Sunday, December 25, 2011

December 25 2011: Most. Tragic. Species. Ever.


Esther Bubley Li'l Skeptics Washington, D.C. July 1943
"Spectators at the parade to recruit civilian defense volunteers"


Ilargi: We're supposed to be celebrating the birth and the life of the man whose only ever act of aggression was he threw the money changers out of the temple, right? Just checking. It's just that I can't seem to find much of anything that reminds me of that.

Looks to me as if the money changers won after all, to be honest. Looks like they've made the man who threw them out of the temple just another pawn in their game. And his followers. All in good faith. Thirty pieces of silver for everyone.

So what do we see happening in 2012? I'm going to have to say that I see a lot of credit downgrades, sovereigns, banks, and precious few upgrades. One or more countries leaving the Eurozone, which will then become very hard to keep intact.

A lot of potential mayhem, and negatives, and tons of lies too. I know some will say that's what I see every year. Well, yes, I do. And it all gets worse every year. You just don't necessarily see it in your personal lives yet. Others do though.

It sneaks up on them when they least expect it. And then they find themselves out of a job, a home, a pension. It will sneak up on you too. Unless you can safely count yourself among the 1%. Then something else will sneak up on you. That may take us beyond 2012, but it will come to pass.

A series of articles in this week's Daily Telegraph provides a good take on the topic, and leads us quite fluently into the next, and bigger, set of problems. First: what already has been and is being lost, according to Paul Farrow:

Average UK family household income falls 8.4% this year
The latest Asda Income Tracker has revealed that family spending power fell by £15 a week in November 2011, leaving the average UK family with £161 of weekly disposable income – 8.4 per cent down from this time last year.


Ilargi: If the average family(!) has only $250 per week to feed and clothe itself, we may just have a slight problem.

Austerity measures are only now starting to kick in for real in Britain, and lots of people have bought homes at prices that won't last much longer. Hence, millions that have just £161 in weekly disposable income today will be further squeezed, and mercilessly so. You buy a home in a bubble, you lose it in the bust.

Our societies are being increasingly gutted, cut to the bone. This is not something that will hit only some people, in some areas, it will affect everybody, and all over the western world. Japan, too, is on the verge of implosion. And China .. well, with home prices dropping dozens of percentage points in just one or two months, China may well be on the verge of an explosion.

2012 may be the year for increasing large-scale conflicts, such as another US attack in the Middle East. There's a lot of chest-thumping going on, and plenty of theaters to choose from. Iran, Syria, Egypt and more. I would be surprised though if it happens that soon, though I'm sure it will eventually.

War is simply too good a way to deflect attention from domestic mayhem, and solidly proven, for politicians to ignore. But I don't really see Obama invading any country yet in order to save his career or his campaign. Not yet.

Don't see it in Europe either. 2012 looks too early there too, though that may change if things get out of hand, too fast. We will see a further run-up to what we at TAE call the Balkanization of Europe: the re-surfacing of age-old conflicts and prejudices. As a truly deeper political union looks completely out of reach, a truly deeper division looks all but inevitable.

Europe doesn't have either the political nor the financial means to "save" its periphery. It can sweep Greece, Portugal, Ireland under the carpet for a while, but that's about it. Handing out half a trillion euros to 523 banks in exchange for already shredded paper assets will prove to be nothing but counterproductive.

It doesn't make any bank more solvent, it only puts more pressure on both the financial position of every European citizen, and on the ties that have bound their respective countries closer together for 50 years. Today, all major banks, and all countries too, are preparing scenarios for a Eurozone break-up.

What may be worse than all of this is a conflict that is brewing, slowly simmering, and that will tear our societies apart from within. It happens slow enough to perhaps not be much noticed next year, but that is not a good thing: it would be better to put out the fire before it spreads. Unfortunately, there is no way in sight to put it out. It looks like it will have to burn it course before it fades. This one will pit parents against their own children and grandchildren. That's how you tear a society apart.

Again from the Telegraph, this time Ian Cowie:

Baby boomers with 80% of UK wealth shouldn’t feel guilty about younger generations' problems
Baby boomers shouldn’t feel guilty about being better-off than younger generations, because people aged over 50 today saved harder and spent less when they were young than is the case today.

That’s the conclusion of analysis of more than 2,000 people by the Chartered Insurance Institute (CII). The study acknowledges that baby boomers – or those born within 20 years of the end of World War II – were fortunate to enjoy easy mortgage availability and decades of house price inflation plus final salary or defined benefit pensions denied to most young adults today.

As a result, about 80% of the Britain's net personal wealth of £6.7trn or £6,700bn is owned by people aged over 50 while younger folk often have no savings, substantial debts and little hope of becoming homeowners any time soon. The average age of first-time buyers is now 37 or about 10 years later than two decades ago.

But the CII claims that 'generation rent' are partly to blame for their own misfortune because many fail to follow their elders’ example by starting to save early. They have come to expect regular foreign holidays, among other treats once regarded as luxuries, often funded by credit cards taken out earlier than their parents did.

A third of the people surveyed who are now in their thirties spent more than half their net income on leisure and entertainment when they were in their twenties, compared to a fifth of those who are now in their fifties and sixties. Most of the younger generation now expect to holiday abroad an average of 2.5 times a year, whereas a quarter of baby boomers never travelled overseas in their twenties. [..]

"While some of this can be baby boomers received undeniable financial advantages during their working lives, there's no doubt that their financial security today is also due to a more frugal mentality in their youth. Today's generation spends more and saves less when compared to the baby boomers, and while people should enjoy their youth and live for today they should not do so at the expense of planning for their tomorrow." [..]

People who start to save young are far more likely to achieve an acceptable outcome than those who wait until later because of compound interest. Pensions are not the only way to save for retirement but they do enjoy substantial tax reliefs. Youngsters who say savings and pensions are boring should ask themselves how exciting poverty in old age is likely to be.


Ilargi: I'd say the numbers, and the opinion offered, speak for themselves.

Let's see here. A generation is normally seen as covering about 25 years. So if we say the youngest baby boomer is now about 50, then we have another generation aged 25-50, and yet another aged 0-25. I know that this is playing with the numbers a bit, but that's not all that important.

What is important is that these generations are set to blame each other for all manner of things. And I can't see how that will work out alright.

The baby boomers made one crucial and fatal mistake right from the start. They didn't have enough children. At least not to keep their pension systems going. The oldest are fine; but anyone now aged 50 has very little to no chance of ever getting a penny in pension money.

Pensions plans are Ponzi schemes, pyramid games. They need fresh blood all the time, and always more of that than there was before. Well, those days are long gone. Moreover, the younger generations, in general and on average, make less money than their parents. And they have to pay a lot more to go to college and university. Ponzi schemes don't collapse slowly. They're here one day and gone the next.

Stories about frugality are cute, but comparing our societies from 30 or 50 years ago with today is real tricky. How much richer did the baby boomer generation get by letting their kids spend? How much did, and still do, they profit from real estate prices so high younger generations can't afford to buy a home?

That is an endless and useless discussion. Useless because the young will take over political power at some point regardless of any external circumstances. What's disconcerting is that this transition may take too long in the face of a rapidly collapsing economy.

Wherever you look, unemployment amongst young people is far higher than the average. Still, the older generations think their children will pay to keep their pension money coming in anyway. With what, though?

The baby boomer generation, willingly or not, it makes no difference, have accumulated a large part of their wealth at the cost of the future. And perhaps, but only perhaps, we would be able to keep that mirage of borrowing from infinity going a little longer if we could keep the economy growing at 5-6-7% annually.

Thing is, we can't. We're stuck in the biggest and deepest credit crunch mankind has ever seen, and we haven't even started to see its true character. In fact, the only thing alleged to be a solution is more of the same: borrowing from the future. Which is what each and every bailout plan is. Nothing more, nothing less.

So we’re setting ourselves up for an epic fight that will tear our societies apart, rip them to shreds. Who's going to willingly give up their pension? Who’s going to volunteer to pay for other people's pensions when they can't even earn enough to feed their own kids? In the end, this will be decided by political power. Or rather, it would, provided we would be able to have our societies function more or less normally until then. What are the odds?

This is of course not all the whole coin, not all sides to it. Our major problems are seldom one- or even two-dimensional. E.S. Browning for the Wall Street Journal:

Oldest Baby Boomers Face Jobs Bust
Many older Americans fear they will be working well into their 60s because they didn't save enough to retire. Millions more wish they were that lucky: Without full-time jobs, they are short of money and afraid of what lies ahead. [..]

Older Baby Boomers are trying to postpone retirement, as many find their spending habits far outpaced their thrift. With U.S. unemployment at 8.6%, and much higher among people in their teens and 20s, younger members of the labor pool accuse Boomers of refusing to gracefully exit the workplace.

But their long-held grip is slipping, as employers look past older Americans to younger, cheaper workers. The Labor Department counts people as unemployed only if they have looked for a job in the previous month. By that definition, 6.5% of workers aged 55 to 64 were unemployed in October, below the national average but more than twice the jobless rate for the group five years earlier.

Taking into account the number of older people who want full-time work but are unemployed, working part-time or need a job but have quit looking, the percentage jumps to 17.4%, or 4.3 million Americans ages 55 to 64, according to the government data. The number has grown from 2.4 million in October 2006. This group without full-time work now accounts for more than one in six older Americans seeking positions. [..]

Older people have more trouble finding new jobs. Among unemployed workers older than 55, more than half have been looking for more than two years, compared with 31% of younger workers, according to the Heldrich Center. Among older workers who found a new job, 72% took a pay cut, often a big one, the Rutgers data show.

The problem has been building for decades: Inflation-adjusted, middle-class incomes have stagnated in parallel with a free-spending culture of indebtedness that has left many Americans with too little saved. Over the same time, many U.S. companies cut pensions and shifted to less-generous retirement-savings plans such as 401(k) accounts that have stagnated or diminished in the market tumult of past years.

Older families aren't just failing to save, they are increasingly draining accounts that were supposed to help finance retirement.

The median household headed by someone aged 55 to 64 has $87,200 in retirement accounts and other financial assets, according to Strategic Business Insights' MacroMonitor database. If each of the 4.3 million unemployed or underemployed people in this age group runs through half the family savings, that will, in theory, total $188 billion in lost retirement money. [..]

The trouble spreads across generations. Older people hang on to jobs or, out of desperation, take lower-level jobs for which they are over-qualified. Either way, they displace younger workers. [..]

At an age when they should be generating peak incomes and savings, many unemployed and underemployed Americans are applying for early Social Security benefits and spending what's left in their retirement accounts.


Ilargi: Yes, it's not just generation versus generation, not just parents against their children. The problem is much more perverted. We no longer have a functioning financial system, a functioning banking system, or a functioning political system for that matter. All these systems died on the same battlefield. Credit.

When Richard Nixon threw out the gold standard in 1971, the younger baby boomers were getting their first jobs and buying their first homes. Happy Days! It took an entire generation, actually a bit more than 25 years, for the inevitable outcome of that decision to reach the high point of its devastating glory.

But here we are now. We've all been had. All but 1% of the people. When it's no longer the fruits of his labor that determine a man's wealth, but the fruits of his wagers, when our leaders are those who are best connected to the moneylenders in the temple, instead of those that throw them out, there is no way we could not have ended up where we have.

Still, pitted against each other we will be. Whether in our own countries, or in skirmishes between countries -Europe-, or a WWIII over energy resources that keep the cattle at home docile, we will fall for it all again. We haven't learned much. But then again, maybe it isn't about learning after all.

We are ready and willing to destroy our societies, and eventually our planet, over a few scraps falling off the big table, like a Mac Mansion, an iPod, an SUV, because that is who we really are. Because we can make ourselves believe those are not scraps, that we are indeed kings now, seated at the table, and heaven knows we have lived better than ancient kings of any age over the past decades.

And most of all because we are no good at all at planning long-term. We can pay into a pension plan, that seems long-term, but at the very same time we can't figure out that if at some point there's less new contributors than older ones, that plan must and will implode.

We all will swear we love our children above anything in the world, and most would give their lives for their kids. And we honestly mean it when we say it.

The reality, however, is that we leave our children with a world that is polluted beyond recognition, in which species disappear at a rate 1000 times faster than before, and in which everything we’ve trained our kids for is vanishing right before their eyes.

Our "leaders" are psychopath lackeys of a long bankrupt financial system that uses its servants to gobble up the yet to be earned wealth of our progeny, and we just sit by and watch it happen.

We never noticed what happened to our financial systems when Nixon pulled his trick in '71, after all, we got richer, right, so who's to complain? We never noticed how the increasing fake wealth drove our societies and families apart, we wanted more space, more individualism, more things to buy and possess. We never noticed how our energy supplies started to run out; hey, we're driving more than ever, so there must be more oil than ever...

We have done exactly the same that any primitive life form would do when faced with a surplus, of food, energy, and in our case credit, cheap money. We spent it all as fast as we can. Lest less abundant times arrive. It's an instinct, it comes from our more primitive brain segments, not our more "rational" frontal cortex.

It's not that we're in principle, or talent, more devious or malicious than more primitive life forms. It's that we use our more advanced brains to help us execute the same devastation our primitive brain drives us to, but much much worse.

That's what makes us the most tragic species imaginable. We’ll fight each other, even our children, over the last few scraps falling off the table, and kill off everything in our path to get there. And when we're done, we’ll find a way to rationalize to ourselves why we were right to do so.

We can be aware of watching ourselves do what we do, but we can't help ourselves from doing it. Most. Tragic. Species. Ever.


















Correcting the Growth of Human History
by Bill Bonner - Daily Reckoning

And so, yesterday, the northern hemisphere had its shortest day of the year. In Baltimore, the sun never rose and never set. It was gray all day. Then it was night again.

And so the days dwindle down to a precious few. In astronomical terms, the year is already over. We have passed the winter solstice. From here on out the days grow longer. In terms of the Gregorian Calendar, we still have a few more days to go in 2011. Then, we face a new year. New challenges. New crises. And new opportunities. Will 2012 be the year the human race goes into a downturn…a slump…a correction?

Time moves on. So do opinions.

Investors were all hot to put their money on stocks on Tuesday. They thought the euro debt crisis had been solved. And housing was looking up in the US.

But yesterday, there was no follow-through. It was as if they had forgotten what they were so excited about.

That’s the way it has been all year. One day, investors are sure recovery is right around the corner. Then, they turn the corner and there’s nothing there.

2011 began with most people expecting a recovery. Now, they know; there’s something else going on. Something more complicated…something different from the typical recession/recovery pattern they’ve been used to.

If they looked more closely, they would notice that each of the recoveries since the ’80s has been a bit weaker than the one that preceded it. The feds still fight downturns in the same way — with counter-cyclical fiscal and monetary policy. Each time output goes down, the Fed reduces interest rates. This cuts the price of credit, which usually gets people going again — with new investments and new hiring.

But credit is not so different from everything else in the world of economics. The law of diminishing marginal utility applies. The first dollar you borrow pays off. You put it to work building new, more efficient and more productive businesses. The investment pays off. Later borrowings are less effective. Finally, they don’t work at all.

Part of the explanation is merely that the borrowers shift from borrowing for very productive purposes to borrowing for less productive purposes…to borrowing not to produce at all. There’s no payback when you borrow to consume. Zero.

Finally, the recession of 2001 was met with a muscular Fed response — with much lower interest rates and a federal budget far in the red. But the recovery was the weakest ever. It was a "jobless" recovery, with an unusually slow rehiring pattern.

Now, 10 years later…we have something new — a jobless non-recovery! People are beginning to wonder. What is really going on?

Even Martin Wolf, chief intellectual at The Financial Times is beginning to ask questions. "The future is not what it used to be," he writes.

Here at The Daily Reckoning we have known for a long time that the Great Correction is no ordinary recession. We didn’t know exactly what it was correcting, but we had a list of possibilities.

Is it correcting the 60-year boom in credit that began after WWII? Seems like it is… Credit, in the private sector, has been going down since 2008.

Is it correcting the bull market in stocks that began in August 1982? So far, not much sign of it…but we think so. People are bound to realize, sooner or later, that business profits cannot expand when credit is contracting.

Is it correcting the power of the US empire? Yes…perhaps…but that’s a long story for another time…

Is it correcting the paper-currency, faith-based, centrally-planned monetary system put in place by Richard Nixon in 1971? Not yet. Instead, US debt — denominated in those paper dollars — gets more respect than ever. But we have a feeling that it will be corrected before this crisis complex is over.

On Monday, word got out that the European Central Bank has lined up with the Fed and other central banks to fight the debt crisis by…yes…creating more debt. And more paper currency. It will lend another half-trillion euros — or so — to the banks. The banks are supposed to make more new loans and buy up more old ones. Specifically, they’re expected to take money from the central banks and use it to buy government debt, thus keeping the chickens from coming home to roost as long as possible.

In the meantime, economic growth, it is hoped, will finally get into action. Growth, they think, is the "mean" to which the developed economies will revert…which will raise GDP and tax receipts, reducing deficits and debts.

But what if growth itself were being corrected?

What if the entire period from the invention of the steam engine to the invention of the internet were not the normal thing, but the abnormal thing? What if the "lost decade" we have just gone through is actually the mean…the usual…the normal thing? And what if — after nearly 3 centuries — we have just now reverted to it?

Until about two weeks ago, we thought human beings had only existed for 100,000 years. Now, archeologists are guessing that we’ve been around as a species for twice as long.

You know what that means? It means that our mean rate of growth — already negligible — is actually only about half what we thought it was. In other words, it took not 99,700 years for humans to invent the steam engine, but 199,700. And now, what if we are not going on to something new, but back to something old? What if the New Age is really more like the Old Age…where growth and progress were unknown.

Let’s see, the typical person in 1750 lived better than the typical person in say 100,000 BC. The person in 100,000 BC lived in a cave or maybe a wigwam. The typical person in 1750 lived in a hovel. There were some great houses too, of course. By the 18th century, humans had been building with arches and columns…and domes…dressed stone with elaborate decoration…for thousands of years. But most people had no access to those monuments. They lived in whatever they could put together — usually of wood or mud.

They lived on what they could grow…with their own hands, or with the help of domesticated draft animals. They hunted wild animals…or got their calories from their own herds and flocks.

The person from 100,000 BC was a hunter-gatherer. But his life was not all bad. At least he got plenty of fresh air and didn’t get caught in traffic jambs or have to watch television.

But the progress between 200,000 BC, when mankind is now thought to have emerged…to 1765, when Watt produced his first engine…was extremely slow. In any given year, it was nearly negligible…imperceptible. Over thousands of years there was little progress of any sort, which was reflected in static human populations with static levels of well-being.

Then, after 1765, progress took off like a rocket. Over the next 200 years, the lives of people in the developed countries, and the human population, generally, changed completely.

It took 199,700 years for the human population to go from zero to 125 million. But over the next 250 years it added about 6 billion people. Every five years, approximately, it added the equivalent of the entire world’s population in 1750.

"Progress" made it possible. People had much more to eat. Better sanitation. Better transportation (which eliminated famines, by making it possible to ship large quantities of food into areas where crops had failed). The last major famine in Western Europe occurred in the 18th century when crops failed. After that, the famines in the developed world at least have been intentional — caused largely by government policies.

Progress abolished hunger. It permitted huge increases in population. And it brought rising real wages and rising standards of living.

By the late 20th century, people took progress and GDP growth for granted. Governments went into debt, depending on future growth to pull them out. So did corporations and households.

Everyone counted on growth. Spending and tax policies were based on encouraging growth. The enormous growth in government itself was made possible by economic growth. After all, as we’ve seen in our Theory of Government, beyond the essentials, government is either parasitic or superfluous. The richer the host economy, the more government you get.

Today, there is hardly a stock, bond, municipal plan, government budget, student loan, retirement program, housing development, business plan, political campaign, health care program or insurance company that doesn’t rely on growth. Everybody expects growth to resume…after we have put this crisis behind us.

Growth is normal, they believe.

But what if it isn’t normal? What if it was a once-in-a-centi-millenium event, made possible by cheap energy?




The Economic Solutions Of Vampires
by Brandon Smith - Alt-Market.com

The vampire bat is a horrifying pig-nosed wart of a creature which feasts in a manner that, believe it or not, is a rather familiar scene to those of us who closely study alternative economics.  After erratically flittering about in the sinking evening sky, it targets the warmth of a sleeping farm animal and latches onto it with its claws. 

Carefully, it inserts a fang into a vein dense region of the creature’s body, and laps away at the blood.  Normally, the oblivious livestock are completely unaware and helpless to the attack.  The tiny parasite does not inflict an immediately mortal blow to its host, but over time, disease and physical debilitation result.  The vampire has destroyed the animal, and, pathetically, the animal has no idea. 

Just as in nature, the economic world has its own bloodsucking vermin in the form of banking elites which are a wretched drain on the whole of the human race.  Without their vicious and predatory presence, I envision a world so rapturously above and beyond what we wallow in today that it is impossible to describe. 

The disgust many feel when considering the virulent feeding habits of the common mosquito or the slithering leech does nothing to compare to the utter gut churning revulsion I feel when studying the financial habits of banks like the Federal Reserve and the "too big to fails".  They are without a doubt the most malignant form of social cancer imaginable.

And yet, after nearly four years of ongoing fiscal exsanguination, a sizable portion of the American populace is still looking to these pests for economic comfort and reassurance, just like farm animals consistently grazing near the entrance of a vampire bat cave, as if it is a shelter from harm. 

Worst of all is the willingness by which investors still, to this day, commit their savings and their livelihoods to the stock market meat grinder.  Let’s be honest; the typical American daytrading investor is a complete moron.  They have absolutely no sense of the fundamentals of our financial structure nor the eccentric rules by which it operates.  They only have the faintest inkling of the functions of the highly manipulated stock market. 

They foolishly believe that what little money they make today riding the wave of an illegitimate liquidity driven rally they will actually get to keep.  For them, stock investment is no different from buying a scratch-off lotto ticket at a hillbilly gas station; it is a cheap and tawdry game rife with failure but exciting to play, if only for a fleeting guilt addled thrill.

To be fair, they play because the game is indeed "rewarding", at least, initially.  The first taste is so sweet that it soils the plasma; the very skin of the cellular membrane of the financial mind becomes saturated.  It swells within the weakening heart of a culture, and overrides its sense of logic. 

It makes us do terrible and stupid things, and we clasp our hands together and pray that it will never end.  But, of course, an ending is painfully inevitable.  The more we indulge, the more it takes down the road to satisfy us.  We become an addict nation, riding the chemical wave of a pharmaceutical roller coaster fed by the opiates of fiat and fantasy.

The bottom line; we are being drained of our lifeblood as a country.  However, the mainstream media is rife with talk of "recovery", and one might ask how this could be possible.  An overwhelming spectrum of solutions has been presented over the past 3-4 years, and each one has given the stock market a little push towards the green, so what’s the problem?

The problem is, the actions taken by our government and banking elites have built the connecting strands of a spider’s web, instead of a safety net. 

Let’s examine some the most common solutions presented to the increasingly desperate American public and why these delusions have lulled us into the role of victim in the most elaborate monster movie of all time…

Centralization As a Solution To…Centralization…?
Europe’s current disintegration is a perfect example of this strange and ultimately destructive policy.  The EU as an experiment is an utter disaster.  Once the jewel of the open border dynamic and a bastion of the "merits" of globalization, the economic union has been exposed as a kind of waxwork museum; a tourist trap curiosity filled with illusions of life, but rather hollow upon closer inspection. 

Half of the countries committed to the EU are burdened with liabilities well beyond the 60% debt to GDP ratio outlined in the 'Growth and Stability Pact’.  Some countries, including Greece, met few if any of the presented criteria for membership and were allowed to join anyway.  The only reason the system was able to function at all was due to the imaginary wealth of the toxic derivative framework which now no longer exists. 

The problem with globalization is that it requires assimilation; it demands that sovereign nations adopt the fiscal character of their neighbors in order to present the face of a single entity. 

Of course, when these countries are unable to do this because of their cultural differences, or their incongruent economies, something has to be slapped together instead.  Artificially tying together societies by forcing them to financially harmonize is, in my view, a criminal act of collectivism. 

Now that this crime is being unveiled for all the world to see, though, the corrupt governments and banking puppeteers of Europe have suggested even MORE of the same!  That’s right…their solution to the collapse of the EU is a harmonization not just of finance, but of politics and law.  A single governing body which would dictate every nuance of the union.   

The claim that Europe was not centralized enough, and that this is what caused the breakdown, is absolutely preposterous.  Globalization makes a system inflexible and weak.  If any portion of that system fails, it sends shockwaves through the rest. 

This is because centralization removes the protections of independently insulated structures and allows corrupt policy to spread like a plague.  As the economic situation grows more dire, the end result will always be a reduction in the common citizen’s standard of living.  In harmonization, It is far easier to make everyone equally poor than it is to make them equally rich. 

With a single, narrow minded leadership, especially one that is completely unaccountable to the people, the EU will become the most fragile makeshift empire in history, and a model for a global government that hopefully will never exist.

Print To Avoid The Pain…
I can’t tell you how truly exhausted I am with the constant rehashing of bailout bills and cheap lending windows as if they have ever or will ever change anything.  Let’s make this clear; Keynesian stimulus measures are useless.  They will always be useless.  Governments do NOT create jobs, they destroy them.  Central banks do NOT create wealth, they dilute it. 

Quantitative easing and zero interest lending does NOT diminish debt, it displaces it; removing it from the shoulders of private corporate banking institutions where it belongs and dumping it in the laps of taxpayers. 

I’ll say it again; the debts created by major banks have not been paid.  They have been handed to you, and your children.  Forget the December Santa Rally and the temporary holiday job boost.  Nothing has changed since 2008.

The process of transferring private debt into public obligation is a tool of economic vampires.  The utility in this is obvious.  A program of wealth transference has the ability to prolong full collapse while at the same time giving the impression of stability.  The dollar itself characterizes this conflict.  The currency has been overprinted since the credit crisis began by some estimates in the ten’s of trillions. 

Not only has it been devalued to temporarily stave off a purging in the U.S., but now also in Europe.  And yet, the dollar index, which supposedly measures the Greenback’s global value, has spiked. 

We are lulled into a sense of safety by such arbitrary measurements, but our buying power is being subversively annihilated.  In less than a year’s time, those who dove into the dollar as a safe haven will discover their bones picked clean by predatory banks and hidden flesh eating inflation.  Count on it…

Create A New Currency…
Globalists love currencies, as long as they aren’t tied down by a commodity.  For central bankers, each fiat currency is a stepping stone to something more sinister.  They are disposable.  They are expendable.  Like toothbrushes.  Yes…even the dollar.  And in this rests the key to economic control. 

