue line) reversed its decline and rose to levels not seen since the mid-1980s.

Students of financial crises, past and present, will recall that over-reliance on short-term debt is a classic precursor of financial distress. Think, for example, of the major financial firms that had to roll over significant fractions of their financing every week … or even every day.

I don’t think the recent boom in short-term borrowing reflects (yet) that kind of challenge for the federal government. Indeed, there’s a good argument that the government was satisfying heightened market demand for short-term, low-interest rate debt. Among other things, that’s enabled the government to pay less in overall interest this year, despite the dramatic increase in outstanding debt.

Still, you can understand why the fine folks at Treasury wouldn’t want this reliance on short-term debt to continue. Among other things, it could be a costly strategy if they believe that interest rates will rise in the future.
It isn’t surprising, then, that Treasury’s “hypothetical” projections show less reliance on short-term Treasuries in coming years. The magnitude of the decline, however, is impressive. Under those projections T-bills maturing within a year would fall from around 43-44% of outstanding debt to about 27%.

Let’s hope there’s a healthy market for all the longer-term debt Treasury will want to issue.

[ThePythonicCow]

Re: Talk of dollar devaluation getting stronger by the day.

They have crammed a ton of it into the short end.

Yup, for sure. Tell me, if faced with either (1) losing the next election, or (2) increased treasury interest expense over the next couple of years, which one do you think will be utmost in a Congresscritters decision process?

[swannmex]

Re: Talk of dollar devaluation getting stronger by the day.

Safe to say getting re-elected trumps EVERYTHING. However, my guess is that this spins out of control to the point that not getting lynched will probably be a greater concern than getting re-elected. Short term ( 3-6 months ) flip a coin. Long term a stronger dollar, IMHO, is not an option.

[ThePythonicCow]

Re: Talk of dollar devaluation getting stronger by the day.

Safe to say getting re-elected trumps EVERYTHING. However, my guess is that this spins out of control to the point that not getting lynched will probably be a greater concern than getting re-elected. Short term ( 3-6 months ) flip a coin. Long term a stronger dollar, IMHO, is not an option.

Think back to Carter years. Lynching was not a serious threat. We're no where close to another la Révolution française. Put that idea aside. Inner city riots, likely. But congress critters will sleep safely at night.

Again, I'm not saying a stronger dollar than now. I'm saying that with gas say $10 at the pump, Congress will have to take action to halt the dollar's slide. They will blame the Banksters (getting serious about coming down hard on them and reinstating serious regulatory control) and they will force the Fed to kill treasuries (jack up rates) so as to stop the dollar's decline.

I entirely agree we don't have a stronger (than now) dollar long term. I'm saying 20% inflation, seriously impacting things like gas pump and grocery store prices, will seriously anger the peasants. Perhaps you don't recall the 1970's. That sort of decline in purchasing power really pisses off the populace.

[swannmex]

Re: Talk of dollar devaluation getting stronger by the day.

"Perhaps you don't recall the 1970's. That sort of decline in purchasing power really pisses off the populace."

In the 1970's we were still masters of our own destiny and a creditor Nation. My guess is that as this unfolds and the dollar collapses what pisses off the populace won't really make much difference. EVERYTHING is going to piss off the populace as we sit down to the banquet of consequences. The idea of a Volker-like solution to our inflation problem just is not in the cards. Raising short term interest rates to double digits with high unemployment and housing sucking air is just not an option ( talk about pissing off the populace ) and I am pretty sure those two problems will be with us for the next few years.

Nope, more likely a 50% devaluation of the dollar. Only question in my mind is will it be done in an orderly fashion over the next 12-24 months or do we get Argentina.

BTW, I grew up in Tyler, Texas not far from Dallas.

[ThePythonicCow]

Re: Talk of dollar devaluation getting stronger by the day.

Nope, more likely a 50% devaluation of the dollar.

That too, but not in a straight line. Notice my several steps in my post above. Each one feeds into the next.

[raja]

Re: Talk of dollar devaluation getting stronger by the day.