A currency is a symbol of trade and labor; if you can create and destroy that symbol at will, then you can dominate trade and labor.  Through a mere piece of paper, you manipulate the very breath of social life.  No one should be given that kind of power without uncompromising transparency and constant public governance, but the Federal Reserve is free from both. 

The suggestion that we can solve our current financial despair with the formation of a whole new currency, or a global currency, is like suggesting to a slave that he would be much more free with a shinier set of chains.  Any solution that purports to undo the crisis by doing more of the same was probably devised by an economic vampire. 

This includes digital currencies like the failed "Bitcoin", which swagger about in the classy looking threads of technology and diversity while flashing us impromptu peace signs.  Digital currencies are a Star Trek theme park distraction, and just like any paper fiat currency, they make promises they cannot keep. 

Any trade system that depends upon good faith in ones and zeros traveling across a network of machines that can be hacked or rendered useless by collapse is doomed.  We have already tasted the danger of digital through the debauchery of credit cards.  Why tempt fate even further? 

More Regulation And Control…
Regulation is not the problem in America’s economy; the REGULATORS are the problem with America’s economy.  The SEC is given thousands of potential investigations a year to pursue, but rarely do they ever follow through, and when they do, it’s to throw the angry masses a Bernie Madoff or two; an act of insincere appeasement in light of much greater fraud.

Being that true free markets have not existed for at least a century, the insinuation that free markets are the root of the collapse is a bit absurd.  The guidelines for government oversight of business in the U.S. already exist; government has just refused to implement them.  Adding new restrictions to an already restricted market will change nothing. 

Therefore, the only solution that makes any sense whatsoever as far as regulation is to wipe the slate clean entirely.  Remove the Federal Reserve, replace the SEC, and replace the current establishment leadership. 

I have heard it said that the philosophy of our economic system is the problem.  This is an ignorant cop-out.  The principals of free markets are not the issue; the men who abuse them and diminish them, on the other hand, are.  Anyone who suggests that we as a country focus our anger on the idea of the system rather than the men behind the misuse of that system is, without a doubt, an economic vampire. 

Lurking in the Shadows...
The question of solutions is difficult, not because there aren’t any, but because those that will actually succeed require pain, sacrifice, and incredible hard work.  Most people don’t like to think about that sort of thing. 

This is why global banks and their proponents have been able to maintain the recovery magic act for the past few years (just barely), and it is why the useless concepts they put forward are still given public consideration.  We WANT to be sold on the proposal of an easy way out.

One rule to never forget when considering any solution is to take into account who benefits most from its implementation, and who has to labor for its success.  If average people are forced to exert all the effort, and an elite few reap all the substantial benefits, this contradiction outweighs any assertion of practicality. 

It is not worth our time, nor our energy, to shadowbox reality.  Unfortunately, this is all we have been doing as a nation since 2008.

The creeping terror that lay ahead is not the economic collapse, but the men who would use it to their favor.  The stakes are high.  With the NDAA and similar bills in place, fiscal distress is no longer just a matter of economics, but a matter of personal liberty.  Without a doubt, a collapse will be used as a rationalization for totalitarianism. 

If we do not make the hard decisions now, and take it upon ourselves to construct our own localized economies separate and insulated from the mainstream, we will, indeed, find ourselves one day cowering in the dark of a long drawn night infested with fiends, and desperate enough to actually ask them for help.  They will be happy to give it, at a very bloody price




Why Are We Forced to Worship at the Feet of 'Mythical' Financial Markets Controlled by the Elite?
by Les Leopold - AlterNet

The markets are "jittery," "upset," "skittish" and "unnerved." They are "confident" or "unsure." They are "demanding" that political leaders "put up or shut up." And they are "reacting unfavorably" to Obama’s newfound populism.

These are just a few of the many ways financial markets are described each and every day by the media, financial players and public officials. At first it seems as if these markets are humanoids onto which we project our feelings. Yet, on closer inspection, it’s more like we have ascribed to them god-like powers.

We are told to appease the market gods or face eternal financial damnation. As President Obama warned Europe recently, they must "muster the political will" to "settle markets down."

Why do we worship these angry market gods?
Trading has been around for as long as humans. We, no doubt, increased our chances of survival through trading what we had more of for what we needed or wanted. The more complex our societies became the more markets grew.

At some point during the Renaissance, markets emerged that traded money as well as goods, as city-states and nations sought ways to fund wars. But these markets were far from god-like. Sovereign nations ruled supreme and money-lenders had to do their bidding if they hoped to be repaid or in some cases, if they hoped to avoid execution.

Even Adam Smith didn’t suggest that financial markets had god-like powers. In fact, these markets seemed more like petulant children throwing tantrums as they puffed up tulip bubbles, South Sea bubbles, railroad bubbles and periodic financial panics.

When the mother of all financial crashes struck in 1929, it seemed as if markets would forever lose their god-like status. A consensus emerged that financial speculation was a major cause of the Great Depression, and tight controls were established during the New Deal to teach these petulant children a lesson they would never forget.

They forgot. We forgot.
After WWII, a new generation of economists emerged who worshiped the markets and detested any and all government interference. For these true believers, markets were infallible, blessed by what they called the "efficient markets" theory.
Financial markets, they claimed, always got prices right. They always provided the best allocation of society’s scarce resources, and most importantly, they undermined bad government decisions. And all of this happened without any guidance and without anyone exercising any control whatsoever.

These great autonomous and anonymous forces of modern economies ruled supreme and that was absolutely wonderful, according to these worshipers– praise the lord!

Led by economist Milton Friedman, these market apostles undermined any and all regulations that were put in place during the Great Depression to contain the diabolical impacts of markets run wild. "Let them run wild," we were told, "and we’ll get an economic boom to make all boats rise."

Starting with President Carter, each and every president unleashed financial markets more and more until the financial sector towered over the global economy.

Not only were the new financial market gods, bigger and more powerful than ever before, but the new high priests -- our financial elites -- earned millions of dollars, then hundreds of millions, and then billions as they collected modern-day tithes from all of us for tending to the financial gods.

While markets were said to be intermediaries between our savings and needed investment, the financial elites became the intermediaries between our money and their own pockets.

Our financial high priests taught our political leaders how to appease the financial market gods: cut more taxes for the rich, gut more regulations and trim social programs. Not only didn’t the riches flow to all of us, but the markets again crashed in 2008 revealing as they did in 1929 to be nothing more than enormous casinos designed by and for the high priests.

When President Obama came into office, the market gods were in total disarray and the high priests were on their knees begging for help. That was the perfect time to unmask the false gods and the false profits.

Instead, like the Bush administration, Obama turned over policy-making to the high priests – Geithner, Summers, Bernanke – who secretly provided up to $7.77 trillion in free loans and asset guarantees to help their fellow Wall Street priests become even more powerful. The market gods were resurrected again and given license to run wild.

The "new and improved" markets would do the bidding for the high financial priests who feared a populist reaction. The financial elites worried they might be pressured by the masses to pay for the damage they had done – the collapsed economy, the loss of millions of jobs, and the reduction of government tax revenues that, in turn, forced up the deficits.

But, in a world ruled by false market gods and greedy priests, the rest of us were asked to shoulder the new deficits. And if we refused, the priests who lurked behind the markets would see to it that money rushed away from any government that resisted them.

The first act of these vengeful money gods concerned America’s debt rating. To tame American populist passions, the high priests sent out their vassals – the rating agencies – to do their bidding (even though those same agencies misrated thousands of toxic assets that led to the crash).

This happened precisely at the time last summer when Congress was debating how to pay back the enormous debts that were created by the financial crash. The message from the vassals was clear – the public must pay, not the high priests, or beware of the vengeful market gods.

When Europe considered controls on financial markets through transaction taxes, the rating agencies again began cutting the debt ratings of European countries and banks, causing them to pay more for financing and helping to heighten the Eurozone crisis.

Again the message is clear: the financial elites want the masses to sacrifice even more in order to pay back the debts that came about in large part as consequence of the financial crash.

Who are these financial elites who pull the strings behind these god-like markets?
They are the proprietary trading desks at the too-big-to-fail banks that grew even bigger during the crash, financed by secret government loans. They are the hedge funds that make billions during crises as they stir up runs against sovereign bonds and banks. They are the enormous pools of private wealth moved by private asset managers.

In short, the markets gods are actually the disembodied cover for the 1/10 of the 1 percent that collectively holds trillions of dollars in capital. These financial elites are using their market gods to bludgeon democracy. Their game is now rigged to the point where all politicians must appease them…or face excommunication.

But this charade may not last. As we watch our democratic processes fold before these avenging gods, unrest is growing. Occupy Wall Street could be the first sign of a serious uprising in defense of democracy against the financial elites.

But nothing is certain except this: The financial high priests will never relinquish their money and power without an enormous and determined populist movement. 

Our choices will become increasingly stark as the high priests demand more sacrifice from us – cuts in schools, cuts in social security, cuts in health care coverage, cuts in our standard of living. They will push us down until we develop the organizational power to unmask their false gods and fight back.

Our resistance can start with this simple cognitive step: every time you hear a commentator talk about what the markets "want" or what the markets "reject," remember the financial elites who are pulling the strings. 




Average UK family household income falls 8.4% this year
by Paul Farrow - Telegraph

The latest Asda Income Tracker showed that the average family lives on just £161 a week. Inflation may have showed signs of easing but family budgets continued to be squeezed thanks to higher energy and transport costs.

The latest Asda Income Tracker has revealed that family spending power fell by £15 a week in November 2011, leaving the average UK family with £161 of weekly disposable income – 8.4 per cent down from this time last year. Annual growth in the cost of basics decreased to 5 per cent in November but budgets continue to be squeezed by the rising costs of running a family home.

In October, gas prices were some 25.3 per cent higher than a year ago, while electricity prices grew by 15.5 per cent, Asda said. Transport costs continue to put pressure on the inflation rate too, with the cost of getting around remaining a large driver of the headline rate of CPI inflation. Figures from the AA show the cost of unleaded petrol grew by 12.3 per cent over the year to November, while diesel prices increased by 14.6 per cent during the same period.

As well as rising outgoings – a weak jobs market further increases the pressure on family budgets – with the unemployment rate remaining elevated at 8.3 per cent during the quarter to October.

With official forecasts indicating that the public sector is likely to lay off more workers than previously anticipated, there are fears that unemployment could rise to 8.7 per cent in 2012.

In addition to the November data, a specially commissioned forward-looking report compiled by Cebr predicts that the amount of disposable income available to UK families in 2012 will stabilise in 2012.

Slowing inflation will help ease the pressure on household budgets, although an increase in mortgage interest costs and weak employment conditions could present a risk to spending power. Cebr therefore predicts a fall of £11 per month in December, and £8 a month in January.

Charles Davis, managing economist, Cebr, said:"Difficult times are set to continue for British households, as economic fallout from the on-going debt crisis in the Eurozone takes its toll on employment and wage growth prospects in the UK.

"With high unemployment set to rise further as deeper than anticipated public sector cutbacks outweigh job creation in the private sector, household spending power is likely to be held back by slow earnings growth. The rising cost of living is expected to slow further in the coming months, taking some pressure off, but household budgets are likely to be constrained for some time to come."

Andy Clarke, Asda President and CEO, said: "2011 saw UK families face an unprecedented budget squeeze, with the cost of basics putting immense pressure on disposable income.




Baby boomers with 80% of UK wealth shouldn’t feel guilty about younger generations' problems
by Ian Cowie - Telegraph

Baby boomers shouldn’t feel guilty about being better-off than younger generations, because people aged over 50 today saved harder and spent less when they were young than is the case today.

That’s the conclusion of analysis of more than 2,000 people by the Chartered Insurance Institute (CII). The study acknowledges that baby boomers – or those born within 20 years of the end of World War II – were fortunate to enjoy easy mortgage availability and decades of house price inflation plus final salary or defined benefit pensions denied to most young adults today.

As a result, about 80% of the Britain's net personal wealth of £6.7trn or £6,700bn is owned by people aged over 50 while younger folk often have no savings, substantial debts and little hope of becoming homeowners any time soon. The average age of first-time buyers is now 37 or about 10 years later than two decades ago.

But the CII claims that 'generation rent' are partly to blame for their own misfortune because many fail to follow their elders’ example by starting to save early. They have come to expect regular foreign holidays, among other treats once regarded as luxuries, often funded by credit cards taken out earlier than their parents did.

A third of the people surveyed who are now in their thirties spent more than half their net income on leisure and entertainment when they were in their twenties, compared to a fifth of those who are now in their fifties and sixties. Most of the younger generation now expect to holiday abroad an average of 2.5 times a year, whereas a quarter of baby boomers never travelled overseas in their twenties.

David Thomson, a director of the CII, said: "Despite the current financial climate, the younger generation is more likely to spend money on a meal out rather than put it in their pension pot, as their older counterparts might have done.

"Holidays abroad are now an accustomed treat for 20-year-olds rather than a luxury for baby boomers, many of whom never took overseas holidays at that age and where a vacation might have meant a week in Norfolk rather than a beach in foreign climes.

"While some of this can be baby boomers received undeniable financial advantages during their working lives, there's no doubt that their financial security today is also due to a more frugal mentality in their youth. Today's generation spends more and saves less when compared to the baby boomers, and while people should enjoy their youth and live for today they should not do so at the expense of planning for their tomorrow."

All that may sound insufferably smug to youngsters today, burdened by student debts and confronted by collapsing confidence in savings and investment after more than a decade of disappointing returns, stockmarket shocks and financial scandals. But the mathematical fact remains that the earliest pounds invested have the longest to work in your favour.

People who start to save young are far more likely to achieve an acceptable outcome than those who wait until later because of compound interest. Pensions are not the only way to save for retirement but they do enjoy substantial tax reliefs. Youngsters who say savings and pensions are boring should ask themselves how exciting poverty in old age is likely to be.




Baby boomers 'more frugal in youth'
by Nick Collins - Telegraph

They may have enjoyed generous pensions and benefited from a surge in house prices, but baby boomers were also more frugal in their youth than today’s thirtysomethings, according to a new report.

While the current "generation bust" has been dealt a harsh hand by the financial climate, the new figures suggest they are partly to blame for their financial woes because they are worse at saving money.

A third of people in their thirties admits to having spent more than half the money they earned in their twenties on leisure and entertainment, compared with the modest 21 per cent of income spent by the average baby boomer at the same point in life.

Most thirtysomethings enjoyed on average two and a half foreign holidays each year in their twenties, while a quarter of the baby boomer generation, now in their sixties, say they never went on vacation at that age.

This enabled the baby boomers to save more money, with the average person in their sixties having commenced pension contributions between the ages of 20 and 24. In contrast 38 per cent of people in their thirties today admit they still have not begun saving for their retirement.

Despite this most people in their thirties today blame the baby boomers’ lack of investment in future generations for their problems today, the survey showed. People now in their sixties also tended to buy homes at a younger age than today and took out their first credit cards much later, helping them stay debt-free for longer, researchers found.

David Thomson, Director of Policy & Public Affairs at the Chartered Insurance Institute said: "More than 80 per cent of the nation's £6.7trn in wealth is owned by baby boomers. "While some of this can be attributed to the undeniable financial advantages baby boomers received during their working lives, there's no doubt that their financial security today is also due to a more frugal mentality in their youth.

"Today's generation spends more and saves less when compared to the baby boomers, and while people should enjoy their youth and live for today they should not do so at the expense of planning for their tomorrow."




Britons save half as much in 2011 as previous year
by Rosie Murray-West - Telegraph

Savers have been put off depositing cash by poor interest rates, choosing to pay down mortgages instead. Britain's savers put away half as much in 2011 as they did the year before, because poor interest rates are putting them off holding money in the bank.

Figures from the British Bankers' Association (BBA) showed that while customers are paying down their mortgages and paying off their credit cards, deposits and savings have increased by £15.8 billion in the first eleven months of 2011 compared with £30 billion in the same period last year. "The incentive for holding bank deposits has given way to paying down debt and using cash for household expenditure" statistics director David Dooks said.

The figures showed a slight increase in mortgage lending in November, with figures 5pc higher than the same period in 2010, House purchase approvals were 16pc higher than in November 2010.

However, the BBA said that large numbers of people were paying down existing mortgages. The amount of unsecured credit - personal loans and credit card debts - also fell by 1.2pc over the year. Many people are using their money to pay down debt and mortgages rather than put money in the bank.

This makes sense because interest rates on deposits are so low that many are struggling to beat inflation, whereas paying down a mortgage has tax advantages and consumers may also be paying a higher rate on these mortgages.

"November's £8 billion of new mortgages, £7 billion of new card credit and £1 billion of new personal loans show that household finance continues to be provided by the banks but until there are clear signs of improvement in the economy and stability on the international front, households and businesses lack the confidence needed to seek credit for spending of investment," Mr Dooks said.

"Stocks of bank lending therefore continue to be driven down as repayments dominate over the absence of any material rise in borrowing demand."




Oldest Baby Boomers Face Jobs Bust
by E.S. Browning - Wall Street Journal

Many older Americans fear they will be working well into their 60s because they didn't save enough to retire. Millions more wish they were that lucky: Without full-time jobs, they are short of money and afraid of what lies ahead.

Deborah Kallick was a professor of biomedical chemistry at the University of Minnesota until she ventured into the private sector in 2000 with a job in genome research. She is now one of more than four million Americans aged 55 to 64 who can't find full-time work. That number has nearly doubled in five years, according to U.S. Department of Labor figures in October.

Ms. Kallick, 60 years old, has been unemployed since 2007 and lives in the Northern California home of an ex-boyfriend. She has run out of unemployment insurance, used up most of her retirement savings and is indebted to relatives and credit-card companies.

A good job could settle her accounts, she said. Until then, Ms. Kallick relies on generosity, occasional consulting work and the sale of sweaters, purses and other possessions on eBay. "It is very hard to work through this and learn to be calm and happy day to day," said Ms. Kallick, who never married. "It has taken a lot of strength and courage to learn to do that."

Older Baby Boomers are trying to postpone retirement, as many find their spending habits far outpaced their thrift. With U.S. unemployment at 8.6%, and much higher among people in their teens and 20s, younger members of the labor pool accuse Boomers of refusing to gracefully exit the workplace.

But their long-held grip is slipping, as employers look past older Americans to younger, cheaper workers. The Labor Department counts people as unemployed only if they have looked for a job in the previous month. By that definition, 6.5% of workers aged 55 to 64 were unemployed in October, below the national average but more than twice the jobless rate for the group five years earlier.

Taking into account the number of older people who want full-time work but are unemployed, working part-time or need a job but have quit looking, the percentage jumps to 17.4%, or 4.3 million Americans ages 55 to 64, according to the government data. The number has grown from 2.4 million in October 2006. This group without full-time work now accounts for more than one in six older Americans seeking positions.

In some ways, older people are doing better than everyone else: Among all U.S. workers, 20% are unemployed, underemployed or have given up looking for jobs. But older people have far less time to rebuild savings.

"This is new. It is different. It is worse than we have experienced before and it is very widespread," said Carl Van Horn, head of the John J. Heldrich Center for Workforce Development at Rutgers University. "It is going to get worse. You are going to have a higher level of poverty among older Americans."

Older people have more trouble finding new jobs. Among unemployed workers older than 55, more than half have been looking for more than two years, compared with 31% of younger workers, according to the Heldrich Center. Among older workers who found a new job, 72% took a pay cut, often a big one, the Rutgers data show.

The problem has been building for decades: Inflation-adjusted, middle-class incomes have stagnated in parallel with a free-spending culture of indebtedness that has left many Americans with too little saved. Over the same time, many U.S. companies cut pensions and shifted to less-generous retirement-savings plans such as 401(k) accounts that have stagnated or diminished in the market tumult of past years.

Older families aren't just failing to save, they are increasingly draining accounts that were supposed to help finance retirement.

The median household headed by someone aged 55 to 64 has $87,200 in retirement accounts and other financial assets, according to Strategic Business Insights' MacroMonitor database. If each of the 4.3 million unemployed or underemployed people in this age group runs through half the family savings, that will, in theory, total $188 billion in lost retirement money.

The typical retirement-age household has too little saved to maintain its standard of living in retirement, according to actuarial and Federal Reserve data.

Financial planners often advise that retirement resources be large enough to provide 85% of a person's working income. Median households headed by a person aged 60 to 62 with a 401(k) account have saved less than one-quarter of what is needed in that account to live as well in retirement, according to Fed data analyzed for The Wall Street Journal by the Center for Retirement Research at Boston College.

The trouble spreads across generations. Older people hang on to jobs or, out of desperation, take lower-level jobs for which they are over-qualified. Either way, they displace younger workers.

In the past, older people who lost jobs often gave up and retired. No longer. In October, two-thirds of people aged 55 to 64 had jobs or wanted them, up from 59% in 1994, according to Labor Department data.

At an age when they should be generating peak incomes and savings, many unemployed and underemployed Americans are applying for early Social Security benefits and spending what's left in their retirement accounts.

Kathi Paladie, 64 years old, lost her job as an executive assistant at a mortgage company in Tacoma, Wash., six years ago. She hasn't found full-time work since but works occasionally as a phone interviewer for a political survey firm.

Her retirement savings is spent, and she said her monthly $800 Social Security checks, $100-a-week unemployment benefits and occasional paychecks barely cover expenses. "If I don't buy a lot of groceries, then I am OK," said Ms. Paladie, who is divorced. "I do a lot of puzzles sitting here and watching TV. And I play with my bird. And that's about it."

She rarely goes out, she said, "but I've got a clean house." To save money, she sometimes eats Frosted Flakes for dinner. She shares them with her African Grey parrot, Muffin, who also likes the sweetened cereal.

Ms. Paladie hasn't been to the doctor for five years, she said. She frets about paying rent after her unemployment benefits run out next year. Her daughter lives nearby but doesn't have the room for her, Ms. Paladie said. "It is kind of a standing joke," she said, "that if this fails, that I can always move in with them and sleep in the garage."

The problem of older, out-of-work Americans extends beyond individuals to the U.S. economy. Among jobless people aged 55 to 64 who want to work, lost annual wages exceed an estimated $100 billion, based on the median income of this age group.

Retirement savings losses exceed $10 billion a year, assuming contribution rates of 8% for employees and 2% for employers. Even if only half the people were working, the economy would gain $50 billion a year in income and another $5 billion in retirement savings. That doesn't count the lost wages of people who have taken salary cuts to get new jobs.

Richard Foster, 59 years old, a former computer programmer and software analyst in Arvada, Colo., near Denver, has been unemployed several times over the past decade. The older he gets, the more trouble he has finding jobs in computer mainframes, his specialty, amid changing technologies. And the longer his absence from programming, the harder it is to attract recruiters, who prefer people with experience in the past six months, Mr. Foster said.

These days, he works on the telephone nearly full-time as a customer-service representative. His employer grades him on how fast he finishes each call and how customers rate his service. Mr. Foster recently contracted Bell's palsy, a temporary facial paralysis thought to be stress-related.

The work pays a lot better than a previous job, delivery driver for a dry cleaner. Still, Mr. Foster said, it pays 40% less than what he earned as a programmer at the University of Colorado Hospital, a job he lost in a restructuring that kept more tenured employees.

Mr. Foster's wife, Tina, has complications from a detached retina, which keeps her from working. Her treatment is only partially paid for by his medical plan, which classified Ms. Foster's eye problem as a pre-existing condition.

He has a retirement-savings plan at his new employer, he said, but it's hard to save, given the couple's struggle "to make ends meet day to day." He is putting off dental work, for example, to save money.

While out of work, Mr. Foster said, he sometimes depended on food banks. He filed for personal bankruptcy in 2003. He and his wife got a break recently: his wife's sister and her husband helped them purchase a home. Mortgage payments to his in-laws are less than his rent. Retirement? He said he has no idea when.

Mr. Foster's worries aren't unusual. More than two-thirds of unemployed people older than 50 report extreme stress, trouble sleeping or family strains, according to surveys by the Heldrich Center at Rutgers. More than 60% of respondents said they didn't expect to hold another full-time job in their field and a similar percentage said they were pessimistic about finding any job soon. One-third of those over 55 reported selling possessions to stay afloat.

In another unfortunate consequence, the younger people are when they apply for Social Security retirement benefits, the lower their monthly checks for the rest of their lives. Two-thirds of Americans older than 50 expect to file for the benefits earlier than they would prefer, or already have done so, according to the Rutgers survey.

"People are taking in boarders, they are moving in with their kids, selling their homes for the cash that they can live on," said Abby Snay, executive director in San Francisco for JVS, a community agency that teaches work skills.

Although her agency has long focused on young people, the fastest-growing client group is closer to retirement age. Before the recession, only 11% of her clients were older than 55; now, it is 17%.

"We are seeing people in a panic, in survival mode," she said. "They are about to finish their financial assets and all they have after that is their retirement funds. They are trying to figure out some kind of bridge so they won't have to pay an early withdrawal fee for their retirement incomes."

Ms. Snay has even seen former donors return as clients. "There is a level of shame and humiliation," she said, "and, 'What have I done wrong?' " She recently offered older clients a workshop on the website LinkedIn. She recalled some people said, "'If I put up a picture, no one will hire me.'" Her response: "We advise people to put up a photo, put their best foot forward."




ECB's Risky Plan to Flood Banks with Cash
by Stefan Kaiser - Spiegel

The European Central Bank has launched the biggest lending operation in its history, and banks pounced on the offer on Wednesday, borrowing almost a half-billion euros for three years at a low interest rate. Governments hope the banks will use the cash to buy sovereign bonds, but critics warn the ECB's strategy is risky and could stoke inflation.

Central bankers tend to be diplomatic and cautious in their public statements, so the dramatic wording the European Central Bank (ECB) used this week to warn about an escalation of the euro crisis was indeed striking.

Tensions in the financial markets had "intensified to take on systemic crisis proportions not witnessed since the collapse of Lehman Brothers three years ago," the ECB warned in its latest report issued on Monday.

ECB President Mario Draghi told a committee of the European Parliament that Europe's banks faced major dangers in the coming months. "The pressure that bond markets will be experiencing is really very, very significant if not unprecedented," Draghi said.

It will be a tough year for banks. In 2012 overall they will have to pay back €725 billion ($953 billion) in debt, of which €280 billion will fall due in the first quarter alone. They will have to borrow fresh money to service this debt, but it's almost impossible for them to raise that money in the private market. Most of them have large holdings of European government bonds on their balance sheets, so they don't have the mutual trust necessary to lend each other large sums of money.

"The interbank market is pretty shut," said Dieter Hein, a finance expert at Fairesearch, an independent research company for institutional investors, banks and brokers. "Virtually no one outside is lending any money to euro-zone banks any more."

ECB Becomes Banks' Lendor of Last Resort
That's why the ECB has become the lendor of last resort for many banks. Ever since the start of the 2008 financial crisis it has kept on supplying the banking sector with fresh cash, for up to one year in some cases. On Wednesday, it launched the biggest lending operation in its history, and banks responded by borrowing €489 billion in the ECB's first ever offering of three-year funding -- at an interest rate of just one percent initially.

This carte blanche for the financial sector has whetted the appetite of Europe's policymakers. French President Nicolas Sarkozy said weeks ago that cash-strapped countries could start turning to their banks for credit again if they had sufficient liquidity.

At first sight everyone gains. The banks could lend their cheaply obtained borrowed cash to governments at higher interest rates, and governments would at last be able to find buyers for their bonds again. The ECB might even be able to abandon its own controversial purchases of government bonds.

But critics are sounding the alarm. They say that by bailing out the banks, the ECB is financing governments through the back door. Bill Gross, head of the world's biggest bond investor Pimco, said Europe was simply shifting funds from one hand to the other.

Hugo Beck, economics professor at Pforzheim University in Germany, said the flood of money would eventually stoke inflation. "The ECB is hurling gigantic amounts of liquidity into the market," he said. "It can't control that, it's playing with fire."

Despite all the risks, the plan seems to be working in the short term. In recent days the risk premiums on high-debt euro member states have fallen significantly. Spain was able to borrow twice as much in the market as originally planned, and at relatively low interest rates. The banks are evidently buying bonds again in anticipation of receiving ample ECB assistance.

But the impact could prove short-lived. Experts believe that banks have recently been buying bonds mainly to use them as collateral for borrowing from the ECB. Once they get the central bank cash, the buying spree could quickly evaporate. After all, the financial sector still regards bonds issued by ailing euro-zone states as toxic for balance sheets.




Eurozone zombies follow Mario Draghi's cheap money
by Damian Reece - Telegraph

Mario Draghi donned his plague suit on Wednesday and urged European banks to "Bring out your dead". But rather than financial corpses it was €489bn (£408bn) of zombie debt from zombie banks that emerged blinking into the daylight.

Far from reassuring markets, the scale of Wednesday's bail-out for eurozone banks by Draghi's European Central Bank (ECB) should simply confirm worst fears.

European banks face a €600bn tsunami of debt coming due in 2012 (mostly in the first quarter) and many simply can't pay up because the usual source of refinancing, wholesale money markets, are refusing to lend them any more. Sound familiar?

One Northern Rock-style collapse after another would have reverberated around the eurozone over the next three months if the ECB hadn't stepped in with unlimited cash costing 1pc. Almost certainly there would have been a euro-Lehman moment too as a once mighty lender, probably in France, fell over.

Draghi has had to ignore any sense of moral hazard and agree to fund weak banks at the expense of strong. He has opened a quantitative easing (money printing) exercise of enormous proportions. Weak banks unable to fund themselves on the open market are now hooked on cheap ECB money.

In return they have to post collateral with the ECB, making wholesale money market debt subordinate to the ECB borrowings. These wholesale funds become even more expensive as a result, making it even less likely that eurozone banks can access them in future, thus increasing their addiction to ECB cash.

Banks accessing cheap ECB funds will lend this on to lowest risk credits, such as blue-chip corporate borrowers, to make an easy profit and rebuild their earnings and invigorate their living dead balance sheets. Bonuses all round. They can also subsidise lending to consumers, grabbing market share from stronger banks without the same balance sheet failings.

Nicolas Sarkozy hopes banks will use the ECB's cheap cash to buy sovereign debt from the usual Club Med suspects. But why banks would load up on even more of the loss-making stuff that's caused their capital positions to deteriorate already is unclear.

There is a carry trade potential of borrowing cheap from the ECB and lending dear to Italy but using three-year money to execute that is against most bankers' instincts and there is a clear risk the trade could go wrong in what are hugely volatile markets. Draghi has avoided a devastating 2012 credit crunch but such a cheap, short-term palliative is no cure for Europe's fundamental problems.

Banks rehearse the euro break-up scenario
Sir Philip Hampton, chairman of Royal Bank of Scotland, thinks that while Europe will move heaven and earth to try to keep the euro together, there is a chance it could split asunder with Greece the most obvious first candidate to leave.

If anyone tells you a break-up of the single currency is simply a swivel-eyed eurosceptic fantasy, think again. RBS, and every other sane bank, has a contingency plan for that very eventuality given its increasing likelihood.

Sir Philip's lucid views are included in Jeff Randall's Sky News show tomorrow evening*. Perhaps most intriguingly, however, are Sir Philip's views on exactly how a country, such as Greece, would go about leaving.




The watchdogs that didn't bark
by Scot Paltrow - Reuters

Four years after the banking system nearly collapsed from reckless mortgage lending, federal prosecutors have stayed on the sidelines, even as judges around the country are pointing fingers at possible wrongdoing.

The federal government, as has been widely noted, has pressed few criminal cases against major lenders or senior executives for the events that led to the meltdown of 2007. Finding hard evidence has proved difficult, the Justice Department has said.

The government also hasn't brought any prosecutions for dubious foreclosure practices deployed since 2007 by big banks and other mortgage-servicing companies.

But this part of the financial system, a Reuters examination shows, is filled with potential leads.

Foreclosure-related case files in just one New York federal bankruptcy court, for example, hold at least a dozen mortgage documents known as promissory notes bearing evidence of recently forged signatures and illegal alterations, according to a judge's rulings and records reviewed by Reuters. Similarly altered notes have appeared in courts around the country.

Banks in the past two years have foreclosed on the houses of thousands of active-duty U.S. soldiers who are legally eligible to have foreclosures halted. Refusing to grant foreclosure stays is a misdemeanor under federal law.

The U.S. Treasury confirmed in November that it is conducting a civil investigation of 4,500 such foreclosures. Attorneys representing service members estimate banks have foreclosed on up to 30,000 military personnel in potential violation of the law.

In Alabama, a federal bankruptcy judge ruled last month that Wells Fargo & Co. had filed at least 630 sworn affidavits containing false "facts," including claims that homeowners were in arrears for amounts not yet due.

Wells Fargo "took the law into its own hands" and disregarded laws banning perjury, Judge Margaret A. Mahoney declared.

And in thousands of cases, documents required to transfer ownership of mortgages have been falsified. Lacking originals needed to foreclose, mortgage servicers drew up new ones, falsely signed by their own staff as employees of the original lenders - many of which no longer exist.

But the mortgage-foreclosure mess has yet to yield any federal prosecution against the big banks that are the major servicers of home loans.

Unprecedented Fraud
Reuters has identified one pending federal criminal investigation into suspected improper foreclosure procedures. That inquiry has been under way since 2009.

The investigation focuses on a defunct subsidiary of Jacksonville, Florida-based Lender Processing Services, the nation's largest subcontractor of mortgage servicing duties for banks.

People close to the investigation said indictments may come as early as the end of this month. Nationwide press reports had showed photos of what appeared to be obviously forged signatures on foreclosure affidavits.

The Justice Department doesn't disclose pending investigations, making it impossible to say if other criminal inquiries are underway. Officials in state attorneys' general offices and lawyers in foreclosure cases say they have seen no signs of any other federal criminal investigation.

"I think it's difficult to find a fraud of this size on the U.S. court system in U.S. history," said Raymond Brescia, a visiting professor at Yale Law School who has written articles analyzing the role of courts in the financial crisis. "I can't think of one where you have literally tens of thousands of fraudulent documents filed in tens of thousands of cases."

Spokesmen for the five largest servicers - Bank of America Corp., Wells Fargo & Co., JP Morgan Chase & Co, Citigroup Inc., and Ally Financial Group - declined to comment about the possibility of widespread fraud for this article.

Paul Leonard, spokesman for the Housing Policy Council, whose membership includes those banks, said any faults in foreclosure cases are being addressed under a civil settlement earlier this year with federal regulators.

False Statements
Justice Department and Federal Bureau of Investigation officials say they have brought mortgage-fraud criminal cases through their "Operation Stolen Dreams." None, however, were against big banks. All targeted small-scale operators who allegedly defrauded banks with forged mortgage applications or took advantage of homeowners by falsely promising arrangements to get them out of default and then pocketing their money.

Justice Department spokeswoman Adora Andy declined to comment on the absence of prosecutions for foreclosure practices by big banks. She said in a statement: "The Department of Justice has been and will continue to aggressively investigate financial fraud wherever it occurs, including at all levels of the mortgage industry and, when we find evidence of a crime, we will not hesitate to pursue it."

Some judges have accused banks of falsely stating in court that they are working on loan modifications for homeowners in default.

In a November 30 court hearing, not previously reported, a federal bankruptcy judge in New York accused Bank of America of falsely telling courts and the public that it was working to renegotiate loans.

"Bank of America issues constant press releases about how it is responsive to their borrowers on these issues. They are not, period," said Judge Robert Drain, in a case involving homeowner Richard Tomasulo, a pharmacist from Crompond, New York. Drain said Bank of America had been telling the court since January that it was working to modify Tomasulo's mortgage, but hadn't done so.

"Whoever is in charge of this program and their supervisor, who should be following it, should be fired" because "they are frankly incompetent."

Bank of America spokeswoman Jumana Bauwens said the bank has completed "nearly one million" modifications since 2008. The U.S. Treasury this year suspended loan modification incentive payments to the bank because it was "seriously deficient" in responding to requests for modifications.

Cheaters and Liars
Foreclosure fraud came to light in September 2010, with evidence that employees of Ally Financial Corp. had committed "robo-signing," in which low-level workers signed and swore to the facts in thousands of affidavits they hadn't read or checked.

The affidavits were notarized outside the signers' presence, in apparent violation of state and federal criminal laws.

Since then, mounting evidence of possible foreclosure fraud has convinced judges and state regulators that servicers have harmed homeowners and the investors who bought mortgage-backed securities.

A unit of the Justice Department that oversees bankruptcy court cases, the U.S. Trustees Program, said in its 2010 annual report that there were "pervasive and longstanding problems regarding mortgage loan servicing," which "are not merely 'technical' but cause real harm to homeowners in bankruptcy."

Banks, the Trustees Program says, have falsified affidavits by claiming homeowners owe fees for services never rendered and by overstating how much owners are behind on payments.

Former federal prosecutor Daniel Richman, a professor of criminal law at Columbia University Law School, says a central question is who prosecutors would target in criminal investigations. Richman said it would be easy but not worthwhile to charge large numbers of rank-and-file workers who, directed by supervisors, falsely churned out affidavits.

He said criminal investigations would be warranted, but harder to bring, "if there are particular individuals who lie at the heart of this conduct in a very significant way."

In October 2010, members of Congress pressed the Justice Department to investigate. Attorney General Eric Holder said investigations were best left to the states, with help from the Justice Department.

The Office of the Comptroller of the Currency, the top bank regulator, quickly negotiated settlements with the 14 largest servicers, requiring changes in practices and "remediation" for harmed homeowners. That settlement allows the banks to choose their own contractors to determine who was harmed and by how much.

Lawmakers and homeowner advocates have criticized the arrangement, contending that it will let the banks avoid making all wronged homeowners whole, because the contractors are paid by and answer to the banks.

Since then, the department's civil division has worked with a shaky coalition of all 50 states, which have been seeking a civil settlement with five banks that are the largest loan servicers. The negotiations center on requiring them to pay $20 billion or more in penalties, only some of which would go to compensate wronged homeowners.

States Take Action
Federal law enforcement has been noticeably absent, even in areas hardest hit by the crisis, such as Las Vegas.

In 2010 the FBI's Las Vegas office shut down its mortgage fraud task force, which had focused on small-scale swindlers.

Tim Gallagher, chief of the FBI's financial crimes section, said that the Las Vegas office had asked to transfer agents to other duties.

Impatient with the lack of federal prosecution, states including New York, Massachusetts, Delaware and California have launched their own investigations of the banks.

In November, it became the first state to file criminal charges. The state attorney general obtained a 606-count indictment against two California-based executives of Lender Processing Services.

It accuses the executives of paying Nevada notaries to forge the pair's signatures and falsely notarize them on notices of default, documents Nevada requires in foreclosure actions. State officials said more indictments are expected.

In an interview, John Kelleher, Nevada's chief deputy attorney general, said the investigation began in response to citizen complaints.

"We were concerned and then shocked at the sheer number of fraudulent documents we were finding that had been filed with the county recorder," Kelleher said.

Investigators found "tens of thousands" of false records filed on behalf of big mortgage servicers, he said.

The two executives have pleaded not guilty. In a press release, the company said: "LPS acknowledges the signing procedures on some of these documents were flawed; however, the company also believes these documents were properly authorized and their recording did not result in a wrongful foreclosure."

Back Home In New York
The U.S. Attorney's Office in Manhattan is the federal prosecutors' office that traditionally has filed the most cases against top banks and financiers. But it hasn't brought any foreclosure-related criminal cases involving Wall Street's biggest financial houses or the law firms that represent them.

To date the only step it has taken publicly was an October 2011 civil settlement with New York State's largest foreclosure law firm.

The Steven J. Baum P.C. law firm, based near Buffalo, New York, in recent years filed approximately 40 per cent of all foreclosures in New York State, on behalf of banks and other mortgage servicers. Court records show that the firm angered state court judges for alleged false statements and filing suspect documents.

Arthur Schack, a state court judge in Brooklyn, in a 2010 ruling said that pleadings by the Baum firm on behalf of HSBC Bank, a unit of London-based HSBC Holdings, in a foreclosure case were "so incredible, outrageous, ludicrous and disingenuous that they should have been authorized by the late Rod Serling, creator of the famous science-fiction television series, The Twilight Zone."

Another state judge that year imposed $5,000 in sanctions and ordered the firm to pay $14,500 in attorneys' fees, ruling that "misrepresentation of the material statements here was outrageous."

But the U.S. Attorney's office in Manhattan filed no criminal charges against the Baum firm. Instead, it signed a settlement with Baum ending an inquiry "relating to foreclosure practices." The agreement made no allegations of wrongdoing, but required the firm to improve its foreclosure practices.

Baum agreed to pay a $2 million civil penalty, but didn't admit wrongdoing.

The law firm said it would shut down after New York Times columnist Joe Nocera in November published photographs of a 2010 Baum firm Halloween party in which employees dressed up as homeless people. Another showed part of Baum's office decorated to look like a row of foreclosed houses.

"The settlement between the Manhattan U.S. Attorney's Office and the Steven J. Baum Law Firm resulted in immediate and comprehensive reforms of the firm's business practices," said Ellen Davis, spokeswoman for the Manhattan U.S. Attorney's office.

Earl Wells III, a spokesman for Baum, said the lawyer wouldn't comment because "he's laying low right now."

An HSBC spokesman said: "We are working closely with the regulators to address any matters raised regarding" the bank's foreclosure practices.

Broken Promises
The most serious potential foreclosure violations involve falsified mortgage promissory notes, the documents homeowners sign vowing to repay mortgage loans. Courts uniformly have ruled that unless a creditor legally owns the promissory note, it has no legal right to foreclose. For each mortgage there is only one promissory note.

Bankruptcy court records reviewed by Reuters show that at least a dozen radically different documents purporting to be the authentic promissory note have turned up in foreclosure cases involving six different properties in the federal bankruptcy court for the Southern District of New York.

In one, Wells Fargo is battling to foreclose on the Bronx home of Tindala Mims, a single mother who works as an ambulance driver. In September 2010, Wells Fargo filed a promissory note bearing a signed stamp showing that the note belonged to defunct Washington Mutual Bank, not Wells Fargo. The judge threw out the case.

In a second attempt, the court was given a different version of the note. But inspection showed physical alterations. A variety of marks on the original were missing or seemed obviously altered on the second. And the second version had a stamped endorsement, missing on the first, that appeared to give Wells Fargo the right to foreclose.

The judge threw out the second attempt too. Wells Fargo is trying a third time. It declined to comment on the case.

Linda Tirelli, Mims' lawyer, in October sued Wells Fargo, alleging "fabrication of documents."

"It seems to me that Washington is deathly afraid of the banking industry," Tirelli said. "If you're talking about filing false documents and filing false notarizations, do you really think that the U.S. Attorney would find it too difficult to prosecute?"

The office of U.S. Attorney Preet Bharara in Manhattan has routinely brought charges involving forgery and filing false documents against smaller targets.

In April, the FBI arrested seven employees of the USA Beauty School in Manhattan. Bharara's office alleged that the seven suspects had forged documents such as high school diplomas, attendance records and applications for financial aid for students taking cosmetology classes.

In August, Bharara's office filed felony charges against a sports-memorabilia company's CEO, accusing him of auctioning jerseys falsely advertised as "game used" by Major League Baseball players.

In a press conference, a U.S. Postal Inspection Service official said prosecution was important because "victims felt that they had a piece of history only to be defrauded and left with a feeling of heartbreak."

Given the record of Bharara's office, and those of his fellow U.S. Attorneys around the country, to aggressively pursue violations both big and small, the absence of cases involving the foreclosure fiasco seems to stand out.

"Why there hasn't been more robust prosecution is a mystery," said Brescia, the visiting professor at Yale.




Jack Bogle: 'Our Markets Have Gone Crazy'
by Mark Jewell - AP

John C. Bogle counted himself among the 1 percent of wealthiest Americans a couple decades ago. You might not guess that today, when you hear the 82-year-old founder of mutual fund company Vanguard rail against economic inequality. He can sound almost like an Occupy Wall Street protester: "Our markets have gone crazy, and there is 200 times as much speculation as there is investing," he says.

It has been 15 years since the low-cost investing pioneer stepped down as CEO of Vanguard. It was Bogle who launched the first index mutual fund in 1976. Vanguard Group has since grown into the largest fund company, managing nearly $1.7 trillion in U.S. fund assets.

Bogle remains wealthy, but his income is a fraction of what he earned when he ran Vanguard. He's paid a modest retainer to run Vanguard's Bogle Financial Markets Research Center, a think tank in Valley Forge, Pa.

He resists a label that applies to most people his age: "I'm so far from retired, it's almost an embarrassment. I'm here in the office every day." He's also writing his 10th book, "The Clash of Cultures: Investment vs. Speculation." And he continues to deliver speeches.

Bogle says he's paying close attention to tax policies he considers unfair, including one that's favorable to the fund industry and investors with taxable accounts. The top rate for dividends and long-term capital gains is historically low at 15 percent, as a result of the extension of Bush era tax cuts that Congress and President Barack Obama agreed to a year ago. In contrast, top earners pay 35 percent on regular income. He doesn't like that disparity.

Here are excerpts from a recent interview with Bogle:

Q: What do you think about the ongoing discussion over tax fairness?

A: I believe the rich should pay more, but that's not a good platform for tax policy. What has gone wrong is that we've failed to recognize the difference between earned income and unearned income. Is it really fair for gamblers on Wall Street to pay a 15 percent rate when they make a winning investment, and an honest working person — a bricklayer for example — may pay an equal or higher tax on their wages than a gambler? That's absolute absurdity.

Rates may have to be changed, but we also need to look at what is taxed, and how. Dividend income should be taxed at the same rate as ordinary income. As for capital gains, there ought to be some distinction between capital made by people who start businesses, and contribute value to society, and capital made by gamblers on Wall Street, some of whom win. Earned capital income should carry the regular dividend rate, but capital income gains by trading, and particularly short-term trading, should pay a higher tax, even than the present ordinary income rate.

Q: What's your take on the Occupy movement?

A: I'm happy to say that my current income puts me in the 99 percent group. So maybe I'm not so happy, I don't know.

This movement has brought to the surface some very serious problems in our country about disparities in opportunity and income. So many young people are having a terrible time getting a job. Young people have great idealism, and the Occupy movement has been a bit unrealistic at times. So what? I can't imagine a worse America if our younger generation didn't have great idealism. I salute them for their enthusiasm, and their mission.

The negative side is that they just pushed too hard for too long. It's very difficult for any movement without any seeming leadership — other than a good idea — to have any sense of taste or judgment. Who's to say, 'This is going too far'? In some places, it's just gone on too long, and it's been too disruptive. So I think it's good that we've been cleaning up the plazas where the Occupy movement set up.

Q: What's the focus of the book you're writing?

A: That our financial system has gone off the rails. It's something we think of as providing capital for new businesses, that will enable people to finance new companies or add to the capital of existing companies. We do that to the tune of about $200 billion a year in financing through Wall Street, or through the financial system. And yet we do some $40 trillion worth of trading every year. I'm selling my investment to you, and you're buying it from me, and it creates no value for society. Indeed, it subtracts value, because the guy in the middle gets his piece.

Many mutual funds turn over 100 percent of their portfolios each year. When I got into this business, it was maybe 18 percent a year. It's amazing. This industry is a big part of the problem. What we need is a transfer tax on trading. We need to tame the trading and speculative element in our financial system.

Q: What's your investment outlook heading into 2012?

A: If you're investing in stocks with the idea of a one-year outcome, you should not invest. You can lose a lot. If you invest in stocks with a five-year outlook, I would think it is highly debatable if you should do that. You have to think about more than just the probabilities of a market crash. You have to consider the consequences for your savings, and whether you'd be decimated.

As for bonds, with interest rates and yields so low now, you just have to take those for what they are — a lot lower than what they have been historically.

With the economy, I'm cautious. I don't expect a boom in consumer spending over the next two or three years. People don't have the wherewithal to spend a lot more, and in today's world, they don't have the confidence. Confidence can change overnight, but wherewithal cannot.




The 7 most illuminating economic charts of 2011
by James Pethokoukis

My Magnificent Seven. Some bust myths. Others highlight a reality the media is ignoring. Enjoy!

1. The overly optimistic unemployment forecast of the Obama White House.

This may be the most infamous economic prediction in U.S. political history (helpfully updated by The Right Sphere). For the original January 2009 chart from White House economic advisers Jared Bernstein and Christina Romer, see here.





2.  The real unemployment rate. The official (U-3) unemployment rate is 8.6 percent. But the labor force has been shrinking as discouraged workers have been disappeared by government statisticians rather than counted as unemployed. But what if they weren’t? What if the Labor Department added those folks back into the numbers? Well, you would get this:





3. Middle-class incomes have been stagnant for decades—not. It is an oft-repeated liberal talking point, one that President Obama himself used in his populist Osawatomie Speech: The rich got richer the past 30 years while the middle-class went nowhere. In short, the past few decades of lower taxes and lighter regulation have been a failure. Or, rather, pro-market policies have been a failure … except that new research from the University of Chicago’s Bruce Meyer and Notre Dame’s James Sullivan find that “median income and consumption both rose by more than 50 percent in real terms between 1980 and 2009.”





4. Inequality has exploded—not. According to the MSM and liberal economists, U.S. inequality has exploded to levels not seen since the 1920s or perhaps even the Gilded Age of the late 19th century. And to prove their point—that the 1 percent has gotten amazingly richer in recent decades—the inequality alarmists will inevitably trot out a famous income inequality study from economists Emmanuel Saez and Thomas Pike. But why not instead look at wealth—all financial and nonfinancial assets—instead of income? It’s less volatile and a truer measure of all the economic resources at an individual’s command. Turns out that Saez has done research on that subject, too. And he even created a revealing chart documenting the ups and downs of U.S. wealth over the past century. It reveals a very different picture of inequality in America:





5. and 6. The underwhelming Obama recovery. When you compare the current recovery to those of the past, it looks pretty anemic. And it doesn’t matter if you look at GDP growth or unemployment (via The Economist).

 





7. America’s debt picture is worse than you think. If you factor in the long-term impact of rising federal debt on U.S. interest rates and economic growth—raising borrowing costs and lowering tax revenue—you’ll find that federal debt could be almost 50 percent higher by 2035 than the estimates usually bandied about in the media.

 






The myth of renewable energy
by Dawn Stover - Bulletin of the Atomic Scientists

"Clean." "Green." What do those words mean? When President Obama talks about "clean energy," some people think of "clean coal" and low-carbon nuclear power, while others envision shiny solar panels and wind turbines.

And when politicians tout "green jobs," they might just as easily be talking about employment at General Motors as at Greenpeace. "Clean" and "green" are wide open to interpretation and misappropriation; that's why they're so often mentioned in quotation marks. Not so for renewable energy, however.

Somehow, people across the entire enviro-political spectrum seem to have reached a tacit, near-unanimous agreement about what renewable means: It's an energy category that includes solar, wind, water, biomass, and geothermal power.

As the US Energy Department explains it to kids: "Renewable energy comes from things that won't run out -- wind, water, sunlight, plants, and more. These are things we can reuse over and over again. … Non-renewable energy comes from things that will run out one day -- oil, coal, natural gas, and uranium."

Renewable energy sounds so much more natural and believable than a perpetual-motion machine, but there's one big problem: Unless you're planning to live without electricity and motorized transportation, you need more than just wind, water, sunlight, and plants for energy. You need raw materials, real estate, and other things that will run out one day. You need stuff that has to be mined, drilled, transported, and bulldozed -- not simply harvested or farmed. You need non-renewable resources:

• Solar power. While sunlight is renewable -- for at least another four billion years -- photovoltaic panels are not. Nor is desert groundwater, used in steam turbines at some solar-thermal installations.

Even after being redesigned to use air-cooled condensers that will reduce its water consumption by 90 percent, California's Blythe Solar Power Project, which will be the world's largest when it opens in 2013, will require an estimated 600 acre-feet of groundwater annually for washing mirrors, replenishing feedwater, and cooling auxiliary equipment.

• Geothermal power. These projects also depend on groundwater -- replenished by rain, yes, but not as quickly as it boils off in turbines. At the world's largest geothermal power plant, the Geysers in California, for example, production peaked in the late 1980s and then the project literally began running out of steam.

• Wind power. According to the American Wind Energy Association, the 5,700 turbines installed in the United States in 2009 required approximately 36,000 miles of steel rebar and 1.7 million cubic yards of concrete (enough to pave a four-foot-wide, 7,630-mile-long sidewalk).

The gearbox of a two-megawatt wind turbine contains about 800 pounds of neodymium and 130 pounds of dysprosium -- rare earth metals that are rare because they're found in scattered deposits, rather than in concentrated ores, and are difficult to extract.

• Biomass. In developed countries, biomass is envisioned as a win-win way to produce energy while thinning wildfire-prone forests or anchoring soil with perennial switchgrass plantings. But expanding energy crops will mean less land for food production, recreation, and wildlife habitat.

In many parts of the world where biomass is already used extensively to heat homes and cook meals, this renewable energy is responsible for severe deforestation and air pollution.