Think back to Carter years. Lynching was not a serious threat. We're no where close to another la Révolution française. Put that idea aside. Inner city riots, likely. But congress critters will sleep safely at night.

When the retirees and pensioners realize that they have lost half their savings . . . and there's no hope of getting it back . . . and when inflation starts to eat away at the purchasing power of what remains, then you can expect that the Congresspeople will start feeling the heat. When unemployment jumps to 20%, and people can't afford to take their kids to the doctor, the pressure will mount.

The People will want to know why they are suffering, and who caused the problem. As Obama said, "We were on the verge of a complete financial meltdown, and the reason was that Wall Street took extraordinary risks with other people's money. They were peddling loans that they knew could never be repaid . . . . and all of us are now paying the price."

The People will demand that Congress prosecute the guilty, or they will vote them out of office. Congresspeople may not need to fear torches and pitchforks, but they are not going to sleep well, especially as some of them are enablers of those that caused the fraud.

[metalman]

Re: Talk of dollar devaluation getting stronger by the day.

how silly... gov't don't devalue reserve currencies these days... they depreciate them. they've been depreciating the dollar since 1971...

google site:itulip.com dollar pound



in the old days, under fixed exchange rates...

[ThePythonicCow]

Re: Talk of dollar devaluation getting stronger by the day.

Here's how I would call these upcoming bouts:

1. Late 2008 to early 2009, it was dollar+treasuries up, dollar denominated stocks, corporate bonds and real estate down.
2. We're just now finishing a round where stocks, etc. are winning over the dollar+treasury team.
3. Next round reverses that, sending stocks, etc. to their final (nominal) low, once again firming up the dollar+treasury team.
4. Continuing massive government debt and increasing foreign revulsion to the dollar+treasury team send them down, much weakened. Nominal stocks and other dollar denominated asset classes rise. U.S. citizens complain of a repeat of Carter-like inflation. EJ says "I told you so -- POOM is undeniably here." Even the deflationists admit it (or refuse to discuss it anymore.)
5. U.S. Banksters and U.S. Congress turn on each other -- Banksters lose. We actually start to see congressional hearings, perp-walks of major financial players (not just side shows such as Madoff or Stanford) and substantial reforms.
6. Dollar and Treasuries go head to head -- Treasuries lose. Volcker's treasury rates are exceeded.
7. Foreign reject their remaining treasury holdings with extreme revulsion, further aggrevating inflation and further complicating the governments debt funding.
8. Major war or major domestic tyranny (governments never go gently into the night, and Americans are too soft for the third alternative - the Second American Revolution.)

After listening to a recent Gerald Celente interview, on iTulip thread Gerald Celente, I think the above scenario is wrong. The above assumes in steps 5 and 6 that Congress critters would be feeling too much heat from voters and have to take down the Banksters and defend the dollar.

No. Now I am thinking that the Congress critters and their elections and the media presenting them to voters are too much under the control of the Banksters. Congressmen will lose elections if they betray their Bankster benefactors, not if they betray America.

So my revised scenario skips the above steps 5, 6 and 7, leaving:

1. Late 2008 to early 2009, it was dollar+treasuries up, dollar denominated stocks, corporate bonds and real estate down.
2. We're just now finishing a round where stocks, etc. are winning over the dollar+treasury team.
3. Next round reverses that, sending stocks, etc. to their final (nominal) low, once again firming up the dollar+treasury team.
4. Continuing massive government debt and increasing foreign revulsion to the dollar+treasury team send them down, much weakened. Nominal stocks and other dollar denominated asset classes rise. U.S. citizens complain of a repeat of Carter-like inflation and Bankster corruption. EJ says "I told you so -- POOM is undeniably here." Even the deflationists admit it (or refuse to discuss it anymore.)
5. Major war and/or major domestic tyranny, instigated by the Banksters, to control (or decimate) the masses.. Governments never go gently into the night, and Americans are too soft for the third alternative - the Second American Revolution. Celente is more "optimistic" than I am that the citizens will revolt against the Bankster nobility.