• Hydropower. Using currents, waves, and tidal energy to produce electricity is still experimental, but hydroelectric power from dams is a proved technology. It already supplies about 16 percent of the world's electricity, far more than all other renewable sources combined.

Maybe that's why some states with renewable portfolio standards don't count hydropower as a renewable energy source; it's so common now, it just doesn't fit the category formerly known as "alternative" energy. Still, that's not to say that hydropower is more renewable than solar or wind power.

The amount of concrete and steel in a wind-tower foundation is nothing compared with Grand Coulee or Three Gorges, and dams have an unfortunate habit of hoarding sediment and making fish, well, non-renewable.

All of these technologies also require electricity transmission from rural areas to population centers. Wilderness is not renewable once roads and power-line corridors fragment it.

And while proponents would have you believe that a renewable energy project churns out free electricity forever, the life expectancy of a solar panel or wind turbine is actually shorter than that of a conventional power plant. Even dams are typically designed to last only about 50 years. So what, exactly, makes renewable energy different from coal, oil, natural gas, and nuclear power?

Renewable technologies are often less damaging to the climate and create fewer toxic wastes than conventional energy sources.

But meeting the world's total energy demands in 2030 with renewable energy alone would take an estimated 3.8 million wind turbines (each with twice the capacity of today's largest machines), 720,000 wave devices, 5,350 geothermal plants, 900 hydroelectric plants, 490,000 tidal turbines, 1.7 billion rooftop photovoltaic systems, 40,000 solar photovoltaic plants, and 49,000 concentrated solar power systems.

That's a heckuva lot of neodymium.

Unfortunately, "renewable energy" is a meaningless term with no established standards. Like an emperor parading around without clothes, it gets a free pass, because nobody dares to confront an inconvenient truth: None of our current energy technologies are truly renewable, at least not in the way they are currently being deployed.

We haven't discovered any form of energy that is completely clean and recyclable, and the notion that such an energy source can ever be found is a mirage.

The only genuinely sustainable energy scenario is one in which energy demands do not continue to escalate indefinitely.

As a recent commentary by Jane C. S. Long in Nature pointed out, meeting ambitious targets for reducing greenhouse gases cannot be accomplished with "piecemeal reductions," such as increased use of wind power and biofuels.

Long did the math for California and discovered that even if the state replaced or retrofitted every building to very high efficiency standards, ran almost all of its cars on electricity, and doubled its electricity-generation capacity while simultaneously replacing it with emissions-free energy sources, California could only reduce emissions by perhaps 60 percent below 1990 levels -- far less than its 80 percent target.

Long says reaching that target "will take new technology." Maybe so, but it will also take a new honesty about the limitations of technology. Notably, Long doesn't mention the biggest obstacle to meeting California's emissions-reduction goal: The state's population is expected to grow from today's 40 million to 60 million by 2050.

There are now seven billion humans on this planet. Until we find a way to reduce our energy consumption and to share Earth's finite resources more equitably among nations and generations, "renewable" energy might as well be called "miscellaneous."


195 comments:

John Day said...

Merry Christmas,
That Bill Bonner article about the anomalous nature of our current fossil fuel powered economic growth is a very nice find.
We must both look to the past, and be creative with the new information tools we now have in the sparer future. We went from cheap energy but limited information, and heirarchical informational distribution, to more expensive energy and cheap and vast multilateral information distribution in a couple of decades.
Now what can we make of it?

Patrick said...

"But what if it isn’t normal? What if it was a once-in-a-centi-millenium event, made possible by cheap energy?"
Bill Bonner is a smart man and I would say the answer to his question strongly leans towards the obvious or else why ask? Combine that insight (which is not new) with the propensity we have as a species to think in short time frames. Gimme a nickel for every talk show caller I've heard say, "It's always been that way," when talking about the most transitory of things, especially in the economic realm. Consequently we acclimated quickly to how cheap energy stocked our larder. It became invisible.

Well, everybody here knows that. But do we all know the implications of what Dawn Stover at the Bulletin of Atomic Scientist has said about renewable energy? I don't think so.
I used to worry that I didn't have the resources to have a collapse plan. I have progressed to stoicism. It seems the only stance to take in view of what's coming. By that I'm not suggesting I'm passive, far from it. But we've never been here on the downside before. All we really know is that it's not going to be like it was. And that getting there will mostly not be fun.

Unknown said...

Your reading of the ASDA report is off base. You really should have taken the time to go to the source and see how 'discretionary spending' is defined. It does not include 'feeding and clothing' (that's covered by 436 pounds cost of living per week) but rather leisure activities (holidays, cinema, eating out, etc.).

I like TAE, but it really weakens your credibility to lead your posting with such a skewed statistic.

Glennjeff said...

Yeah.

Played guitar in a Christmas Carols band last couple of weeks. It was so depressing listeng to all the self delusion and pumping oceans of children up on presents and lollies and stores full of goodies and consume, consume, consume, with the occasional mention of "of course it's about spirituality not materialism" lip service.

Santa Sanat Satan, pretty obvious really.

I got so depressed, like def con 5 suicidal. Thank god it's over, won't be doing that gig again. Have recovered.

Clif High's web spider report over at halfpasthuman.com suggests finance and politics are going to bounce off the asymptote by late March.

In Japan it's time for nuclear melt down babies to be born. Cliff thinks there are going to be 3 massive waves of radiation epidemics. We no longer eat seafood, oh well, one big chunk of the foodchain gone.

Clif also preicts a couple of REALLY nasty winter storms for the northern hemisphere. Methane belching up from the tundra, nasty bit of voodoo that one.

Given the gravity of our global situation one really has to find contentment or peace or whatever inside ones own head or consciousness space. I'll be doing lots of neurofeedback and meditation this year.

It's traditional to utter Christmas / New Year merriment, but that is not appropriate.

"Best of Luck for Christmas and 2012 TAEers",

seems vaguely realistic.

Nassim said...

Glennjeff,

It seems to me that if you volunteer for carols, you should know what to expect. We try to stay away from consumer and pseudo-religious nonsense over Christmas. Our sole extravagance was to go and watch Tintin in 3D today. Great movie, but it helps if you have read the picture books beforehand. We have had most of the much-loved collection for years. The books are much better than any movie. Periodically, I bring them out of the garage and they are avidly read by the kids.

Everyone has a different situation, but I think that what we are in the process of witnessing firsthand is really historic. Nothing like it has ever happened before. Of course, unlike American movies, it does have a tragic end - but that is what makes it so interesting. I also enjoy reading Dosteovsky so there must be something wrong with me. :)

Glennjeff said...

Nassim,

Actually never been exposed to church or carols at all in my 55 years on this planet. Did lots of thought experiments to pre-prepare me for it all but it was not sufficient. A chance to work with some very talented musicians.

Did you manage to avoid those golf ball sized hailstones that they had in Melbourne yesterday.

East coast retailers not happy with pre or post christmas numbers. Housing market crashing over east?, it's holding here in the far west for the moment, China looks like it's having a seizure which will be double plus ungood for Oz.

Nassim said...

Did you manage to avoid those golf ball sized hailstones that they had in Melbourne yesterday.

Glennjeff,

I think the hailstones fell around Sunshine which is 10Km away. However, we did watch the street fill up with water and I took some pictures. The lightning was spectacular and one bolt must have hit perhaps 100m away. Typical La Nina weather. The afternoon was sunny and we walked along the beach and watched the kitesurfers. A guy in my street imports these kites from China and gives lessons. He did a deal on Spreets and got 400 takers - mostly women offering lessons to their guys, or so he says.

Ilargi said...

Unknown said...
Your reading of the ASDA report is off base. You really should have taken the time to go to the source and see how 'discretionary spending' is defined.


Unknown, you may well be right in your interpretation of the ASDA report, intuitively it would make sense.

However, that would mean Paul Farrow's interpretation is dead wrong.

You bring up "discretionary spending", but that's not what he talks about. He talks instead about "disposable income". Which is defined like this, I'll do the whole Wiki thing:

Disposable income is total personal income minus personal current taxes.[1] In national accounts definitions, personal income, minus personal current taxes equals disposable personal income.[2]

Subtracting personal outlays (which includes the major category of personal (or, private) consumption expenditure) yields personal (or, private) savings.

Restated, consumption expenditure plus savings equals disposable income[3] after accounting for transfers such as payments to children in school or elderly parents’ living arrangements.[4]

Discretionary income is money you have after you've paid off all of your bills. Discretionary income is income after subtracting taxes and normal expenses (such as rent or mortgage, utilities, insurance, medical, transportation, property maintenance, child support, inflation, food and sundries, &c.) to maintain a certain standard of living.[5]

It is the amount of an individual's income available for spending after the essentials (such as food, clothing, and shelter) have been taken care of...


Obviously, the terms are easy to confuse. And Farrow may well have fallen victim to this. Still, he did use the term "disposable income". Whether I should hold the finance writers for the Telegraph in such low esteem that I need to read any and all reports they quote is another matter altogether.


.

TAE Daily said...

Number of first-time buyers plummets to lowest on record

(UK) "Around 187,000 people became first-time buyers in 2011, which was 7pc fewer than the preceding year and less than half the recent peak of 402,800 seen in 2006.

The figure from Halifax, the lowest recorded since it started tracking the data for the UK, will stoke concerns that a generation of Britons is locked out of the property market.

Hefty deposits mean first-time buyers are struggling to get on the housing ladder despite prices being at their most affordable in eight years, according to Halifax’s annual First-Time Buyer Review."

bosuncookie said...

ASDA Income Tracker Report

Alexander Ac said...

Ilargi,

one of the more depressing (if realistic) posts.

Is it because of Christmas? I read people are more susceptible to suicides during the Christmas...

For me, the best part of this excellent post is this:

We all will swear we love our children above anything in the world, and most would give their lives for their kids. And we honestly mean it when we say it.

The reality, however, is that we leave our children with a world that is polluted beyond recognition, in which species disappear at a rate 1000 times faster than before, and in which everything we’ve trained our kids for is vanishing right before their eyes.


That is my dillema: I want to have (at least 1) child/children, but by having them I will make all the other (financial/environmental) problems worse.

Yes, it is not about "learning" from history. It is about us. That is what we are. "Ready to destroy everything around and then ready to rationalize why it was necessary. But never ready to avoid that outcome."

Alexander Ac said...

Ah, and one more point on (having) children...

One theory sayz that people have children in order they had somebody, who will take care of them when they grow old.

The illusion of money gave us the feeling that we do not need that many children to take care of us after all...

ah right, not everything is about money (and self-interest), right? It is almost everything...

cheers,

Alex

Joe in NC said...

Spain's finance minister predicts downturn

.

Ilargi said...

bosuncookie said...
ASDA Income Tracker Report


Thanks. The disposable vs discretionary issue is clarified right on page 3:

ASDA:

"The average UK household had £161 a week of discretionary income in November 2011, 8.4 per cent less than a year before."

Which Farrow turned into this:

"The latest Asda Income Tracker has revealed that family spending power fell by £15 a week in November 2011, leaving the average UK family with £161 of weekly disposable income – 8.4 per cent down from this time last year.."

Not sure that everyone at ASDA itself is all that clear in the distinction, either, though, since on page 2, there's this quote from Andy Clarke, Asda President and CEO:

"2011 saw UK families face an unprecedented budget squeeze, with the cost of basics putting immense pressure on disposable income.

While they define their Asda Income Tracker very clearly as being a measure of discretionary income, and disposable income is not even mentioned anywhere.

ASDA also delves into the nonsensical CPI "inflation" numbers. In which it includes for instance alcohol prices, which are mostly set by taxes.

Think that one through, and you must conclude that it must be very easy for a government to control and lower "inflation". All it would take is lowering taxes.

Even better: from that logically follows that it must be equally easy to fight deflation: all that would be required is raising taxes (!!).

Here's hoping that one day people will understand why defining "inflation" as "rising prices" makes no sense whatsoever. The tax examples above should at least make them wonder, I should think.


.

--- said...

El G,

Re Russo... FYI

http://www.youtube.com/watch?v=VdY5ghcnaw0

TAE Daily said...

Bakken shale and U.S. oil production

"On Sept. 25, 2011 National Public Radio’s All Things Considered program had a segment consisting of what I considered highly questionable information concerning oil production in the Bakken Shale region of North Dakota and U.S. oil production in general. The segment indicated that U.S. oil production would rise dramatically in the foreseeable future due to new technological developments. Segments like this may play well to the public’s desire for optimism but they don’t present an accurate assessment of future oil production in the Bakken Shale region or in the U.S."

Jeffrey said...

I would like to revisit the subject of cash that I got such good information on here not long ago. I managed to open an online account with treasury direct. It took about twelve days to get after applying with having to send the notarized ID. Now I am trying to understand how purchase and redemption work. Let's suppose I buy one $25k 4 week treasury bill every week for a month. This would give incremental one week roll over so if and when I need cash I could redeem them in one week intervals. If I understand this right to get cash the bill would be sent to a bank as cash. Isn't the bank still the week link? Suppose we start to see a situation of real money contraction and bank failures and you decide you want to redeem you treasury bill as cash in hand. If even in supposed normal times banks/credit unions are actually just loaning you the amount stated in your account and do not have that cash on hand would you not be even less likely in an economic decline. If banks are in question could you still walk in after making an online transfer and get $25k to put in your pocket?

el gallinazo said...

Alexander AC

Regarding reproduction. At my age only sociopathic billionaires like Jim Rogers feel confident and entitled to reproduce. But my position from the standpoint of ethics is that every human being has the right to reproduce twice if they care to. If some choose to reproduce like rabbits, that should not affect your rights. I personally only chose the option once, but I am sure the gene pool will survive (perhaps with a infinitesimal decrease in the Planck Institute's estimate of Neanderthal contribution.) If I were younger, my primary concern would be with the responsibility and difficulties of keeping a child physically and mentally healthy during the coming die back.

I love Joe Bageant, and now that he is dead, it's always a treat to come across an unknown interview. Here is one: #149 on the C-Realm podcast - A Chemical Season of Mind.

I was shocked to read Brandon Smith comparing Wall Street and City bankers to Latin American vampire bats. Ethically, these bats stand head and wing above their financial counterparts, with an astounding willingness to share food with the less well off of their species.

Vampire bats

Vampire bats, which primarily feed on livestock or other vertebrates, must obtain a meal every 48-72 hours or face starvation. On a given night, there are individuals that do not successfully feed. Fortunately for them, a successful individual may regurgitate their meal for the unsuccessful individual. In order for this trait to have persisted through evolutionary time, a level of recognition is necessary among individuals. An altruistic bat may refuse to regurgitate blood for another bat that has not given blood to others in the past. The mechanism for this reaction is not known.

One should research the details of any being before defaming them with a comparison to these bankers. For example, rats show far more empathy for their fellows than do these bankers.

http://www.cbc.ca/quirks/media/2011-2012/qq-2011-12-10_01.mp3

Ash and NPR

NPR and PBS have become quite useless shill media. Or perhaps they were all along and I am becoming more aware. Just the sight of Jim Lehrer now makes me nauseous. Even with Pacifica, I've come to the conclusion that Amy Goodman, who is not the brightest bulb in the pack anyway, is a CIA asset via foundation funding in terms of her geopolitical reporting. The CIA doesn't really care about gay marriage. OTOH, we do have Bonnie Faulkner and Guns & Butter who compensates on the network for Goodman, though with less distribution.

el gallinazo said...

@Jeffrey

"If I understand this right to get cash the bill would be sent to a bank as cash. Isn't the bank still the week (sic) link?"

Yes it/they are. That is why it is advisable to have as many as three accounts, if possible, at different banks tied to td.gov. As to rolling your savings every week, I would think that a little extreme. That is what Backyard National is for. Could lead to making errors. Since 4 week bills don't pay any interest anyway, it might be more advisable to leave emergency money in C of I. Bills may be a little safer than C of I as your money is allocated to a specific instrument. Also, if you chose not to roll the bills automatically through td.gov, be sure to have them put into C of I, as the default is to send it back to your bank.

Gerald Celente thinks that there may be a national bank "holiday" in 2012, which means that the Fed or President would shut down all banks. Another reasons for Backyard National. Regarding getting your money out of the bank as currency, it would be advisable to discuss the exact situation with your bank before instructing td.gov to wire you the money and even get something in writing from the bank so they can't give you a blank stare when you come for your cash. Also be aware that banks must report cash transactions of $10,000 or greater, thus making you a (suspected?) criminal terraist, and some drop it to $2500 on their own discretion. I also understand that having a missing finger also makes you a terraist, so if you have that infirmity, be sure to wear gloves to the bank.

bluebird said...

So far, I have only setup my credit union for transactions with TreasuryDirect. I suppose I could take the time to setup another institution to access TD. But why couldn't I contact TD to send me a check? Then I could take it to a Federal Bank?

el gallinazo said...

"Nowhere to hide" Dept.

While surfing the other day, I came across a year old Howard Davidowitz interview. Davidowitz has such an entertaining style of presentation that one might watch him for that alone. Davidowitz was discussing how Internet shopping was cutting into bricks and mortar retailers, and was a major factor in increasing their failure rate as well as the looming disaster in CRE in general. He pointed out that since community banks are the primary funders of modest local commercial investment, such as strip malls, a lot of community banks may be going belly up shortly.

Also Max does an excellent half hour interview with Mish

http://www.youtube.com/watch?feature=player_embedded&v=IRxv3_rpKLU

Re the Joseph Stiglitz article in Vanity Fair, "The Book of Jobs"

While rarely individuals will win Nobel Prizes in two fields, Linus Pauling in Chemistry and Peace for example, I find it regrettable that the rules prohibit one from winning the prize twice in the same field. (Yeah, I know that Economics is not a real Nobel, but they have to follow the rules to keep up the pretense.) Because Stiglitz's article should make him eligible for a double win by its sheer stupidity. He is totally unaware of peak resources, misallocation of infrastructure, and how to fund his mega Keynesian stimuli in this age of sovereign debt collapse. Additionally, I find his theory of the collapse of the family farm precipitating the Great Depression as also highly suspect. Joe Bageant in his two books points out that the family farms he knew as a boy were 80+% cashless, relying on their own production and neighborhood barter. Admittedly the Appalachian family farm may not have represented the family farms nationwide. but with Stiglitz's general moronisitude, it makes you wonder. Bageant also did an entire chapter on exactly how the family farmer was converted by federal design into the industrial wage slave as he returned as a veteran from WW II. Who you gonna believe, a Nobel Prize winning economist or Joe Bageant? Tough call :-)

Bluebird

" But why couldn't I contact TD to send me a check?"

There is absolutely nothing that prohibits you from doing such. But unfortunately, I am 99% sure that they would not accede to your wishes. I believe all transfers in and out are electronic. That is one reason why you need at least one registered bank to sign up. I just did a rapid FAQ check at td.gov, and I found nothing to change that position. But it wasn't thorough. The easiest way to check it would be to call them up and ask them when it isn't a national holiday.

jimmyjames said...

Ilargi said..

Our societies are being increasingly gutted, cut to the bone. This is not something that will hit only some people, in some areas, it will affect everybody, and all over the western world.

War is simply too good a way to deflect attention from domestic mayhem, and solidly proven, for politicians to ignore.

*****************

Our societies have been in breakdown since WW#1
The removal of the gold standard and the roots of its demise-in order to fight the war to end all wars..dubbed "the great war"

Germany was not an aggressive nation prior to 1914-she was an industrial power house and she was kicking our asses-
We went to war over the sinking of the Lusitania--very fuzzy-very cloudy circumstances-if you read all eye witness accounts-

With the gold brake jammed-it left politicians/central bankers in control of the money supply and gave them full control of the herding effects that the availability of money supply/inflation/deflation has on societies-which are well known to some of us-

The mother was at one time the anchor of our societies-the one who held us all together and made us strong as a family unit-when only one person in the family was required to work in order for a family to have an adequate life style-

The removal of the power of the mother through such government encouraged fashionable fads such as woman's liberation/child care subsidies etc. and the need to have both parents working as constant inflation destroyed the buying power of our money unit and this theft via inflation eventually succeeded in destroying the family unit-

So if you wonder why we are where we are today-look no further than the loss of gold as the monetary anchor and the rest falls into place-
If this sounds sexist-it is not meant to be-

scandia said...

FYI...a heads up on a 3 part lecture series
" Meet Your Brain "
The Royal Institution Christmas Lectures-2011
( BBC )
Dec 27,28 & 29

Http://www.rigb.org/contentControl
?action=displayContent&id=0000000
5110

Jeffrey said...

Thanks El G
I guess what you do depends on ones view the stability of society and finance. I was looking at 4 week bills for their liquidity but from treasurydirect.gov "The Zero-Percent Certificate of Indebtedness ( or C of I) is intended to be used as a source of funds for purchasing eligible interest-bearing securities." This looks to be a kind of a cash holding bay. One could have some longer term treasury bills for more security than a bank but getting .005 interest and then some funds in C of I for more liquidity. In regards a bank holiday I don't live in a place where I can have a backyard national so I keeping much at home makes me nervous. I am wondering about safety deposit boxes. I wonder if there is any historical precedent for being barred access in a bank holiday? It seems a stretch to think you couldn't get access to your box even if the bank was not giving out cash.

Frank said...

JimmyJames

I can't tell where you got that bit about Germany/WWI, but the part about Germany's non-agression is at best highly questionable.

Once Prussia annexed the rest of Germany, it promptly set out to claim a place as at least a peer of Britain and France, never mind that their empires were built over more centuries than Germany could claim decades.

FWIW, my take is that then as now, the Kaiser's (now Bundesrepublic) government thought they deserved to be first among equals. Her (later his) Majesty's government's totally predictable response to this attitude pretty much guaranteed the eventual sinking of the German fleet.

I tend to agree that the west never recovered from WWI. But the deathdance started long before. Neither France nor Prussia was willing not to be number one, and the Brits quite deliberately sided with number two every time.

ogardener said...

Ilargi: "We're supposed to be celebrating the birth and the life of the man whose only ever act of aggression was he threw the money changers out of the temple, right? Just checking. It's just that I can't seem to find much of anything that reminds me of that."

Amen!

Nothing But Flowers

el gallinazo said...

jimmyjames

"The removal of the gold standard and the roots of its demise-in order to fight the war to end all wars..dubbed "the great war"

Huh? The USA entered WW I in 1917. FDR killed the gold standard within the USA in 1934 and Nixon for balance of trade in 1971.

I agree that the sinking of the Lusitania formed a weak pretext for entering the war. Since the Federal Reserve was (and is) a tool of the English banking cartel, and Wilson was obviously a tool of them also, Wilson entered the war, IMO, at their orders.

Jeffrey

Re safety deposit boxes. When banks go on "holiday" or go belly up they lock their doors. Really. Additionally, during the Great Depression, after the "holiday," SDB were often only allowed to be opened in the presence of a T-man observer. At that time they were looking for gold. But today, any serious cash would be ipso facto proof that you were a drug dealer or a terraist, and thus subject to confiscation without due process and possible shipment off to a FEMA camp. (You - they keep the cash.) Additionally, claims of theft of cash and valuables from SDB by private bank entrepreneurs are rising, with no chance of compensation. Best to Google your Great Depression history before making assumptions.

jimmyjames said...

Huh? The USA entered WW I in 1917. FDR killed the gold standard within the USA in 1934 and Nixon for balance of trade in 1971.

***************
I left you a detailed message on the last post-
I suggest you re-read it and do your own study-because-
You are wrong-

bosuncookie said...

The gift of attention and awareness is a two-edged sword, to say the least. Our ability to focus our attention gives us great analytical power, but the price we pay for this power is ignorance. It is impossible to both focus and see the big picture.

Thus, given that all causes and conditions bear an interdependence beyond our ability to see or calculate, ascribing one single cause in a generalization about the malaise of our society comes from an incredibly narrow focus.

Jimmyjames wrote: So if you wonder why we are where we are today-look no further than the loss of gold as the monetary anchor and the rest falls into place...

The presumptuousness of such a statement is incredible. It bespeaks a narrow focus on gold. I have no clue about the role of gold and finance as they are related to the so-called "breakdown of society."
However, as little as I know about that, I'm pretty sure it's not a straight line, one-to-one correspondence of cause and effect. this kind of analysis bespeaks a hubris that will lead to great suffering.

jimmyjames said...

he presumptuousness of such a statement is incredible. It bespeaks a narrow focus on gold. I have no clue about the role of gold and finance as they are related to the so-called "breakdown of society."
However, as little as I know about that, I'm pretty sure it's not a straight line, one-to-one correspondence of cause and effect. this kind of analysis bespeaks a hubris that will lead to great suffering.

*********
You think that because you're clueless as to the social effects that the availability of the money supply has on people in mass-

bosuncookie said...

I may be somewhat clueless about the social effects that the availability of the money supply has on people in mass,that is true. But I know enough to know that to ascribe that one cause to our present state of affairs is a very narrow focus that leaves out a multitude of possibilities.

The interdependent web of cause and effect is wider than either you or I are able to imagine.

Ash said...

jimmyjames,

Even if we accept your underlying argument to be true, i.e. central control of the money supply is the root of all our problems today (which is a very generous concession), we still cannot accept that a "gold standard" prevents that control or the effects of that control, because there are documented historical instances of both extreme monetary deflation and devaluation within nations on a PM standard, not to mention extreme sociopolitical upheaval and mass exploitation around the world.

jimmyjames said...

The interdependent web of cause and effect is wider than either you or I are able to imagine.

*************

At this point in time the world economies are our biggest problem and what i was trying to explain was that it was in fact the government/central bankers control over the money/credit supply and the effects of their inflationary policies ie: credit availability to anyone who could fog a mirror and lax regulations that has brought us to this point-

Do you not see that we have been in a credit mania?
Do you not see that walmart greeters have been living in $500K homes and driving brand new shiny cars-without a cent of their own money involved?
Do you think the outcome of this-will be thought of in the future as any different than we think of insanity of the people who were caught up the tulip mania?

The availability of our money/credit supply has everything to do with both finance and societies problems of today ie:
50 million on food stamps-millions more living in foreclosed houses-that would never have happened with a locked money supply-

There is no "anchor" on the money supply to stop us from reaching this point and now the only corrective mechanism is the market itself and it is screaming crash-

jimmyjames said...

Even if we accept your underlying argument to be true, i.e. central control of the money supply is the root of all our problems today (which is a very generous concession), we still cannot accept that a "gold standard" prevents that control or the effects of that control, because there are documented historical instances of both extreme monetary deflation and devaluation within nations on a PM standard, not to mention extreme sociopolitical upheaval and mass exploitation around the world.

************
What you're looking at are anomalies-
Yes the California and Klondike gold rushes caused massive inflation and the subsequent deflations-

Look at GB and the 100 years of gold standard that they enjoyed-

Nassim said...

One theory says that people have children in order they had somebody, who will take care of them when they grow old.

Alexander Ac,

I think that for the 99%, having children is a bit of insurance. While it might be "good for the planet" for each woman to have only one kid, that does not make much sense when others are having 3+ kids. It is a bit like The Tragedy of the Commons.

I feel quite sorry for all those lovely ladies in Paris who are still waiting for that amazing guy who will show up on a white horse and take them to his country estate. I think they will have to continue pretending that their cats are an adequate replacement for the real thing for a lot longer than they expect. It is another clear case of mass-delusion - inspired by TV, cinema and women's magazines. Obviously, what applies to Paris is to be found in many other places.

YesMaybe said...

Jimmyjames

Look at GB and the 100 years of gold standard that they enjoyed-

I take it you're not impressed by:

(a) The gold reserve requirement only applied to notes, not to bank deposits and loans, and so not in any real sense to the money supply.
(b) That convertibility was suspended on multiple occasions.

Additionally, I think it's beyond bizarre to refer to women's liberation as a fad.

Hombre said...

I alo would like to hear a competent response to Bluebirds 12:20 pm comment/question.
I am thinking of swapping some credit union based CD funds next month to TDirect... but... only if the T bills are quickly accessible in the case of a sudden banking crisis.
I am hearing that Treasury Direct bills are funneled through a bank or banking institution. ?

el gallinazo said...

Nassim

Yeah, I agree. We might as well put a gazillion cows on the common green and a gazillion kids on the common planet. The planet is totally phucked anyway. Why worry? The Tragedy of the Green ends in tragedy, and nature always bats last. As the world drifts back to one billion people (if the race is lucky), I'll only be around for part of Act I anyway.

When it comes to a battle between the big brain and the little brain, the little guy always wins.

el gallinazo said...

Hombre

The short answer is that yes, you must put your money in and and take it out through a bank. If you have more than one bank account, then you can have them all registered with td.gov. My experience has been that after I tell td.gov to wire my money to my bank, it is available in 24 hours or less.

What would you do if they mailed you a check instead? First it would take a lot longer. Then what would be your other option? Take it to your local payday lender loan shark to cash it?

But that is why I told Jeffrey that td.gov is no substitute for Backyard National. In theory, the money in your bank account can be stolen by the Jon Corzines of the world just as easily as a brokerage account. Oh yeah, I forgot. That money was insured by the CME /sarc

The idea behind using td.gov is that USG cannot go bankrupt and cannot afford to destroy the international boyz trust in treasury debt by Timmah blatantly stealing your individual account money and putting it in his personal Cayman account. The worst it can do is dilute the value of your money by running the presses at warp speed. We little lambs are hiding among the bison from the predators.

bluebird said...

If the USG is not supposed to go bankrupt, then I would think the 12 Federal Reserve Banks would also not go bankrupt. My thinking was to link up my TreasuryDirect account electronically with the FRB. But from my quick reading, it doesn't appear that we people can directly access the FRB.

jimmyjames said...

(a) The gold reserve requirement only applied to notes, not to bank deposits and loans, and so not in any real sense to the money supply.

***********
Unreal the lack of understanding about the gold standard here-

Everything was payable in gold-wages/consumer goods/import and export products were all settled in gold-

Loans were made against gold and the "depositors of gold would either agree to have their deposits loaned out for a risk premium ie: rate of interest or not-
Before the manipulation of gold standard-there was an amount of gold equal to the deposit and to the circulating currency-except for the agreed to risk premium and the risk of a decease in the collateral of the loan and if you lost-too bad-that is how the free market should work-
"Under true gold standard"

*************
(b) That convertibility was suspended on multiple occasions

************
Ummmm yeah-which is what I've been trying to get across here-it was the manipulation of the true gold standard which was supposedly protected by the constitution-it was instead ignored/violated and handed over to bankers and that is where it all started to unravel-
Do some research on more than just Google snips-

*************
Additionally, I think it's beyond bizarre to refer to women's liberation as a fad.

************
And what the hell do you call it?
Do you still see burn the bra slogans and the multitude of other break free from the home slogans?

I have no problem with the woman of a family being the bread winner and the husband being the mom-i do have a problem with government subsidized day cares raising our kids ie" "The State"
I have no problem with woman demanding equal rights and i agree they should have equal rights-

Don't you see-that by the power of bankers diluting the money supply that those fads were set in place by the Rockefeller's etc. of this world to encourage everyone to work while allowing the dilution/Inflation of money for their conquest to gain control of the money supply and mask the fact that it started to take everyone in the family to have a job in order to maintain the same level of lifestyle that took only one person to accomplish when money maintained its buying power with gold?
Then it took rising credit driven house prices to maintain a our lifestyles and the illusion of wealth as outsourcing quietly went viral and our wages stagnated and prices climbed-
Now we have a gutted industrial base-sky rocketing unemployment and our saviour-house prices are fu-ked for years
Ask yourself--
Who does Inflation benefit?
Certainly not the people-as should be evident by now-

Did you know that at the end of Britain's 100 years of gold standard that the price of goods and services remained basically stable throughout the whole 100 years and in that time all sorts of inventions and innovations came into being-

I did say my intention was not meant to be interrupted as sexist and since you don't understand what i was trying to drive at-you did take it as exactly that-sorry-

peripety said...

" ... we still cannot accept that a "gold standard" prevents that control or the effects of that control, because there are documented historical instances of both extreme monetary deflation and devaluation within nations on a PM standard"

I think you have Nixon's ear on that statement; his mouth would add that sticks and stones beat the honest curses of gold.

'Due to the excess printed dollars, and the negative U.S. trade balance, other nations began demanding fulfillment of America's "promise to pay" – that is, the redemption of their dollars for gold.'

A gold reserve would work but only where there are honest brokers. Not where the politicians run about proclaiming they are not crooks.

el gallinazo said...

Bluebird

"But from my quick reading, it doesn't appear that we people can directly access the FRB."

How about getting chartered as The Bluebird of Happiness National Bank. I'll set up an account with you.

"The mythology of the bluebird of happiness has deep roots that go back thousands of years. Indigenous cultures across the globe hold similar myths and beliefs about the bluebird. It is a widely accepted symbol of cheerfulness, happiness, prosperity, hearth and home, good health, new births, the renewal of springtime, etc. Virtually any positive sentiments may be attached to the bluebird."

jimmyjames said...

A gold reserve would work but only where there are honest brokers. Not where the politicians run about proclaiming they are not crooks.

************
Cool- someone gets it-

Referring to Nixon as ending the gold standard is akin to saying wet sidewalks cause rain-

Yet even as battered as gold was during Nixons reign of terror it still "worked" it threw the US into deflation because of the French rightful demands for gold only payment under the then "World gold agreement" nit a gold standard by any means-but still-gold castrated the USD and gold became the only form of currency payment for foreign debts-

Nixon defaulted on gold payment obligations and the foreign governments started dumping USD's in mass-they bought gold/oil/commodities and caused the stagflation of the 70's as the run on the dollar weakened it-
Gold prices went through the roof and then enter one Paul Volcker who jacked rates up to 20+% which lured everyone back into US treasuries and the USD strengthened as money flowed back out of commodities and into the high yield debt paper and finally prices came down-
Volcker is credited with taming Inflation--BS-
Volcker saved the USD that's all-

YesMaybe said...

Jimmyjames:


Before the manipulation of gold standard-there was an amount of gold equal to the deposit and to the circulating currency-except for the agreed to risk premium and the risk of a decease in the collateral of the loan and if you lost-too bad-that is how the free market should work-

Fractional reserve banking is not now, and wasn't in 19th century Britan, gold deposits + currency. This is hardly a minor point.

(b) That convertibility was suspended on multiple occasions

************
Ummmm yeah-which is what I've been trying to get across here-it was the manipulation of the true gold standard which was supposedly protected by the constitution-it was instead ignored/violated and handed over to bankers and that is where it all started to unravel-
Do some research on more than just Google snips-


I wrote this directly in response to, and quoting, what you said about Britain having the gold standard for 100 years. In Britain they suspended convertibility multiple times in that period. You seem to be equivocating between what Britain had and your own ideal of a gold standard. I have no idea what you're talking about with regard to the gold standard and the constitution, we were talking about britain.

And regarding sexism (which I didn't accuse you of), I'll drop it as off-topic.

AL said...

Anyone care to comment on chart #3 in the piece by James Pethokoukis? I have indeed been under the impression that real incomes for most folks have not risen since the early 70's and that they/we have been making up for that inconvenient reality by blowing our oft-mentioned credit bubble since then. Have I been duped by those scurilous liberal economists?

Ash said...

jimmyjames,

You are repeating facts that most here are very well aware of, as we have discussed them numerous times before. The unprecedented and unrestricted creation of credit money over the last 100 years, and especially the last few decades, is a central component of the financial analysis here at TAE. Still, you fail to understand why we are taking issue with you when you say this:

"So if you wonder why we are where we are today-look no further than the loss of gold as the monetary anchor and the rest falls into place-"

Some may say that the above displays arrogance, but I am simply saying it is a false assertion. A typical libertarian fallacy that confuses a symptom of broader and more foundational forces for a root cause. FDR's revocation of the domestic gold standard and Nixon's revocation of the international gold standard in the debt-dollar reserve system were natural outcomes in the evolution of the industrial capitalist system.

It was the system of private property, private markets, never-ending growth and profits that made gold unsuitable as a monetary backing for the elite class. It was not just the individual greed of politicians and bankers who wanted to control the money supply and expand the power of the state. Again, those are merely symptoms. And all of this ignores the broader and more severe energy/envrionmental issues we face due to a combination of our socioeconomic/political/cultural environment and human instinctual behavior, which includes aspects of both greed and malice.

A gold standard has never, and could never adequately resolve those issues in a complex, global society such as the one that was emerging at the turn of the 20th century. So you have made valid points, none of which I suspect is news to anyone here, but your emphasis on a gold standard as the deus ex machina to all the predicaments in an evolving story of humanity is very misguided and misleading.

YesMaybe said...

AL:

I think what hasn't risen is real wages (income per hour worked), but Americans have notoriously been working more and more hours, at least up until the recent crisis.

jimmyjames said...

I have no idea what you're talking about with regard to the gold standard and the constitution, we were talking about britain.

*********
Actually we were talking about gold standard period-i only referenced Britain because of the time length-but anyway-

*********
Britain they suspended convertibility multiple times in that period.

***********
What period?
The redemption refusals were not made under true gold standard-they happened prior to true gold standard-
Prior to true gold standard was bi-metalisim which actually worked until the government artificially locked the ratio of silver to gold which had prior been allowed to float against locked gold-the ratio was locked at 15-1 which eventually caused a massive inflation as silver having a guaranteed price came into the market in great quantities because of it abundance and actually weakened gold-

Can up point out in the time frame of 1844 to WW#1 where convertibility redemption's were refused?

************
The 1819 Act for the Resumption of Cash Payments set 1823 as the date for resumption of convertibility, reached instead by 1821. Throughout the 1820s, small notes were issued by regional banks, which were finally restricted in 1826, while the Bank of England was allowed to set up regional branches. In 1833, however, the Bank of England notes were made legal tender, and redemption by other banks was discouraged. In 1844 the Bank Charter Act established that Bank of England Notes, fully backed by gold, were the legal standard. According to the strict interpretation of the gold standard, this 1844 act marks the establishment of a full gold standard for British money.

http://en.wikipedia.org/wiki/Gold_standard

Joe in NC said...

El G,

Yeah, I guess Stiglitz was flaming Keynes per the Vanity Fair piece. The main problem I have is no mention of where the funding is supposed to come from. Sadly, I have to admit I was buying into his theory of the collapse of the family farm precipitating the Great Depression. I've heard many theories on the cause of the GD but...??? Do you have a theory on this? Or a "favorite" from someone else?

Steve From Virginia said...

@al:

- James Pethokoukis' charts are misleading or promoting an agenda. The first is a chart but unemployment isn't Obama's fault. Obama simply considered our 'crisis' to be a typical post WWII downturn caused by high interest rates and excess capacity. He was right ... he just didn't realize how high the rates (+ oil prices) and how much overcapacity (China).

The second chart is silly b/c is shows 'negative real unemployment' from 2000 to 2004!

The third chart doesn't index for inflation since 1980.

The net worth distribution can be found @ Wikipedia: http://en.wikipedia.org/wiki/Distribution_of_wealth

The next blames Obama again (whilst the GOP is in charge of something, right?) while the final chart assumes to instruct what will happen decades in the future.

Disposable as mendacious.

"Everything was payable in gold-wages/consumer goods/import and export products were all settled in gold-"

The idea of 'consumer goods' is a post-war phenomenon that would not be possible without debt money in fact industrialization and debt money are synonymous, one cannot exist without the other (due to overcapacity and the need to create synthetic demand).

'Everything' was certainly NOT payable in gold: silver was used for smaller transactions along with paper bills and notes: in the US before the Depression there were at least five different forms of currency in the US: gold specie, silver specie, discountable Treasury bills (at the Federal Reserve), Federal Reserve notes and private bank issues. There were also special gold 'certificates' and letters of credit. All of this was in addition to 'ordinary' credit, demand- and time deposits (checks). Money is whatever comes to hand, my boy!

There is nothing special about monetary gold, it cannot do anything by itself but sit there like a lump.

Finally, ours is an energy crisis in drag. Problem is at end of your driveway.

jimmyjames said...

Some may say that the above displays arrogance, but I am simply saying it is a false assertion. A typical libertarian fallacy that confuses a symptom of broader and more foundational forces for a root cause. FDR's revocation of the domestic gold standard and Nixon's revocation of the international gold standard in the debt-dollar reserve system were natural outcomes in the evolution of the industrial capitalist system.

**********
There was no Gold standard during FDR's term as president-which is what I've proved here many times-so to reference either FDR or Nixon as ending gold standard is wrong-

They were not eventual outcomes of the evolution of the industrial capital system-

They were outcomes of the tampering with the gold standard in 1922 and to gloss over that "fact" is where so many err and come up with false conclusions--

Gold cannot fix what's happened-it was never meant to fix anything economically speaking-it was simply meant to be an an anchor on the availability of money supply--

As Von Mises said-no supply of money is too small providing a free market is allowed to adjust to that fixed supply-

Inflation and Deflation are natural market forces based on the balance of trade-with gold standard-

Gold was simply a self correcting and self adjusting money anchor mechanism- no more-no less-

el gallinazo said...

AL and YesMaybe on chart #3

When I shake hands with an economist from the U of Chicago or one affiliated with the American Enterprise Institute, afterwards I count my fingers. If you trace the graph link back from TAE page, it goes back to a simplistic PowerPoint presentation without any sort of footnotes or citations for the data. Furthermore, the label on the ordinate states that the data was CPI corrected and that it was a median, but it does not say a median income of whom. Perhaps wombats or echidnas. Or perhaps households. If the latter, it then brings in the question of the median number of people including wives and children who were working in a household over the years graphed to account for the increase. But my doubts are probably unwarranted and the graph is undoubtedly a fair and accurate representation of the data for median per capita income. Would the AEP or a U of Chicago Pinochetista deliberately obfuscate such data?

Well try another experiment. Since the PP presentation is all on one web page, plug a page find function in for individual, per capita, and household. The results: 0, 0, 14.

bosuncookie said...

jimmyjames wrote:

At this point in time the world economies are our biggest problem.

Not everyone would agree with this assertion. In fact, the present state of the world economies may merely be a symptom of other fundamental problems of equal or greater significance. Problems are symptoms and symptoms are problems.

Interdependence. The web of cause and effect is ultimately beyond our unraveling. The causes and conditions of any signal event are too wide, too interconnected, and too unavailable to our limited perceptual apparatus to speak with certainty. Which is more important... AGW or the collapse of the interdependent financial system? Contraction due to peak oil or the increase in the rate of species extinction? The Fukushima disaster and its implications or GMOs? The globalized financial/political complex commandeered by the oligarchs or the advanced pollution of vast stretches of the world's oceans? The continued subjection of the population to mind-numbing schooling or the deforestation of the planet?

What is clear is what is most important to you, jimmyjames: the role of gold in finance. But don't presume to speak for anyone else but yourself about what is our "biggest problem," thank you. Again, labeling this as our "biggest problem" speaks of a narrow-minded hubris.

Not that I lose sleep at night over all of those biggies, and more. I think about them, and I talk about them, but mostly what I do is act at the local level in my tiny little sphere of influence. I grow things; I try to wake people up to the virtues of reliance upon community; I try to build bridges between activist groups; and I preach the value of introspection, contemplation, and silence.

And I try to be absolutely clear about the extent of my knowledge. That's why I mostly lurk here. I'm pretty clear that I don't know very much about what is usually discussed here. I listen, I learn. I rarely speak, and then, only about something that I have experienced first hand.

But what I don't do very often is presume. Methinks that jimmyjames presumes much.

YesMaybe said...

Jimmyjames

OK, well, my comments were on your use of Britain as an example of having the gold standard for 100 years.

Anyway, to answer your question, yes, I can give you the times. From http://en.wikipedia.org/wiki/Bank_Charter_Act_1844

"Although the Act required new notes to be backed fully by gold or government debt, the government retained the power to suspend the Act in case of financial crisis, and this in fact happened several times, in the years 1847, 1857, and in 1866, during the Overend Gurney crisis."

The whole story of England's financial system at the time is discussed in more detail in Bagehot's Lombard Street.

Note that the crises which Bagehot discusses and which caused convertibility to be suspended were possible because the system was of fractional reserve banking, with the reserves held not being sufficient to cover even half of the claims on them. Again, see his book for details.

YesMaybe said...
This comment has been removed by the author.
YesMaybe said...

El G:

What can I say, I'm too gullible/sloppy.

Also, you put into words (but better than I would have) pretty much what I thought of the Stiglitz piece when I read it.

Ash said...

jimmyjames,

"There was no Gold standard during FDR's term as president-which is what I've proved here many times"

See, there's your problem. You're confusing your own utopian sense of what a "gold standard" is and should be for "proof" that FDR and Nixon did not play any role in ending what most would call a "gold standard" for money. You haven't proved anything, only told us your misleading opinion on how to define "gold standard".

"As Von Mises said-no supply of money is too small providing a free market is allowed to adjust to that fixed supply-

Inflation and Deflation are natural market forces based on the balance of trade-with gold standard-"

Mises was wrong, and some analysts from the Austrian school recognize that. The industrial/financial capitalist system requires increasing growth in economic activity and therefore the money supply over time. An adequately policed and enforced gold standard does not allow that. If you really want a return to what you would call "free market capitalism" at anything resembling the scale of economic activity that we have today, then you should not be advocating for a gold standard, because it would surely be the final nail in its coffin.

If you are not familiar with FOFOA, I recommend you read some of his articles on this issue. He is a very astute student of monetary history and is heavily influenced by the Austrian school of economic thought, yet he still heavily advocates against a "gold standard". In fact, he suggests that such a standard is not sustainable in our current environment and therefore free market forces will lead us to a new equilibrium in which gold serves exclusively as a store of value and global asset reserve that floats freely against fiat currencies, which are the exclusive mediums of exchange. I completely disagree with this prediction, but that's a whole different story.

If you are interested in reviewing his thoughts on money (and gold), I would just go ahead and start with this behemoth of a post, called Moneyness. It includes a nice little debunking of MMT as well. If you'd rather not because its way too long, that's understandable, and I can find some relevant quotes and post them tomorrow.

jimmyjames said...

The idea of 'consumer goods' is a post-war phenomenon that would not be possible without debt money in fact industrialization and debt money are synonymous, one cannot exist without the other (due to overcapacity and the need to create synthetic demand).

*******
Such BS-

England's industrial revolution happened under a gold standard-

In the 1850s, the industrial revolution was taking place in England. ... During the gold standard period, (i) prices were stable, and (ii) so little gold actually moved

http://www2.econ.iastate.edu/classes/econ355/choi/golds.htm

***************
'Everything' was certainly NOT payable in gold: silver was used for smaller transactions along with paper bills and notes: in the US before the Depression there were at least five different forms of currency in the US: gold specie, silver specie, discountable Treasury bills (at the Federal Reserve), Federal Reserve notes and private bank issues. There were also special gold 'certificates' and letters of credit. All of this was in addition to 'ordinary' credit, demand- and time deposits (checks). Money is whatever comes to hand, my boy!

***********
Well "boy" you are only halfassed right-

Silver was coinage and needed no backing unlike paper Gold certificates/USD's which were redeemable in "gold" and yes money can be anything-

But please get this--

There was no Fu-ken Federal Reserve under Gold Standard-so "no" FRN's

The Fed was formed in 1913-
The US went off Gold standard in 1914 and there was still a gold standard for that one year until this--

"By World War I, most countries were on the gold standard. Despite a few recessions, it worked pretty well until the costly war began.

Between 1914-1919, most countries suspended the gold standard so they could print enough money to pay for their military involvement.

http://useconomy.about.com/od/monetarypolicy/p/gold_history.htm

jimmyjames said...

See, there's your problem. You're confusing your own utopian sense of what a "gold standard" is and should be for "proof" that FDR and Nixon did not play any role in ending what most would call a "gold standard" for money. You haven't proved anything, only told us your misleading opinion on how to define "gold standard".

*******
Only in your mind does it matter what "most people" called a gold standard-most people are wrong-including you-

**********

"As Von Mises said-no supply of money is too small providing a free market is allowed to adjust to that fixed supply-

Inflation and Deflation are natural market forces based on the balance of trade-with gold standard-"

Mises was wrong, and some analysts from the Austrian school recognize that.

**********
This is about as simple as i can make it for you-eg:

You and i live in different countries-
I work for $1/hr--you work for $20/hr-
We both stop at the pub after work for a beer-
My beer costs 25 cents-your beer costs $5
How are you any richer or better off than i am?

How is the velocity of my 25 cents any less than the velocity of your $5 when either one can purchase the same amount of goods and services?

And as far as FOFO goes-Gonzo Lira has his head up his ass-

Glennjeff said...

jimmyjames told ElGal that "HE IS WRONG"

Ah Ha! Such certainty is a cue for me to switch off jimmy.

IMNSHO there are no absolutes, but whatever.

peripety said...

"You are repeating facts that most here are very well aware of, as we have discussed them numerous times before."


That is right Ash, Jimmyjames fails to realize that this is not a site for economic discussion but for the propagandizing of a particular view of economics.

jimmyjames said...

That is right Ash, Jimmyjames fails to realize that this is not a site for economic discussion but for the propagandizing of a particular view of economics.
*******
Fair enough-

The troll will leave you alone to theorize about whatever-

YesMaybe said...

jimmyjames

Fair enough-

The troll will leave you alone to theorize about whatever-


Before you go, can you confirm that you learned here about convertibility in Britain having been suspended several times during the gold standard period you brought up?

Because arguing other people are wrong but not acknowledging your mistake when someone points out some facts which contradict what you said is pretty trollish.

Ash said...

jimmyjames,

"This is about as simple as i can make it for you-eg:"

As I implied before, your erroneous presumption that no one here understands how gold can theoretically act as a stabilizing mechanism for international trade is blinding you to the larger issue involved. Capitalism requires certain large economies to continuously run trade deficits if the system as a whole is to grow, i.e. a permanent imbalance of trade and standards of living within the system, and that was a big factor contributing to the "failure" of the international gold standard.

"And as far as FOFO goes-Gonzo Lira has his head up his ass-"

What Gonzalo Lira has to do with any of this, I do not know. His arguments are completely different from those of FOFOA. Not to worry, though, because I'll indulge you with some further explanation tomorrow.

@Peripety

That is right Ash, Jimmyjames fails to realize that this is not a site for economic discussion but for the propagandizing of a particular view of economics

None of this qualifies as "economic discussion" for you? My, what high standards.

Glennjeff said...

peripety,

I thought this was a self organizing collective or community. Then again, even with an IQ of 150, I'm not the brightest spark usually. (that comment was a cheat in gamer parlance)

jimmy,
chill a bit man, reiteration is learning reinforcement, if one comes on too hard it tends to generate perfectly natural defensive mechanisms within the hive.

Do you folks grow fruit and veg'? Very rewarding.

Nassim,
Yes, a good year for weather (rain) here.
We've got more food than we can give away from a 1/8 acre block.

SecularAnimist said...

Between 1914-1919, most countries suspended the gold standard so they could print enough money to pay for their military involvement.

On the contrary, Polanyi’s argument is relevant to the current global situation precisely because he places the rules governing the world economy at the center of his framework. His argument about the rise of fascism in the interwar period pivots on the role of the international gold standard in constraining the political options that were available to actors within countries. To understand this part of Polanyi’s argument requires a brief excursion into the logic of the gold standard, but this excursion is hardly a digression, because the underlying purposes of the gold standard continue to exert a powerful influence on contemporary market liberals. Polanyi saw the gold standard as an extraordinary intellectual achievement; it was an institutional innovation that put the theory of self-regulating markets into practice, and once in place it had the power to make self-regulating markets appear to be natural.

Market liberals wanted to create a world with maximal opportunities to extend the scope of markets internationally, but they had to find a way that people in different countries with different currencies could freely engage in transactions with each other. They reasoned that if every country conformed to three simple rules, the global economy would have the perfect mechanism for global self-regulation. First, each country would set the value of its currency in relation to a fixed amount of gold and would commit to buying and selling gold at that price. Second, each country would base its domestic money supply on the quantity of gold that it held in its reserves, its circulating currency would be backed by gold. Third, each country would endeavor to give its residents maximal freedom to engage in international economic transactions.

The gold standard put a fantastic machinery of global self-regulation into place. Firms in England were able to export goods and invest in all parts of the world, confident that the currencies they earned would be as “good as gold.” In theory, if a country is in a deficit position in a given year because its citizens spent more abroad than they earned, gold flows out of that country’s reserves to clear payments due to foreigners.22 The domestic supply of money and credit automatically shrinks, interest rates rise, prices and wages fall, demand for imports declines, and exports become more competitive. The country’s deficit would therefore be self-liquidating. Without the heavy hand of government, each nation’s international accounts would reach a balance. The globe would be unified into a single market place without the need for some kind of world government or global financial authority; sovereignty would remain divided among many nation-states whose self-interest would lead them to adopt the gold standard rules voluntarily.

CONSEQUENCES OF THE GOLD STANDARD

The gold standard was intended to create an integrated global marketplace that reduced the role of national units and national governments, but its consequences were exactly the opposite. Polanyi shows that when it was widely adopted in the 1870s, it had the ironic effect of intensifying the importance of the nation as a unified entity. Although market liberals dreamed of a pacified world in which the only international struggles would be those of individuals and firms to outperform their competitors, their efforts to realize these dreams through the gold standard produced two horrific world wars.

The reality was that the simple rules of the gold standard imposed on people economic costs that were literally unbearable.

SecularAnimist said...

cont

It was not just workers and farmers who found the costs of this type of adjustment to be high. The business community itself could not tolerate the resulting uncertainty and instability. Hence, almost as soon as the gold standard mechanism was in place, entire societies began to collude in trying to offset its impact. A first recourse was for countries to increase their use of protective tariffs for both agricultural and manufactured goods. By making trade flows less sensitive to price changes, countries could gain some degree of greater predictability in their international transactions and be less vulnerable to sudden and unanticipated gold outflows.

A further expedient was the rush by the major European powers, the United States, and Japan to establish formal colonies in the last quarter of the nineteenth century. The logic of free trade had been strongly anticolonial, because the costs of empire would not be offset by corresponding benefits if all traders had access to the same markets and investment opportunities. But with the rise of protectionism in international trade, this calculation was reversed. Newly acquired colonies would be protected by the imperial powers’ tariffs, and the colonizers’ traders would have privileged access to the colonies’ markets and raw materials. The “rush to empire” of this period intensified the political, military, and economic rivalry between England and Germany that culminated in the First World War.

For Polanyi the imperialist impulse cannot be found somewhere in the genetic code of nations; rather, it materializes as nations struggle to find some way to protect themselves from the relentless pressures of the gold standard system. The flow of resources from a lucrative colony might save the nation from a wrenching crisis caused by a sudden outflow of gold, and the exploitation of the overseas populations might help keep domestic class relations from becoming even more explosive.

Polanyi argues that the utopianism of the market liberals led them to invent the gold standard as a mechanism that would bring a borderless world of growing prosperity. Instead, the relentless shocks of the gold standard forced nations to consolidate themselves around heightened national and then imperial boundaries. The gold standard continued to exert disciplinary pressure on nations, but its functioning was effectively undermined by the rise of various forms of protectionism, from tariff barriers to empires. And yet even when this entire contradictory system came crashing down with the First World War, the gold standard was so taken for granted that statesmen mobilized to restore it. The whole drama was tragically played out again in the 1920s and 1930s, as nations were forced to choose between protecting the exchange rate and protecting their citizens. It was out of this stalemate that fascism emerged. In Polanyi’s view the fascist impulse—to protect society from the market by sacrificing human freedom—was universal, but local contingencies determined where fascist regimes were successful in taking power.

jimmyjames said...

Before you go, can you confirm that you learned here about convertibility in Britain having been suspended several times during the gold standard period you brought up?
************
I answered to your question on convertibility and pointed out to you that the "true gold standard" ie: convertibility was established in 1844 and lasted until WW 1-
Prior to that period was only a quasi gold standard-

In 1844 the Bank Charter Act established that Bank of England Notes, fully backed by gold, were the legal standard. According to the strict interpretation of the gold standard, this 1844 act marks the establishment of a full gold standard for British money.

*************

Capitalism requires certain large economies to continuously run trade deficits if the system as a whole is to grow, i.e. a permanent imbalance of trade and standards of living within the system, and that was a big factor contributing to the "failure" of the international gold standard.

************
Keynesian capitalism requires continuous trade deficits-

Gold standard corrected these trade imbalances through inflation and deflation-

For eg:
If a country was productive and had a high export demand-gold would flow into the country as more goods were sold(inflation) as more gold flowed in productive companies would benefit-wages would increase-prices would rise-eventually to the point that foreign buyers would look elsewhere for cheaper products-
As exports decreased the trade balance would shift and eventually turn negative as demand dropped off and gold would start being shipped out as trade diminished (deflation) -plants would close-unemployment would rise prices/wages would fall-products would become cheaper until eventually foreign buyers would return and the process would start all over again-
During the deflation and unemployment-buying power would increase because the value of the money (gold) remained constant and deflations downward pull on prices would actually compensate for the lower wages-

Gold standard was not a panacea-it was a smoothner and a self correcting mechanism -not perfect because nothing is-but it was much better than central banks trying to be "the market" by blowing bubbles with interest rate adjustments and encouraging greedy bankers to crank out credit to unworthy borrowers-as we've seen all the boom bust credit cycles since they came into being-

I thank you for allowing this discussion to continue-

I have read some of fofoa's stuff and i thought you were referring to gonzo lyras BS theory on "free gold"

Please read this explanation on GS-

http://www.acting-man.com/?p=102

YesMaybe said...
This comment has been removed by the author.
YesMaybe said...

jimmyjames

See my comment above, at 10:24 pm. In case you missed it before, that is.

YesMaybe said...

jimmyjames

Also, the boom-bust cycle was around in the 19th century as well, both in the US and in Britain (in spite of the 1944 charter act).

http://en.wikipedia.org/wiki/List_of_banking_crises#19th_century

It didn't come into being as a result of the gold standard being abandoned before WWI.

jimmyjames said...

Overend Gurney's monetary difficulties increased, and it requested assistance from the Bank of England, but this was refused. The bank suspended payments on 10 May 1866. Panic spread across London, Liverpool, Manchester, Norwich, Derby and Bristol the following day, with large crowds around Overend Gurney's head offices at 65 Lombard Street.[5] The failure of Overend Gurney was the most significant casualty of the credit crisis.[6] The bank went into liquidation in June 1866.[7] The financial crisis following the collapse saw the bank rate rise to 10 per cent for three months. More than 200 companies, including other banks, failed as a result.[8]


See my comment above, at 10:24 pm. In case you missed it before, that is.

**********
Yes i did miss it-

****************
Overend, Gurney & Company was a London wholesale discount bank, known as "the bankers' bank", which collapsed in 1866 owing about 11 million pounds, equivalent to £981 million at 2008 prices


"Although the Act required new notes to be backed fully by gold or government debt, the government retained the power to suspend the Act in case of financial crisis, and this in fact happened several times, in the years 1847, 1857, and in 1866, during the Overend Gurney crisis.

**********

A private company involved in a fraud which caused panic in the markets-the suspension of convertibility to my understanding was only to those investors who took the risk and lost-
*******

The directors of the company were tried at the Old Bailey for fraud based on false statements in the prospectus for the 1865 offering of shares. However, the Lord Chief Justice Sir Alexander Cockburn said that they were guilty only of "grave error" rather than criminal behaviour, and the jury acquitted them. The advisor was found to be guilty.

*******

3 years of hiccups out of 100 years-not so bad and i thank you for pointing those facts out-i will do some further study on that subject-

*************
Also, the boom-bust cycle was around in the 19th century as well, both in the US and in Britain (in spite of the 1944 charter act).

********
As i pointed out above-there were anomalies such as the gold rushes that flooded the system with new gold and in the end caused panics-

Could this happen again?
Sure it could-but i would rather take my chances on a stable money supply that would allow protection of retaining its value-then to be at the mercy of a bunch of bond and currency traders like we are now-

Glennjeff said...

Jimmy

"Could this happen again?
Sure it could-but i would rather take my chances on a stable money supply that would allow protection of retaining its value-then to be at the mercy of a bunch of bond and currency traders like we are now"

The punctuation mark warrented the readers persistence.

Personally, I think the money problem is a reflection of a psycho-spiritual (neuro-physiological) maladaption of our species, succintly rendered by Nate Hagens (paraphrase) "We are not short on resources, but long on expectatons"

YesMaybe said...

jimmyjames

The business cycle is approximately 10 years. It's not a matter of 3 years in 100. And, no, when the bank of england suspended convertibility it was for everyone.

Anyway, the facts are out there and there are plenty of resources, including Polanyi's The Great Transformation which is about this period and has been mentioned above. I recommend you get started by reading through each of the wikipedia articles about those panics and see what 'anomalies' may have caused each of them. Then compare that with the recessions in the 20th and 21st centuries and ask yourself if there's really such a big difference.

Don't take this the wrong way, but based on what you've written here in discussions with me and other contributors, I get the impression you're heavy on austrian theory and light on history and perspective. Anyway, I'm not going to go on, take it for what it's worth, if it's worth anything.

jimmyjames said...

jimmyjames

The business cycle is approximately 10 years. It's not a matter of 3 years in 100. And, no, when the bank of england suspended convertibility it was for everyone.
********
Can you prove that-i certainly did not read it that way-

**********
Don't take this the wrong way, but based on what you've written here in discussions with me and other contributors, I get the impression you're heavy on austrian theory and light on history

*******

I do subscribe to the Austrian theory-but what has that to do with the historical facts on various money supplies throughout the ages?

I would not be throwing out insults to people if all i had provided for evidence is wiki blurbs of questionable interpretations of facts-

Try to enlighten yourself and re-read all the links i have provided since yesterdays and today's posts-

SecularAnimist said...

With all the troubling trajectories, burgeoning crises and increasing social dissatisfaction of present day industrial CAPITALIST society. Suggesting a gold standard as a solution to anything, seems, I don't know, just a bit out of touch with reality. Good Grief.

Capitalism is way past its shelf-life and starting to stink

Nassim said...

A new study published in the peer-reviewed journal International Journal of Health Services alleges that 14,000 people have already died in the United States due to Fukushima.

Study: Fukushima Radiation Has Already Killed 14,000 Americans

Alexander Ac said...

El G and Nassim,

thanks. For those interested here are

50 doomiest stories of 2011

Among them: ocean life decline, soil erozion, frogs decline, bees decline, extreme drought, overpopulation, etc...

Alex

Hombre said...

El G - Thanks for the info.

I hope all these very intelligent posters assaying gold will get around to sharing some more informed speculation as to how and where we go from here.
If we can salvage enough pieces from falling off this debt cliff... THEN... it will be time to discuss PM standards and currency methods.
I do have a small stash of 90% silver coinage of a similar type which has well served troubled peoples in many eras and countries in economic chaos. I recommend that as a bit of local bartering insurance.

Stoneleigh said...

A gold standard is no panacea. During expansionist times, people will circumvent it with a tower of human promises (credit). During contractionary times gold will be hoarded by the powerful and almost nothing will circulate. Rules may appear to confer stability for a while, but one cannot rely on them when it actually matters most, because rules will either be abandonned or rewritten for the benefit of the powerful at such times.

Rules that appear successful are a reflection of stability rather than a cause of it. When stability disappears, so will the rules associated with it. The new rules of contractionary times will be about forcing the losses into the laps of the powerless and maintaining privilege for the few. Those rules will also fail at the end of a pitchfork at some point. This is the larger-scale cycle that plays out over decades and centuries.

See my take on this from last year: The Infinite Elasticity of Credit.

TAE Daily said...

@Glennjeff

Not acceptable for common usage here.

___________

LTRO "Bazooka" Is Epic Disaster As Banks Scramble To Redeposit "Free Carry" Cash With ECB, Lose Money On "Inverse Carry"

"When on Friday we penned "And This Is Where The LTRO Money Went" we said that the final nail in the "Carry Trade" theory was that instead of using the LTRO "Bazooka" cash to collect meaningless pennies in front of a steamroller, Europe's banks turned around and deposited it right back with the ECB after the bank's deposit facility soared to a 2011 record €347 billion, €82 billion more than the day before.

Today, any residual doubt of where the LTRO cash proceeds went is eliminated, as the ECB has just confirmed that what goes out of one pocket comes back in the other, as the ECB's deposit facility has just exploded to not a 2011 record, but an all time record high €412 billion, a €65 billion increase overnight, and €167 billion higher in the past two days alone, which effectively accounts for practically all of the LTRO's free €210 billion.

And to those who foolishly claim this is a seasonal year end cash parking, we present the full history of the ECB's facility usage since it exploded on the scene in 2008. P;ease go ahead and show us when in 2008, 2009 and 2010 there was a spike in year end facility usage. We have all day. But wait: there's more!

In another independent confirmation that all hell is about to break loose, we just saw the 1 Year Bund drop sub zero again. As a reminder, the last time it was there was in the last days of November, just before the global central bank cartel had to come in and provide a global liquidity bailout for Europe's banks. So: back to square minus one ladies and gentlemen of an insolvent Europe?

But the biggest slap in the face of Sarkozy is that instead of banks pocketing the "guaranteed" 2-3% in carry trade between the 1% LTRO rate and the soveriegn bond yield, banks are losing 75 basis point on this inverse carry trade, where they take LTRO cash and deposit it with the ECB where it yields... 0.25%!

TAE Daily said...

Capital controls coming to a theater near you.

Treasury plans for euro failure

"The Treasury is working on contingency plans for the disintegration of the single currency that include capital controls.

The preparations are being made only for a worst-case scenario and would run alongside similar limited capital controls across Europe, imposed to reduce the economic fall-out of a break-up and to ease the transition to new currencies.

Officials fear that if one member state left the euro, investors in both that country and other vulnerable eurozone nations would transfer their funds to safe havens abroad. Capital flight from weak euro nations to the UK would drive up sterling, dealing a devastating blow to the Government’s plans to rebalance the economy towards exports.

Earlier this year, Switzerland was forced to peg its currency to the euro to protect the economy after a massive appreciation in the Swiss franc due to spiralling fears over Europe.

The plans emerged as Spain’s new finance minister Luis de Guindos warned the country’s economy was set for negative growth in the last quarter."

bosuncookie said...

The work that SecularAnimist quotes is here.

Ash said...

jimmyjames,

Given both the length of this discussion and all of the great comments posted since mine last night, I will have to renege on my "promise" to continue the discussion. Thank you for all of your thoughts on the issue.

Just to clarify, FOFOA is the person who subscribes to the theory of "freegold", not Gonzalo Lira. I prefer to read FOFOA because he has a more unique and open-minded view of Austrian economics, interpreting the thoughts of Hayek, Mises, etc. in a more "liberal" manner, and is very knowledgeable when it comes to monetary history.

He opposes the extreme policy "solutions" of both the "easy money" and "hard money" camps.

TAE Daily said...

U.S. Home Prices Fell More Than Forecast

"Estimates in the Bloomberg survey for the price change ranged from declines of 2.4 percent to 3.6 percent. The Case- Shiller index is based on a three-month average, which means the October data were influenced by transactions in August and September.

Home prices adjusted for seasonal variations fell 0.6 percent in October from the prior month after dropping 0.7 percent in September. Unadjusted prices decreased 1.2 percent from September as 19 of 20 cities showed declines. Eleven of the cities slumped by 1 percent or more. Only Phoenix posted a gain.

Atlanta and Las Vegas posted new post-peak lows in October, the report showed."

Tom Therramus said...

@Ash
"My main issue with your analysis is that you simply assume market crashes (i.e. asset price deflation) are lagging indicators of economic recession and financial instability. Therefore, there must be some identifiable preceding cause for the crash."

There are no assumptions made with respect to the data. Correlations are simply reported as read from the data sequence. To wit, as one reads Figure 1 from the recent essay (Is Oil Fueling the Rise Political Partisanship?) from left to right along the x axis (time) it is striking fact that every US recession and stock market since 1966 has been preceded by a spike in oil price variance. Every one. NO exceptions.

Now a response to this may be... well... Therramus is a lone nutcase - which could have some truth to it. Figure 1 was first published in 2009 at the OilDrum in an essay entitled "Was Volatility in the Price of Oil a Cause of the 2008 Financial Crisis?" . In the run-up to this 2009 post, I had emailed the well-known economist James Hamilton (UCSD) a couple of times and he had graciously responded with brief notes and pointers. In 2011 Hamilton published a paper (Historical Oil Shocks) for the US National Bureau of Economic Research (NBER) that recapitulated and confirmed the story that had been laid out at the OilDrum. As Gail Tverberg (GailtheActuary - a well known Peak Oil expert ) commented on her blog "The (Hamilton's) paper seems to suggest an amazingly close connection between oil price shocks and recession–almost an “if and only if” situation" .

While Hamilton's 2011 paper essentially told the same same story as Figure 1 , it also extended the analysis. Namely, it showed that Tverberg's implied rule “if and only if” (i.e., a recession occurs only occurs if preceded by an oil price increase) has held for the entire post-WWII period. By contrast, the earlier analysis at the OilDrum had only tracked the remarkable 1 to 1 match between oil shocks and recessions from 1966.

So to return to "your main issue with my analysis". If I can paraphrase the critique - you seem not to be comfortable with the deterministic streak in my interpretation of the data as this interpretation goes against the established theories of Keen et al. Fair enough. But I would counter by again pointing out that nearly 20 recessions and market crashes have occurred since WWII - all of which were preceded by an oil price increase. You'll note that at the bottom of Figure 1 are listed the multiforme reasons posed by conventional economic wisdom to explain each recession and crash. The hypothesized causes are nearly always different. IMO if you have single factor (e.g., oil shock) that unfailingly foreshadows the elicitation of a phenomena (e.g., a recession) at some point application of Occam's razor should be considered.

Tom Therramus said...

@Ash
"However, Minsky's financial instability hypothesis suggests that people don't even realize financial instability is building up until the asset markets crash, and then a recession/depression usually follows."

Not quite certain how Minsky's hypothesis fits in your response - I think your suggesting that instability has its own dynamics and that these dynamics are somehow divorced from the more deterministic, cause and effect model that I infer from my data.

I will say that in my model conscious recognition is not necessary for participation/response in/to unfolding events. Transient spikes in instability seem to propagate through the system to other variables (e.g., economic, financial and political) under their own steam - albeit by transmission mechanisms that are not as yet apparent - at least to me. However, the effects of the transmission of these instability transients are clear enough. For example, the analysis of political polling data summarized in "Is Oil Fueling the Rise Political Partisanship?" , shows that spikes in oil market instability are nearly always upstream of corresponding swings in political polls. Moreover, the Fourier (FFT) analysis in this essay indicates that since 1999 volatility in oil price and polling data have gone from showing no correlation to having an extremely strong relationship. Specifically, since the mid-2000s volatility spikes in oil price and political polls have recurred with the same 32.3 month dominant period.

And what is the reason for this pattern of recurring spikes in oil price over the 2000s ? Many experts believe it results from the teetering balance between a fixed or slowly increasing supply, but quickly rising demand that will occur at peak oil. Returning to James Hamilton, a recent chapter he published online ahead of print in the Handbook of Energy and Climate Change (Dec 2011) puts the ceiling on global oil production at around 90 mbd. Together with the prospective mathematical models he summarizes in the chapter, Hamilton shows that this constraint means that every time GDP even goes modestly positive, demand for oil will rapidly outstrip supply, prices will spike, and recession will ensue. Hamilton's forward looking models fit with our retrospective Fourier Transformation analyses showing cycling volatility spikes that recur every 2.5 years or so nicely.

@Ash
"I find it hard to believe that the reckless real estate speculation of the 80s and the dramatic slowdown of home sales in 1986 was not a significant factor and/or driver of the Black Monday crash.

After that, we had the savings & loan crisis and a recession. There may have been many other factors involved in Black Monday as well, but your argument would dismiss the influence of all of the exogenous drivers and place it almost solely on the exogenous 1986 oil price spike."

The cause for Black Monday is officially listed as unknown. There have been speculations about the role of early versions of computer based trading, market overvaluation, and market psychology. Your suggestion of a role for "the dramatic slowdown of home sales in 1986" or the "savings & loan crisis" are new ones to me - but who knows - the list is long and the factors you suggest may have contributed. This being said, I will return to what I think is the key observation from my OilDrum essay - which is that every US recession and stock market crash since 1966 (and per Hamilton for recessions since 1945) has been preceded by a oil price shock. Black Monday is not excepted from this. Black Monday is not a horse among zebras. With respect to the "if and only if" rule it is one of the herd.

Alexander Ac said...

@Ash,

He opposes the extreme policy "solutions" of both the "easy money" and "hard money" camps.

Which begs the question:

What is THE (right) solution for the End of Exponential Growth??

cheers,

Alex

Tom Therramus said...

@Ash
"With regards to the lack of price volatility of barley in 1929, why would we expect there to be any? Leveraged commodity vehicles have only become heavily used in recent times."

OK- fair enough. The analysis of barley prices around the time of the 1929 Wall Street crash is preliminary. In mitigation it was emphasized in my earlier comment that n=1. However, I note that in an earlier comment you said that... "Dr. Keen and others have argued that price volatility is characteristic of periods of financial instability and debt deflation, such as in the late 80's, late 90's... ". Which century were you referring to wrt the "80's and 90's"? And have "Leveraged commodity vehicles" been available in any century during the decades of their respective 80s and 90s?

@Ash said...
" "you simply assume market crashes (i.e. asset price deflation) are lagging indicators of economic recession and financial instability"

To preemptively clarify, when I say the above, I mean you assume that we would find evidence of economic recession and instability preceding a market crash if people like Minsky and Dr. Keen were correct. However, that is not true. "

Are saying its "not true" because Drs Minsky and Keen say so? Even if one does not buy my analysis showing the emergence of a distinct volatility signature in oil price and its impacts on the financial system and politics over the last decade - to use an oldie, but goodie - absence of proof, is not proof of absence.

@el gallinazo
"In your Figure 1, what is the function that you use to convert oil prices to the volatility number of your ordinate?"

The index of oil price volatility was calculated by generating a rolling three month average between Jan 1966 to Dec 2009 and then generating a rolling bi-monthly standard deviation from this sequence. Standard deviation is utilized to provide a "positive definitive" measure of changeability in oil price month-to-month over over the time course between 1966 and 2009. For anyone interested the rationale and approach is described in detail in my first essay on the topic
Volatility in the Price of Oil since Hubbert's Peak and Investment Risk
. The 2009 wiki essay was subsequently published in a shortened form at the OilDrum in an essay entitled Was Volatility in the Price of Oil a Cause of the 2008 Financial Crisis?. In the comments section of this OilDrum essay there is a lengthy discussion of pros and cons of this approach to estimating oil price volatility, including remarks from professional statisticians and other numerati. Further rationale to my approach is provided in my 2010-2011 wiki essay
Volatility in the Price of Oil since Hubbert's Peak and Investment Risk
.

p01 said...

What is THE (right) solution for the End of Exponential Growth??

The end of exponential growth is a well known, tried and tested method that nature employs since the beginning of life on this planet. We can kick and scream all we want, we will only speed-up the nature's solution by trying to fight it, or circumvent it, ending up fighting each other, therefore speeding-up the inevitable.
I hope this puts some perspective on having children at this point, Alex. Personally, we would, had we had a self sufficient life-style that we could pass on to our children, but that is not possible now, and unlikely in the future. I'm turning 42 soon.

Ash said...

TomT,

"There are no assumptions made with respect to the data. Correlations are simply reported as read from the data sequence."

Understood. I made a rather weak attempt to preemptively clarify. I was saying that you assume that the reported macroeconomic data since WWII, i.e. GDP, inflation, etc., would reveal a preceding cause for a crash in asset prices, IF Dr. Keen's debt deflation model (which is based on Minsky's Financial Instability Hypothesis) was predictive. My counter-argument was that, under FIH, the confirming macroeconomic data typically follows the asset market crash. Therefore, the theory is perfectly consistent with the data, both before and after WWII.

"Not quite certain how Minsky's hypothesis fits in your response - I think your suggesting that instability has its own dynamics and that these dynamics are somehow divorced from the more deterministic, cause and effect model that I infer from my data."

Here is a brief description of Minsky's FIH from the Wikipedia article linked above.

"Minsky proposed theories linking financial market fragility, in the normal life cycle of an economy, with speculative investment bubbles endogenous to financial markets. Minsky claimed that in prosperous times, when corporate cash flow rises beyond what is needed to pay off debt, a speculative euphoria develops, and soon thereafter debts exceed what borrowers can pay off from their incoming revenues, which in turn produces a financial crisis. As a result of such speculative borrowing bubbles, banks and lenders tighten credit availability, even to companies that can afford loans, and the economy subsequently contracts."

I am suggesting that, given the systematic leverage present in all economic sectors since at least the early 1970s, it would not be surprising to see oil price spikes preceding every asset market crash and recession in the US, under the logic of the "speculative euphoria" stage in Minsky's FIH. Oil has been and is still the most leveraged commodity that is traded on exchanges. That is a well-established and alternative explanation for the correlation in your analyzed data.

"Which century were you referring to wrt the "80's and 90's"? And have "Leveraged commodity vehicles" been available in any century during the decades of their respective 80s and 90s?"

The 1980s and 90s, as per your analyzed data. None of this is to suggest that supply issues have had no influence on price, obviously. Only that these issues are not the sole or primary driver of oil price volatility since WWII, and certainly not the primary driver of financial instability and economic recession/depression. At least, I do not believe your analysis has overturned Misnky's FIH and Dr. Keens corresponding debt deflation models.

Ilargi said...

Tom,

Since both Stoneleigh and I once were editors at The Oil Drum, we are well aware of the "oil caused the financial crisis" idea, and have been for many years. We discussed it so many times at TAE that dragging it up -or down- again is not a very appealing prospect.

Thing is, the idea only makes sense to those who reason strictly from an oil standpoint. Once you manage to break away from that, which is nigh impossible for Oil Drum afficionados, you realize that the financial crisis stands on its own.

In fact, that's why we left there. They refuse to step back and even consider the option. And bringing up Gail as an "expert" does not exactly help your cause. The Oil Drum was once a great site; now, not so much. Our leaving is but a part of that. We're not the only ones who left.

You are never going to prove what you want to, because it's not there. Just because things happen at or around the same time does not prove causality.

What other price indicators have you looked at? Cookies? Medium quality cotton underwear? Fine wine? Concrete? Lumber? If not, why the conclusions? I mean, I'm sure i can find a professional sports team with results that seem to indicate correlation with either oil prices or financial crises too. But what would I prove?

The present financial crisis doesn't need any help, and never did, in blowing up. Comparing it to previous crises in the past fifty years in a dangerous thing, since it’s at least a 100 times bigger than any of the others. In fact, the opposite argument, that the credit crunch influences -and will influence- peak oil far more than the other way around, is much more valid.

But that still doesn’t say anything about what caused this financial crisis. For those, you need to look elsewhere: inside the financial system, and inside the political system.

Causality between subprime loans and peak oil? Or Goldman Sachs helping Greece and Italy cheat on their budgets through opaque financial instruments? Nothing there. Lost cause.


.

jal said...

@ board
Great discussion about gold!
Until you can factor in the effects of what the ancients did with gold, and work out the social and economic impacts, the conclusions will be wrong.

What did the ancients do, to avoid the same problems that our social/economy/capitalistic system is facing?

1. Jubillee, debt forgiveness, every 7 years.

2. Allow the wealthy families to keep the cash flow but take their tokens out of circulation by burying them with their owners.

3. Prevent Ursery.

4. Employ the accumulated wealth of the wealthy, (tokens which represented a demand payment for an assets etc.), for public works, (ie. monuments, roads, bridges, pyramids).

Remember, that their cash flow will not be impeded but might be enhanced. As usual, the rich will get richer if their accumulated wealth is used to create public work.
---
Are we going to have the wisdom of the ancients and apply a modern version to this old problem OR will we let our structures collapse?


REMINDER: Gold is a durable token, a medium of exchange.

It is worthless for the very rich who have captured the cash flow.

That's why they buried it with the owner.
That's why it was used as a store of wealth to buy perishables such as grain to feed the workers who built the monuments and public buildings.

Just ask yourself what would have happened if the accumulated gold of the dead rich man got put into the society to buy all the grain and left none for the population ... starvation and upheaval.

Our social economic structures have got the value of gold all skewed.

Not being among the very rich and not having captured all the cash flow, of course, I'll keep gold as a durable token, a medium of exchange, and as a storage of wealth, and I'll hope that I never have to use it.

jal

TAE Daily said...

Good news of the day:

Greek 1-year bond yield fell 7.04%!

Now, it only stands at 349.9%.

http://www.bloomberg.com/quote/GGGB1YR:IND

Greenwood said...

for El G

Bet you never taught a chemistry lesson like this.

Chemistry of an Empire: the Last Roman Empress by Ugo Bardi

Fascinating story I've never heard about Rome's Swan Song.

~

el gallinazo said...

Tom Therramus

Thanks for replying with the details of the oil price volatility function.

I really can't understand the debate going on from your original posting. You did a statistical analysis of oil price volatility and found it very tightly correlated with certain economic events. However, you stated in your original article, as I recall, that you are not drawing any causal connections or conclusions from this correlation. I am not a statistician and would, for arguments sake, accept your numerical analysis as being accurate. Then from not making any statement of causal connections, this debate starts to focus very much on causal connections. Hmmmm...... am I missing something?

el gallinazo said...

Do I have this right? The European banks sold sovereign bonds they were holding as a repo buy back to the ECB, and in three years are committed to buying them back at the original sales price plus 3%. They then took the cash from the sales and parked it in ECB reserves at an annual interest rate of 75 bp less than they are eventually required to pay to the ECB when they supposedly buy back these bonds, thus taking a loss of 2.25% if the world, in fact, lasts another three years.

Does this cash with the ECB reserves help them with the tighter reserve requirements that the new 9% requirements impose, or would the bonds they sold to the ECB have worked just as well? One interesting factoid I have not uncovered is whether the ECB paid nominal price for the bonds, a la the Fed, or market price. Bankstas and central banks, being what they are, I assume the former. Otherwise, the banks could have just sold the bonds into the secondary market and parked the proceed in the ECB reserves. But since everyone is insolvent anyway, the banks could not have sold off their sovereign debt without crashing the market to anyone but the central bank. ZH claims that this operation created new pseudomoney credit. Ash says it didn't. It certainly created liquidity by turning relatively illiquid sovereign debt into cash. But then the cash just gets parked at v=0 at the ECB. The liquidity only lasted a nanosecond.

I assume the the primary reason that the banks did this is that they assume that all shit is going to break loose soon, and they wanted to stick the ECB with the soon to be worth very little peripheral SD. I also assume that as the CEO's of the banks and eurocrats running the ECB talk to each other constantly, that this came as no surprise to Draghi and the leadership of the ECB, and the crap about the banks taking the money to buy new sovereign debt was just a ruse. When the ECB takes a huge loss they can thus state that they miscalculated in good faith as opposed to being an accomplice to fraud with their banksta buddies.

Bottom line - the LTRO was just a way of sticking the debt serfs of Europe with more private bank owned toxic waste.

Joel Caris said...

Great post, Ilargi. I wandered my way over here after seeing some hits on my site from a link Ash posted in the comments of your previous post and I liked what I found. Good perspective. I think I'll follow along from here on out.

It would be nice if during the holidays people spent a bit more time actually reflecting on the real values of the religions they're purportedly engaging. Not that I'm a religion expert, but I suspect someone like Wendell Berry has a much firmer grasp on what Christianity is supposed to be about than, say, the vast majority of the suburban mega-churches out there. I can't help but think we're headed for bad times and learning some of those forgiveness lessons from Christ might help it out. As you note, there's a significant risk of inter-generational blame games taking the stage that could prove horrifically destructive and completely counter-productive.

A little Buddhist philosophy would help in this regard, as well. Accept the reality and deal with it on its own terms. That article of mine about Occupy Ash linked to last week was essentially trying to get at the idea that there are austerity measures coming that are only partly about the vast screwing that those in power have been delivering to the general populace. We have serious energy constraints, the collapsing of our financial system, and environmental catastrophe all knocking on our door. The temptation is going to be to lay the blame for all those things at the feet of others. But we've all had a hand in it (if you're reading this comment, you've most certainly had a hand in it) and putting all our attention into a long, drawn out, violent theater of blame isn't going to make the hard realities of the future easier to deal with. It's just going to distract us from the necessary work ahead of completely remaking our way of life to survive a poverty-stricken, low-energy future.

Not to say that there's no social justice work to be done and that we can't make the future a little better for everyone by creating fairer rules, but that's not going to come close to solving the problem in and of itself. And at a personal level, I don't see that as being the venue for the most valuable work. As things continue to come apart, I have little hope of a mass justice movement gaining significant ground. I imagine the most effective work will be local.

mike said...

all will be well in 2012, folks. we have hit a speed bump a little larger than usual, no need to go off the deep end. As with everything human innovation will take care of the rest. Hind sight is 20/20 when it comes to saying the industrial world is what brought us out of a slump prior, new things are always evolving in the background and this time is no different. This blog is getting way ahead of its self and has actually become a drag.

Greenwood said...

"...new things are always evolving in the background and this time is no different..."

Techno-narcissism makes my ass twitch. It smells like a BBQ at first, but on a moment or two of reflection, it betrays an underlying aroma of burnt rubber.

~

Ash said...

El G,

I believe your bottom line is pretty accurate.

"Bottom line - the LTRO was just a way of sticking the debt serfs of Europe with more private bank owned toxic waste."

However, I'm not sure that you captured that transaction accurately. The sovereign bonds were not sold to the ECB, but were pledged as collateral for a 3-year loan. I understand that "repos" are technically accounted for as a "sale and repurchase" of underlying securities, but they are really just loans.

So the bank received as much as money as they were able and willing to borrow for 3 years at 1% against Spanish and Italian bonds, and whatever other crap they posted as collateral. Since it's not a true sale, they don't have to account for any losses on the bond. The fact that much of the borrowed money has been recycled back into reserves held at the ECB is similar to how investors are willing to pay the US, UK or German governments to borrow very short-term money from them.

The European banks are shunning risk and attempting to preserve capital to such an extent that they don't want to re-lend the money to anyone but the ECB, and at a loss in yield spread! Essentially, paying to lend money to the ECB for safe storage. I suspected that ZH and Tchir would be correct about the LTRO being a major DUD, but I didn't expect it would be this bad and this soon. So why borrow in the first place?

Well, as you said, they have effectively transformed their toxic waste positions into cash positions, assuming the "repurchase" side of the obligation never comes to fruition in 3 years, which is a safe assumption. I do not disagree with ZH that the ECB is engaged in a very indirect form of "monetization" over a medium to long-term time frame, but it's not monetization of newly issued sovereign debt and it's not right now, which is the only thing the banks want to see before they are willing to take on any risk in the Euro bond markets again.

bosuncookie said...

A Run On The Global Banking System—How Close Are We?

p01 said...

@jal
Slavery, feudalism or a combination of both seem the most likely outcomes to me too, although I don't regard them as models, but as inevitable.

p01 said...

@Nassim
:p

Hombre said...

Bosuncookie - From your link...
"...Two, the central banks will “provide liquidity”—that is, print money—while simultaneously declaring a banking holiday to, quote, “calm the markets”. During that bank holiday, the currency will be devalued by double digits—which will mean that your cash holdings will essentially be taxed to save the banksters—again. (Like they did in Argentina.)
If this is true then putting one's modest savings into treasuries might not be as good an idea as putting it into some form of "hard resources."
Thanks for the link. I'll be watching for some responses from our fellow commenters here.

Nassim said...

p01,

Life begins at 40 :)

Ilargi said...

Obama administration to seek $1.2 trillion debt ceiling increase

The Obama administration will formally ask Congress later this week to raise the nation’s debt ceiling by $1.2 trillion, a Treasury Department official tells CNN.

The latest request is the third of three requests authorized by the contentious debt ceiling agreement reached last August and is expected to come on December 30 – the day the debt is projected to fall within $100 billion of the current $15.194 trillion ceiling. The new request asks the ceiling be raised to $16.39 trillion.

According to the terms of the debt ceiling agreement, Congress has 15 days to pass a joint resolution disapproving of an increase which President Obama is authorized to veto.

The new debt ceiling is expected to satisfy U.S. debts until the end of next year, according to the Treasury Department official.



I wanted to say: no comment, but I do have one: there is no way this one will last for a whole year.

Other than that: seek shelter! The lunatics have taken over.

.

Alexander Ac said...

Ilargi, what did you write about possible (oil) conflict in Middle East?

IRAN: 'Not A Drop Of Oil Will Pass Through The Strait' If Sanctions Increase

Read more: http://www.businessinsider.com/iran-says-no-oil-will-pass-through-the-strait-of-hormuz-if-we-sanction-their-oil-exports-2011-12#ixzz1hm13aSwU


yeah, this particular conflict was with us since the 1st oil shock... and never happened, right?

Alex

el gallinazo said...

Ash

re LTRO

I know that the whole repo thing is an accounting gimmick, but it should be hoisted up on its own petard. They want legally to pretend that they are buying and selling this crap instead of making conventional loans, then they are.

While reading your response to my LTRO posting, the other nefarious motive just dawned on me. Since the central banks of the nations of the EZ cannot print money, they can truly become insolvent and forced, even against their will, into default. But the ECB can always print "in an emergency," so the more toxic SD the banks can stuff up the wazoo (read balance sheet) of the ECB, the more they can coerce the ECB into monetizing the debt, keeping the peripheral bonds out of default so the banks don't have to take a haircut below the chin on their remaining holdings of SD which they can't unload. And when TSHTF, Germany will be forced to choose between Scylla and Charybdis - allowing the ECB to monetize the debt or giving Buba guarantees to the ECB. Draghi and his TBTF buddies are not stupid, they saw this in the planning stage.

Re the Gonzalo Lyra link - Bosuncookie beat me to it. Interesting analysis of the MF Global fiasco. I agree with most of his points. And he makes a very important point repeatedly that the MSM is overlooking, which is that most of the stolen loot wound up at the Morgue. I disagree with him on a point that he skims over - mainly that the theft was legal if not moral. I am no commodities lawyer, but Janet Tavakoli has stated without a qualm that only a small portion of the stolen customer funds were covered by hypothecations loopholes, and that the remainder were sheer embezzlement. So TPTB cannot go after Corzine for a variety of reasons. But one of the important ones is that if it were proven in a court of law that the vast majority of the customer accounts now in possession of the Morgue, were embezzled funds, then the Morgue would have to return them. You cannot legally own stolen property unless it is real estate stolen from Native Americans. And do not lose sight that Obama's current chief of staff is one of Jaime's top lieutenants. Obama would probably serve the American people better if he toured the 40 best golf courses of the world. Perhaps he could get a Nobel Prize in Golf.

One irony of Lira's article is that after the great Thrilla in Manilla bout between Lyra and our Stoneleigh, they are both recommending that you get your remaining money into physical assets. Or as the redoubtable Ann Barnhardt would put it, if you can't stand in front of it with an assault rifle, then you don't own it. Actually, I re-listened to her interview with Jim Puplava a couple of days ago. And except for her nasty comment about affirmative action, she hit every nail right on the head. Which doesn't mean I see eye to eye with her "social agenda" despite my Neanderthal antecedents, but when it comes to the corruption at the top levels of government and the financial markets and institutions, she is both brilliant and succinct.

And getting back to the Lyra interview, it becomes quite clear that it would be "legally" easier for a Corzine or a Dimon to steal money from a checking account at a commercial bank than a segregated account at a brokerage. Because when you put your money in a checking account, you are "lending" it to the bank. As Lyra points out, the analogy to a segregated account at a brokerage account is much closer to a safety deposit box.

Ilargi said...

Bosuncookie, hombre,

I'm sure Gonzola Lira is a nice guy, but he has no idea of thew workings and mechanics of hyperinflation. Unfortunately, that precisely the topic he's chosen to make his name with. Don't get caught up in that stuff. The USD is in for a very strong period of time, with all the capital fleeing Europe -and eventually Japan-. It won't be until the US leaves the international -bond- markets behind (and that will not be voluntarily) before Gonzalo's words come even close to ringing true. By then he'll be poor, very poor, and wondering why he didn't pay more attention to TAE. He did do a long discussion with Nicole on the topic, but he was too wrapped up in his own shine to listen.

Yields on Treasuries are very low. The US therefore can borrow very cheaply. And the EU is blowing up, so more, many more, people will flock towards Treasuries.

They won't be good forever, which is why we say get short-term ones. They will be fine for a while longer though. If not, raising the debt ceiling once more would be a whole different story.

.

Ilargi said...

Alex,

These and similar stories have been around forever, twice on Sunday. I don't see the US as having the political climate and will to pull the trigger now. No consensus in sight. I'm sure the Reps would go to war tomorrow morning, but not with Obama in charge.

This time, also, Russia and China are not very likely to sit still on their hands.
.

jal said...

"...they don't want to re-lend the money to anyone but the ECB ..."

Hey!

Look at all of those deposits!

They must be good for leveraging by the ECB????

bosuncookie said...

Ilargi,

Unfortunately, I have no savings, no funds to fuss over. I don't have to worry about where to park money because I don't have any, accept the hand-to-mouth working cash provided by a meager SS, state pension and an occasional dip into the shadow, off-the-grid economy of odd jobs and day labor.

I'm familiar with the stand of TAE on the unfolding of events; when Nicole stayed at my home, I suppose I became a convert.

What I am interested in is in learned speculation about what my happen as things seize up. In particular, speculation about how banks, governments, and individuals will deal with a system of digital money, digital pension payments, and digital bill-paying in a world of upheaval.

I posted the Lira link because he does touch on that in a tiny way. I would find discussion of those issues extremely useful. I realize I may be in the minority here; many of the commenters at TAE seem very interested in what to do with their assets. I've taken every bit of TAE advice that I can, matched it with my own situation and sensibilities, and got on with my life. I really don't worry about any of this stuff, except from time-to-time.

What do I worry about then? It's not really worry, but a certain tiny anxiousness about the consequences for direct pension deposit and automatic bank draft of mortgage payments in a banking world gone feral. This anxiousness arises, as I said, because I live hand-to-mouth, and those issues are likely to have a bearing (at some point) for my decision-making. Those are the kinds of topics I'm really interested in, even though I read this site multiple times daily.

Thanks for all the good work, continued insights, and truth-telling in a world of deceit and lies.

Joe in NC said...

"The USD is in for a very strong period of time, with all the capital fleeing Europe -and eventually Japan-."

Support of this from Gordon T Long (via ZH):

Why ECB's LTRO Won't Stop Collateral Contagion

"I would argue that the problem short term is a shortage of real collateral and that US dollar cash, versus 'encumbered' cash flow, is now king."

.

peripety said...

Ash sez:

"None of this qualifies as "economic discussion" for you? My, what high standards."

Yes my dear, the best!

You see, I like to allow discussion at any level, so long as it is honest and not too self serving.

Anyone for mudfest?

el gallinazo said...

To follow up on Ilargi's comment. The safer place to put your assets is cash or cash equivalents (read T-bills) or physical assets, which include doomsteads, PM's, a trailer of high quality agricultural hand tools, etc. The balance between cash and physical assets depends on your individual circumstances as well as the state of "progress" of the deflationary collapse, and Stoneleigh gives good pointers on all of this in her primers.

Stoneleigh points out that as the Ponzi collapses, the robber barons are going to steal everyone else's paper assets, i.e. claims on real wealth. This is what has Lyra so freaked out. He is an ultra-conservative and it grieves and surprises him to see the uber wealthy eat the merely wealthy. It grieves and shocks him to see that the rule of law was simply a sham built on convenience. Of course, Stoneleigh is not surprised at all. Lyra also does not appear to understand the Ponzi nature of the global financial web.

Currently, the deflationary collapse is in the foundation of the buildings, still below ground so to speak, and is taking place primarily in the shadow banking "industry" which provides most of the liquidity to the Ponzi. As shadow banking collapses, the central banks will try to compensate (which is what is happening in Europe right now), but will be unable to cope with the magnitude of it. All markets are at ridiculous levels due to leverage. When shadow banking collapses, the markets will collapse as leverage disappears. This will include precious metals for a while, but they will stabilize in value earlier than most other commodities or physical assets.

That is why Prechter sees the Dow at under 1000 before 2015. If people have to buy stocks with "real" money instead of hyperhypothecated credit, the prices will be much, much lower.

There is a not so tacit agreement on this blog to accept the I&S definition of inflation and deflation, which is different than the purchasing power of a dollar or the cost of living. Everyone knows that the COL from the Bureau of Lying Statistics is bogus. Most libertarians are telling us that the COL is shooting up. (Ironically most libertarians are Austrians except when it comes to inflation - then they follow the Keynesians because it feels so good to vent :-) From what I have heard as I am residing outside of the USA, a lot of stuff like food and medical has increased in price, but a lot of stuff, like electronics, has gone down. But the gorilla in the middle of the room is real estate, both commercial and residential. Has that been factored into COL properly? Amusingly (to me anyway), a really big boost to the US economy is strategic defaults on mortgages. Stiffing the banks on $2000-4000 a month while living in the McMansion anyway can buy some really nice Caribbean vacations.

The collapse of shadow banking is affecting Europe first, because Europe is leveraged to the gills, even worse than the USA. As deflation goes beyond shadow banking to conventional banking and the equities and commodities markets, the deflationary collapse will no longer be shadow and underground, but everywhere you look.

@ Ilargi and war

I hope you are right, and you may be right. But that is what they said in the early summer of 1914. No leader could be that irrational and stupid. Hmmm. Being a European, I don't think you understand the "Dominionist" nature of a large part of the USA deep government, particularly among the generals and admirals. They are a lot crazier than you suspect. If you think Obama has much say, you just don't get geopolitical decision making in the USA empire. The last president who thought he could make those decisions was JFK 50 years ago. Whatever.

Alexander Ac said...

Ilargi,

thanks, I hope you are right. BTW, regarding the G Lira article on ZH - what is Tyler Durden's gang position on deflation/hyperinflation?

I guess they have no firm position (?) since they publish tons of material every day...

Alex

Ash said...

El G,

"And when TSHTF, Germany will be forced to choose between Scylla and Charybdis - allowing the ECB to monetize the debt or giving Buba guarantees to the ECB. Draghi and his TBTF buddies are not stupid, they saw this in the planning stage."

That's an interesting theory. I think it would be useful to find out what the creditor status of the ECB would be after they have foreclosed on the bond collateral and in an event of sovereign default. My guess is preferred over private banks, along with the IMF, and so the marginal pressure, over and above what already exists, on Germany may not be as much as one would expect. Germany also has another option - bail out (as opposed to bailout) before anyone defaults and withdraw their capital from the ECB. Here's another thought - what's to stop the Bundesbank (via the ECB) from just seizing all the cash that banks have on deposit in the event that they are unwilling to buy back their toxic waste and pay back the loans?

Ash said...

Alexander AC,

There is a clever difference between TD's position on HI and his strategy with regards to public predictions on the deflation/HI debate. It is quite clear that he heavily leans towards dollar HI as a near-term outcome, since he believes global central banks will act "predictably" and
monetize every single impaired debt-asset out there until all confidence is lost in the underlying currency.

However, his strategy is to mix his personal position on HI with a healthy dose of other content that suggests everything from severe deflation to prolonged stagflation. A year from now, if the deflationary case has only become stronger, he certainly will not lose any face and perhaps will even say that ZH "told you so", and, in a very real way, they have been.

If HI occurs within a year, otoh, he will definitely say "we told you so!" and "sorry for your losses from listening to those ignorant deflationists, even though we clearly warned you not to!" Reference this, this and that article. Like I said, it's a clever strategy.

Joe in NC said...

"That is why Prechter sees the Dow at under 1000 before 2015. If people have to buy stocks with "real" money instead of hyperhypothecated credit, the prices will be much, much lower."

It seems to me the Fed has no speed bumps when it comes to devaluing the dollar (or attempts to devalue). Considering this, does it still come back to the old "velocity" requirement thing? I'm just thinking Precter may need to update his Dow 1000 prediction.

.

Ilargi said...

Actually read the Lira piece just now. Last time for real now. I can't understand what people find interesting in that. So many things I've seen Denninger and Durden write on MFG that he just glosses over. He simply hasn't understood what went down. Really, he hasn't. Now he's preparing for black swans. Might want to look up the definition of what a black swan is. Like rule number 1: you can't prepare for them.

And then to top it off it turns out it's all to promote some money vehicle he's set up... Yawn...


.

Joe in NC said...

I guess the reason Prector deserves an opportunity to update his prediction is because at least some companies in the Dow own a few hard assets. I don't think they all operate as banks.

.

peripety said...

Stonleigh said:

"During expansionist times, people will circumvent it with a tower of human promises (credit). During contractionary times gold will be hoarded by the powerful and almost nothing will circulate."

What a powerful argument for getting on that golden gravy train early! (If, of course, one has already bought the mandatory bag of rice and one of beans. AS well add a good water filter for anyone living in the low lands. That would be another, first to hoard, item as well).

Joe in NC said...

Peripety - Are you implying Stoneleigh advocates hoarding gold :-,

.

p01 said...

Potential leak prompts another shutdown at Plymouth nuclear plant
The shutdown comes less than two months after a leak in a different valve forced Pilgrim officials to shut down the facility for more than a week to make repairs.

However, not to worry!:

“At this point, they’re in fine shape,” Sheehan[Nuclear Regulatory Commission spokesman] said.

bluebird said...

bosuncookie - I also am concerned about digital pension deposits and digital payments, especially if/when the financial institutions freeze during a crisis. I would assume that there would not be any credit nor debit transactions during bank holidays, that bills would get paid via money orders. If/when the global financial system collapses, doesn't that indicate very few banks, if any?
How could there be electronic transactions if there are no financial institutions for us people?

Ash said...

re: GL and MF Global

I didn't really find out anything new or interesting about the MF Global debacle in GL's article, and like Ilargi, thought his conclusions were way off. FOFOA also wrote about MF Global recently, and, as I said before when we were discussing the "gold standard", I prefer his analysis over GL's any day. I obviously don't agree with his conclusions either, but at least the analysis provided a unique perspective and some facts that I was not already aware of. Also, he isn't asking me to sign up for some subscription to read his "scenarios" and investment advice.

Unambiguous Wealth 2 – The MF Global Chronicles

"This MF Global bankruptcy is like a shockwave spreading out over the whole marketplace. It's like an EMP that could fry the matrix in a flash, once people begin to understand its implications. It's already had far-reaching consequences.

One group that has so far been disproportionately affected is the non-bank physical gold dealer network. Many large and small, retail and wholesale gold dealers used the COMEX paper market to hedge their physical business. Say someone walked in and sold a dealer a thousand ounces of krugerrands. That dealer would immediately go to his MF Global online account and short ten COMEX futures contracts worth 100 ounces each.

So these dealers often have large cash balances sitting at the ready so that they can earn the spread from any customer without taking the price risk. It was not their contracts or COMEX positions that disappeared when MF Global went bankrupt, it was their large cash balances. Active positions were rolled over to other clearing houses, but the cash disappeared.

........

I'd like to mention now that Jim Sinclair has been absolutely ON FIRE talking about the implications and the shockwave of consequences emanating from the MF Global bankruptcy. In his latest great interview he says that by putting the OTC derivative positions of a bankrupt clearing house ahead of its client's deposits, this case will ultimately break the very market mechanism for price discovery. He says the system ($IMFS) is already broken, but whereas Lehman Bros. was the "Lehman event" for Main Street, MF Global is the "Lehman event" for the insiders. When your clearing house becomes a questionable counterparty, it's over."

Glennjeff said...

Illargi said,

"I don't see the US as having the political climate and will to pull the trigger now."

Maybe not, but Iran might.

I Hope it's televised in 3D.

mike said...

"Techno-narcissism makes my ass twitch. It smells like a BBQ at first, but on a moment or two of reflection, it betrays an underlying aroma of burnt rubber."

You best get that looked at and quick, herpes might be the cause as it makes its way to the back as well.

Hombre said...

Bosuncookie - I don't have a large "stash" either but what little I do have I want to try to make safe as possible. Good luck to both of us.
My concern is to listen to either and all folks and try make "living decisions" as events progress. As a bottom line, I certainly rate I & S far above Lira but still want to keep all options open.
As a troubleshooter in my previous career, sometimes I made proper decisions based on all the best input available and even so the result was often counter to what it "should" have been.
Like some others here, I suspect a political event (war?) will trash all the best efforts of those who are trying to perpetuate the status quo.
Ilargi - Thanks, point taken.

Glennjeff said...

Gold. I was going to buy some last week, wasn't real sure about "the feel" of it all, driving to The Mint I got the eeby jeebies about 300 metres away, took a hard left and went for a drive around our lovely river.

In my insane head there is this thought that waiting till about $1200 might be fine art. That's when they will hyperinflate said the man who wasn't on the stairs again today, around the equinox.

Never lonely with invisible freinds.

You good folks probably know poetry, literature etc but it's new to me and really resonates for some reason.

The Hollow Men by T S Elliot read by Marlon Brando

peripety said...

Joe in NC said...
" Peripety - Are you implying Stoneleigh advocates hoarding gold :-,"


Ah! If only I had the temerity to be so rash as to chisel that lay into Stone. What song indeed would that lady sing?




.

Joe in NC said...

Peripety - you served up the quote from Stoneleigh...not me.
.

jimmyjames said...

Stoneleigh-

I read the link to part #1 that you left-(where can i find #2)
These are some snips and i hope I'm not picking out of context-

****************

Ultimately, great socioeconomic expansions sow the seeds of their own destruction. Being swings of positive feedback, the initial virtuous circle of increasing prosperity that monetary expansion enables becomes a vicious circle, as the consequences of divorcing the money supply from the constraints of reality rapidly become apparent.

Vicious circles begin with a credit crunch, or period of acute illiquidity, as liquidity in a financial system is a reflection of confidence. Without confidence, there is no credit, and without credit there is no price support at anything like the levels achieved during a long expansion. This was as true in medieval times as it is today.

*************
Monetary expansion does not increase prosperity it decreases it as your paper money is diluted and loses its buying power-
It is "never" about how much money you have--it's always what the money you do have can purchase ie: Zimbabwe

Any supply of money would be sufficient to accommodate the services money needs to render-
Money only has one use- and that is as a medium of exchange-
In a free market economy even though we no longer live in such a system as free market capitalism-but if we did-the purchasing power of a locked money supply would rise to accommodate the increase in goods and services and trade-

This is how in a money locked free market-living standards would improve ie: "real incomes" would steadily rise-
All that a constantly expanding money supply does is increase prices because it cannot immediately increase the supply of goods-so an always increasing supply of money is "always" chasing the same supply of goods-

******************************

Specifically, periods of monetary expansion have proceeded despite rules (of various degrees of stringency) intended to prevent it. The problem is that monetary rules have focused on the traditional money supply, as measured in varying degrees of broadness (ie degrees of removal from underlying real wealth).

They have tended to neglect the vital role of credit, or virtual wealth, in the expansion of the effective money supply relative to available goods and services. Indeed monetarist thinkers continue to do so today, concentrating on conventional money supply measures while regarding private debt as inconsequential.

Neglecting the vital role of ephemeral credit in the composition of the effective money supply in manic times is a major omission, as it is the virtual nature of credit that defines such periods, and its abrupt loss that leads to the severity of the depression conditions that inevitably follow.

******************
If you're saying that credit expansion constantly cheapens the pre-existing circulating money-then i agree with that-

***********************

With the population falling, and collective psychology no longer supportive of economic expansion, the pressure to increase the money supply disappeared. Credit evaporated, the remaining money supply contracted substantially, and prices fell.

Money began to disappear. Europe's stock of silver and gold contracted sharply during the late 14th century

****************************
Again-if the stock of circulating money shrinks-the exchange rate/purchasing power "must" increase and therefore compensate for the lack of available circulating money and as he mentioned "prices fell"
Falling prices for a society as a whole is a good thing-provided most of the society doesn't have their ass levered to the prices that are falling-like we have now-

A Fall Guy said...

@jimmyjames

I suggest you tone down inflammatory statements, such as "Unreal the lack of understanding about the gold standard here". In case you haven't noticed, the commentators here have a diverse set of opinions regarding gold. Also, many readers of TAE would probably agree that the women's lib movement was used as an opportunity, or even co-opted, to undermine wages and family/community cohesion (Elizabeth Warren gave a nice presentation on this). But to suggest that this was the basis of the movement is an insult to women and those who fight for equal rights. An alternative, and more plausible explanation is the Shock Doctrine. Also, fractional reserve banking started centuries ago. Yes, trade could be done in gold or gold-backed notes, but deposits could be used to leverage loans by multiples. You might want to watch Money as Debt. I welcome constructive debate, but not mudslinging.

It seems to me that the root of societal problems runs much, much deeper than the lack of gold-backed money. Absolutely, removal of gold backing has had a profound effect and is a fundamental reason why credit could explode beyond any reason.
But,
(a) TPTB use whatever tools are available to fleece the masses and hang onto power, and
(b) the masses of plebes delude themselves in multiple ways.
Credit that can't be repaid is just one example. Over-population, over-pollution, over-extraction, over-indulgence. The list goes on, and not everything is orchestrated. It is arguable that lack of gold backing has helped some of these processes go into hyper-drive (via credit to pull demand and production from the virtual future), but it is not the underlying cause of our woes. Similarly, it's debatable whether gold-backed currency offers any solution to present problems.

The main cause of our woes is best found by looking inside oneself. Sadly, at a fundamental level, most human beings don't seem to take the future seriously.

peripety said...

Joe in NC said...

"Peripety - you served up the quote from Stoneleigh...not me."

Yes I did, didn't I. Please continue.

---------------

Glennjeff, would you agree that Mensa has a lot to answer for.

Tom Therramus said...

@Ash
"it would not be surprising to see oil price spikes preceding every asset market crash and recession in the US, under the logic of the "speculative euphoria" stage in Minsky's FIH."

This is why I find the 1987 Black Monday (BM) stock market crash so interesting. Black Monday follows the post-war rule "if oil shock then recession or crash". However, BM is also instructively different. First, Black Monday occurred during a time of stable and growing US GDP. The mid 80s also were also not marked (in the US) by abnormally high levels of financial exuberance or speculative euphoria and no recession immediately followed the crash. Indeed, GDP continued at a moderately positive clip for at least 3-4 years after Black Monday, until the Gulf war, and associated oil shocks heralded a brief recession in the early 90s.

Second, we know the oil shock in 1986 that preceded Black Monday had nothing to do with a speculative euphoria. This oil price spike was caused by a temporary collapse of the OPEC cartel when the Saudis tired of sibling countries cheating on their quotas. In short, the Black Monday crash occurred in the wake of an exogenously induced spike in oil price and BM was not confounded by the usual factors employed to explain market crashes. As such, a case could be made that for Black Monday, Minsky's FIH may not apply. You may now want to discount the uniqueness of Black Monday by raising the role of diverse and extraneous variables such as something going on with housing etc in the late 80s and so on. However, if this thought process starts, I pre-emptively return you to the para above and to my earlier comments in this thread. BM is not a horse among zebras - it is one of the herd. Occam's razor.

@Ilargi and El Gall
In summary, Ilargi and El Gall have critiques based on the fact that my position relies on correlative inference. Fair point - but if you read my essays, I am always careful to prominently raise this weakness. However, here are a couple of points to ponder. First, per Hamilton's and my own analysis there are nearly 20 points on the scatter plot and for each of these the oil price increase always precedes the recession or market crash. This unremitting sequence does not prove causality, but to infer that oil shocks are causal does require that they should always come first, and since WWII this apparently has been the case. Second, for one of these data points, Black Monday, the effects of changes in GDP and recession etc were not significant confounding factors. A technique used by statisticians to get around the "correlation is not causation problem" is to control the study for confounding variables. For Black Monday the oil spike is present, but the effects of variables associated with Minsky's FIH are apparently minimized. Again, this does not prove causation. However, it does take us a few steps away from the brush-off that the analysis is no better than might be achieved by correlating to the performance of a professional sports team.

jimmyjames said...

A Fall Guy said...

@jimmyjames

I suggest you tone down inflammatory statements, such as "Unreal the lack of understanding about the gold standard here".

***********
Pardon me?

You best busy yourself re-reading past posts here and see who has been the brunt of mudslinging

The discussion was "specifically" about gold standard-not all the other myriad of troubles we have-which I'm well aware of-
**********
But to suggest that this was the basis of the movement is an insult to women and those who fight for equal rights.
***********

As far as to my post about women's lib-you obviously missed this part-

I have no problem with the woman of a family being the bread winner and the husband being the mom-i do have a problem with government subsidized day cares raising our kids ie" "The State"
I have no problem with woman demanding equal rights and i agree they should have equal rights-

*******
Where did i ever say there hasn't been FRB?

Basically your post-which you must have spent all day typing up makes no sense at all to the topic being discussed-

snuffy said...

Bosuncookie,

I am close to your condition...except I made it part of my life plan to never again worry about something like y2k destroying literally my ability to feed myself,as I slip into "adulthood".My situation is thus

2.8 terraced acres.A whole lot of "passive food producers"[fruit trees],BIG garden spot a house ,passively heated..with a good wood stove and r-50 walls.Water.End of a dead end road.1/2 mile of bad gravel road just to see my place...

For a long time my wife and I have avoided guests and "socializing".We are very damn careful about a "Friend of a Friend",still ,I have had tools and gear "boosted" from my places...though not much,and not since "Samson",the English mastiff mix we adopted, took over guard duties.
One would think,as much effort and time as I have taken to prepare for a uncertain future,that I would be confident as one may/could be in such circumstance...not the case.
When I see what we are becoming as a nation,when I look at what is being created,in the name of "security",my heart breaks,as I know that their will exist,in my life,a whole lot of stuff,I had hoped to miss.And I know those grandchildren,who have become so dear to me,will have as part of their everyday life.
Some parts of "seeing the future" suck.
I have looked at my life,and thought if their was anything I could do,or have done,to change the way this is going to end.

Nope.This future was cast in quik-set before I was a gleam in my mothers eye.

My only key in this game will be to try and raise two very bright kids with every bit of savvey and "world smart" I can pound into their head.Computers this year.Tutors next.{I don't know how long I will have "poor" scholars "cheap"}
Got the place,now need to train the next gen,I think.And start to get more living space here for the rest of the tribe.Odds are I will be needing it soon.

Bee good,or
Bee careful

A happy,safe,and "boring" new year


snuffy

NZSanctuary said...

Ilargi said...
Tom,
Since both Stoneleigh and I once were editors at The Oil Drum, we are well aware of the "oil caused the financial crisis" idea, and have been for many years. We discussed it so many times at TAE that dragging it up -or down- again is not a very appealing prospect.


Oil-as-primary-cause seems to only encompass recent decades when looking at correlation. What about over a longer time-span: have there been financial crises/credit crunches characterised by massive credit expansion that have happened during times of energy expansion? Have there been recessions/depressions during times of abundant energy?

Yes.

SecularAnimist said...

The cause of every financial crisis is the process of capital accumulation. And when peak oil dynamics does come into play - it will still be the process of capital accumulation driving further disenfranchisement.

A Fall Guy said...

@ jimmyjames

"Basically your post-which you must have spent all day typing up makes no sense at all to the topic being discussed"

My main point was about level of discourse. Comments that are not civil, like the one above, are a waste of time regardless of topic.

Not sure why you think I spent a lot of time typing in my last comment. But an alternative explanation for my late reply is that I am busy preparing, which means physical work. Please don't wait for me to respond to further comments. My time is more valuable than that.

Glennjeff said...

peripety,

Never joined or gave it a second thought, remember thinking it was a bizzare idea (MENSA) at the time. ( I was 14 )

"Elite Clubs", it's pretty plain to see where they get us.

IQ testing, as it was back in the day, only addressed a limited range of what is actually "intelligence". They only discovered my unusual ability to rip the tests apart because they were trying to figure out if I had a classifyable psychiatric condition. On the up side, it got me out of getting heavily medicated :}

I'm smart enough to know I'm stupid.


TAE daily,

Fair, as always. The tone of the board was getting a bit abrasive so I thought a coarser grit sandpaper might be applicable.

The "instability of money standards" may need a revolution in the education system from age 4, a eugenics program and an authoritarian, algo based daily monitoring of all citizens and their employment status to be solvable.

RFID's and the film Gattica come to mind. The jackboot eternally stomping on humanities neck.

Cyclicity, recursive algoriths and failure to learn from history are an integral part of this magical dimension we inhabit.

Ash said...

Tom,

"Black Monday occurred during a time of stable and growing US GDP. The mid 80s also were also not marked (in the US) by abnormally high levels of financial exuberance or speculative euphoria and no recession immediately followed the crash. Indeed, GDP continued at a moderately positive clip for at least 3-4 years after Black Monday, until the Gulf war, and associated oil shocks heralded a brief recession in the early 90s."

A few points:

1) As already noted, the lack of confirming macroeconomic data before the market crash does not undermine Minsky's FIH one bit, and is in fact perfectly consistent with the theory.

2) As already noted, the 1980s was marked by high levels of speculative "exuberance" in the real estate sector. Home sales dramatically fell in 1986 and the savings and loan banking crisis began shortly after (and continued into the early 90s), while an official "recession" occurred 1990-91.

"In an effort to take advantage of the real estate boom (outstanding U.S. mortgage loans: 1976 $700 billion; 1980 $1.2 trillion)[5] and high interest rates of the late 1970s and early 1980s, many S&Ls lent far more money than was prudent, and to ventures which many S&Ls were not qualified to assess, especially regarding commercial real estate. L. William Seidman, former chairman of both the Federal Deposit Insurance Corporation (FDIC) and the Resolution Trust Corporation, stated, "The banking problems of the '80s and '90s came primarily, but not exclusively, from unsound real estate lending."

In this context, BM is not necessarily the freak event that some make it out to be (remember, these are the same neoclassical economists who were saying 2008 was a freak crisis), and it was quickly followed by marked financial instability and economic slowdown (again, perfectly consistent with FIH).

It is true that there are marked differences between BM and other market crashes in terms of both its proximate causes (not root cause) and its distance from an official recession, but no one has ever said that FIH makes all periods of financial/economic instability alike, especially when we're talking about completely different periods of time (and arguably manipulated data). Indeed, that would be quite weird if they were.

3) You now seem to be relying on your n=1 BM example to validate your entire working hypothesis, and present it as the "simpler" explanation for the data we observe as opposed to FIH. In fact, FIH is the much simpler explanation for the range of data we observe over decades, when you take the broader perspective about how the financial system fundamentally works and how it has evolved over time. Ignoring this perspective now leads you to causally (and casually) conclude that "associated oil shocks heralded a brief recession in the early 90s", dismissing everything that happened within the financial system over the 1980s as a factor. That is not so much the simplest explanation, as a simple way of ignoring a complex reality.

Greenwood said...

If each 'generation' is roughly 25 years and we go back to the beginning of the boomers, let's say 1950 as a even number, what could have gone different then to alter what we have now.

I was speaking to an old friend from the WWII generation, a parent of the 'boomers'. He said his generation had been raised as children in the depression and then fought a world war and in general, as a generation, did not want that kind of experience for their own children. He said it was natural to want things 'better' for your kids, especially after the 30's and 40's. He use to sing a little song when I worked with him years ago with the chorus line, "the good old days, the good old days, I was there, where were they?"

If you think the general population's lack of finess on macro economic theory and energy awareness is pitifully low now, in 2011, it was damn near nonexistent in 1950.

So after the depression and a WW, the boomer generation's parents were 'rewarded' by the 1% of their day with the National Security Act of 1947, which institutionalized the black shadow 'defense' budget, and gave rise to the atomic warfare scare, the Red scare and the cherry on top, the 'Korean Conflict'.

My older friend also said he and most of his friends would be damned if they were 'going back to the farm' after WWII to live a natural 'sustainable' lifestyle. It was not an appetizing or nostalgic notion. They had seen a wider world and considered 'the sticks' to be a big bad dead end. He and his friends though the 'back to the land' thing in the 70's by the hippies was hysterical, they knew how hard life on the farm really was and not one in a thousand (of the tiny fraction of the general population) of the 70's kids 'made it' sucessfully with their new 'balanced' lifestyle choice.

What pray tell would a parent of that age do 'different' to have altered the course of events and avoided today's Clusterfuck? Got any arm chair rear view mirror advice to the 'Greatest Generation' and their life decisions?

~

Ash said...

Tom,

Also, I would like to again clarify the position here. I do not believe anyone is refuting the fact that high oil prices contribute to economic slowdown in the developed world, and that economic slowdown can contribute to financial instability. It would be silly to do so. We are also not saying that speculative euphoria is the only cause of high prices (or ensuing price volatility), and fundamental supply/demand issues obviously play a large role (although they are very much inter-dependent with the financial system).

The argument is against your working hypothesis, which suggests that high oil prices (or periods of high price volatility) are the sole and/or primary cause of financial instability and economic recession/depression, and perhaps the sole driver of political instability as well. That hypothesis is simply not borne out by existing theory and evidence in support of that theory (which, btw, dates all the way back to at least the earliest critics of capitalism), and your data analysis falls well short of changing that.

p01 said...

Got any arm chair rear view mirror advice to the 'Greatest Generation' and their life decisions?

No. On the other hand what they could do now is try to wake at least one soul and teach some of the wisdom they have to at least one GenX-Y-er (this is the real tough job). It was inevitable, don't lose too much sleep over what could have been done.

TAE Daily said...

Number of homeless children highest in American history

"The number of homeless children in the United States is at its highest levels in the nation's history, according to a study released last week from the National Center on Family Homelessness. 1 out of every 45 children is homeless. That's a staggering number; a majority of them are under 7."

Tom Therramus said...

@Ash
"The argument is against your working hypothesis, which suggests that high oil prices (or periods of high price volatility) are the sole and/or primary cause of financial instability and economic recession/depression, and perhaps the sole driver of political instability as well."

Hi Ash,
The discussion is appreciated. I have enjoyed the back and forth. I'm going to stop now (except a final comment below) - as I've made my points and believe that we are in danger of chasing each other in circles.

Final comment - If you read my last essay (and it is not clear to me that you have) you will find that no such sweeping claims are made as suggested above. To the contrary, what is reported is that oil volatility and swings in political polls, including Presidential approval and Direction of the Country, show NO evidence of relationship between 1999 and 2005 - as assessed by Fourier transformation (FFT). There is also no sign of a dominant spiking frequency in the FFT spectra for either the oil or polling volatility series during this period.

However, between 2005 and 2010 FFT spectra for all become extremely similar - and moreover a single dominant frequency (32.3 months) emerges in the series for oil price and Presidential and Direction of the Country polls. My collaborator and I Mike-the-Mechanic are now "windowing" the time series using FFT to determine when in the mid 2000s the 32.3 mo dominant frequency first became manifest and if the timing of its emergence in the oil data precedes that in the frequency domain from the polling data - with the hypothesis that oil price instability is downstream during this specific period of time : >)

Alexander Ac said...

@Ash,

you was right regarding the TD's position on hyperinflation, as latest post proves:


So, just what happens next year when the banks box Draghi in a corner and the Goldmanite decides to actually... print.

Perhaps this is a question, as before, left best to our German readers, who unlike their detached from reality peers in the US, know that hyperinflation is and can be all too real.


Just so predictable that HI gang predicts printing :-)

cheers,

Alex

Ash said...

Tom,

Fair enough. I too have enjoyed the discussion and, as said before, I appreciate your detailed data analysis and high degree of objectivity in the matter, and find it all very interesting food for thought. My concluding thoughts:

I was unclear about your position on the relationship between oil spikes and political divisiveness. On that matter, I would have to agree with Ilargi that it would be extremely difficult to isolate any meaningful connection between the two over such a short time period (post 2005), and based on a loose and vague measure such as public polling data. Political "science" has always been a very suspect field for those kinds of inquiries. Still, I would like to hear about your future analysis in this area.

With regards to oil price/volatility and financial/economic instability, I believe your data analysis does establish a meaningful connection since WWII. The difference is that I believe this connection is perfectly consistent with established financial theory and models (*established*, but certainly not mainstream), while you are much more skeptical and lean towards taking the correlation at "face value". I am also eager to hear about any future analysis you conduct in this area.

jal said...

Greenwood said...

"... What pray tell would a parent of that age do 'different' to have altered the course of events and avoided today's Clusterfuck?"
===

snuffy said...

"... My only key in this game will be to try and raise two very bright kids with every bit of savvey and "world smart" I can pound into their head."
===

Well said ...

Clap, clap!

This is what this blog is about.

We who are watching the "great game" are trying to advise our circle of life how to avoid the pitfalls structured into our social and economic systems and, hopefully, be, at the same time, positioned to take advantage of opportunities that may become within reach.

In an ideal universe, where there is no limits on exponential growth, everyone can follow this instinctive primal drive and everyone will have a better life.

In our real world, we must ALL reset our urges to respond to what is provided by our environment.

As always, in every social and economic structures everywhere, we all want to survive and have a better life.

That we have survived has not always been due to the forethought and insight of the individual, but rather to a lot of "being in the right place at the right time."

300 years ago, my forefather came to North America and got a better life. Before that, 300 years previously, my forefather was part of the viking invaders that settled in northern england and got a better life.

The archeological records show that during the roman empire the well to do set up their estates/doomsteads away from the center of civilization with all of their household servants to get a better life.
The same records exists for the Greeks and from all previous civilizations.
None of those estates have survived to present day.
There is no way of knowing if any of us can trace their ancestry and attribute our survival to the fact that they were part of one of those doomstead.

What ever the circumstances, "being in the right place at the right time" played a great part in our survival and existence.

===
Patrick said...

"I used to worry that I didn't have the resources to have a collapse plan. I have progressed to stoicism. It seems the only stance to take in view of what's coming. By that I'm not suggesting I'm passive, far from it. But we've never been here on the downside before. All we really know is that it's not going to be like it was. And that getting there will mostly not be fun."

===
A lot of reset must happen.
The most important reset must be in our way of thinking and in our expectations.

Not every descendants from my 600 years ago forefather survived to today.

Not even their survival stories survived.

What we can do is to make sure that we pass on the "stories" to guide our descendants.
Hopefully, they will be able to use our accumulated wisdom and achieve fulfilling lives that does not destroy the environment to the point that homos can no longer exist on this planet.

This is my little bit of wisdom that I pass on to you and wish all of you happiness for the new year.
jal

Ash said...

Alex AC,

Yes, exactly. And the thing is TD will be right about that over time, and both he and we know that. Central banks will print and nearly all fiat currencies will hyperinflate. His strategy will never leave him in a position of being "wrong", because only a few times (only one time I can remember, actually) has he stated that dollar deflation cannot take hold for a significant period of time before HI. And no one is going to go digging up that one article when it happens. Or, I should say while it happens, because it has already been happening for some time now, but will certainly intensify.

bosuncookie said...

Snuffy, you wrote…

One would think, as much effort and time as I have taken to prepare for a uncertain future, that I would be confident as one may/could be in such circumstance...not the case.

When I see what we are becoming as a nation, when I look at what is being created ,in the name of "security", my heart breaks, as I know that their will exist, in my life ,a whole lot of stuff, I had hoped to miss. And I know those grandchildren, who have become so dear to me, will have as part of their everyday life.

Some parts of "seeing the future" suck.

I have looked at my life, and thought if their was anything I could do ,or have done, to change the way this is going to end.

Nope. This future was cast in quik-set before I was a gleam in my mothers eye.


I identify with much of what I’ve quoted above. The differences? I am urban-bound (by choice), and my “doom-stead” preparations are naturally different, although I do have copious plantings of blueberries, pecans, pears, and blackberries surrounding my 1000sf garden. We have no mastiff but rather a mild-mannered Chihuahua who only barks at the UPS truck!

I suppose the main difference is relationship to the community. Foolish or not, we reach out to the community rather than separating ourselves. I now have two other families living with me in our ½ acre suburban lot; we converted unused spaces into dwellings. I have a boarder in the main house. It’s not familiar, but it’s comforting none-the-less. Many writers here have predicted such arrangements as things contract.

In addition, we are very engaged with the larger community; my daughter and I are the movers and shakers (haha) of a small nonprofit dedicated to community building and social self-reliance. We work to create parallel structures that operate right alongside the official ones. When things fall apart, we hope to have it together, so to speak. I am fortunate that my two children and their families live close by in our small town, and that our extended circle of families and like-minded friends is very strong and diverse.

I wish that I could proselytize to these people about ways of being ready for a dark-yet-undefined future. What I have learned as a classroom teacher, parent, and thoughtful human being, however, is that “pounding” rarely works. Sometimes I want to pound on my daughter or my son. What I have learned is that the best I can do is 1) be an exemplar by living my life thoughtfully, preparing for an uncertain future in mindful ways without obsession, and 2) speak clearly about my preparations when the opportunity arises naturally in the context of our conversations.

Which is often, because I am in the midst of thoughtful people and wonderful conversations are always arising.

But I don’t preach, and I don’t pound. I am especially concerned about the future for my 18 month old grandson, who is a funny little boy. My Buddhist studies, however, remind me to act with intention while letting go of the results. This tempers what I do with him and everyone else. Ultimately, the best preparation for contraction is the ability to let go. If I could teach my friends and family one thing, it would be that, even as I continue to learn it myself.

Best wishes to everyone for realizing the fruit of your preparations!

el gallinazo said...

Greenwood

I am about half way through your link on the only Empress of the Roman Empire. Interesting. Haven't gotten to the tie in with chemistry yet other than some hintings that history is driven by inevitable, thermodynamic-like forces.

Re "the greatest generation" and off the farm

Of course I am a great Joe Bageant fan. Bageant's father returned from fighting in Europe in his early 20's to the family farm in Appalachia with a pregnant bride which eventually resulted in Joe. Like myself, he was a first year boomer. Recommend his second book, Rainbow Pie, completed shortly before his death, for great insights into this great demographic movement.

Adults on the farm worked from dawn till bed though the boys had time for lots of fun and adventure. But they didn't regard the work as misery. One reason is that being to a large degree self-sustaining and with amazing expertise and creativity in a vast variety of tasks, the challenges and hard work was usually interesting and satisfying. Compare that to the assembly line worker at a Ford plant putting on wheel nuts all day long.

re the origins of the woman's lib movement and the two worker family.

Personally I believe in the total equality of rights and opportunities between men and women, and the birth of the women's lib movement always struck me as being just what it appeared to be. But the conversation between Aaron Russo and Nick Rockefeller, where the conversation drifted to that movement, and Rockefeller laughed and said, yeah - that was one of ours, gets me wondering that there might be more to it than meets the eye. Occasionally the NWO does apparently the right thing for the wrong reasons. But when that happens, things usually do not turn out well anyway.

el gallinazo said...

@Bosuncookie

I enjoy reading your philosophic posts. As to whether the future was pre-ordained before you where born - well, I am not so sure of that. The fulcrum of the human condition is the freedom to choose between alternatives. But our consensual reality is an integration of the results of seven billion beings choosing, so our ability to change consensual reality is, for the vast majority, infinitesimal. But the good news is that our choices create our own personal reality and each individual can evolve to more skillful spiritual states regardless of the common reality. And by evolving positively, we make the total human reality a tiny bit better, and for those at one or two degrees of separation, quite a bit more than that.

OTOH, whether the common future was set before you were born is open to debate. I would submit that JFK won the presidency in 1960 through Illinois election fraud. If Nixon had acquired the office, the Cuban missile crisis would have resulted in a total thermonuclear war between the US and the Soviet Union. While I am highly critical of JFK in many respects, he had the determination to resist the huge pressure toward war. So if this argument is accurate, perhaps the course of history was not set prior to your birth, and its path vastly altered by the decisions of just one man.

bosuncookie said...

El G,

Actually the part about the future being "quik-set" was quoting Snuffy's post. I absolutely share your notions about reality, both self-constructed and other-constructed as well!

In particular, I absolutely ascribe to this sentence that you wrote: "But the good news is that our choices create our own personal reality and each individual can evolve to more skillful spiritual states regardless of the common reality."

This aligns perfectly with my idiosyncratic understanding of Buddhist free-will.

Max said...

Ilargi wrote”But that still doesn’t say anything about what caused this financial crisis. For those, you need to look elsewhere: inside the financial system, and inside the political system.

Causality between subprime loans and peak oil? Or Goldman Sachs helping Greece and Italy cheat on their budgets through opaque financial instruments? Nothing there. Lost cause.”

Increase in oil costs from $19 to $100 is $81 per barrel.
Greece uses 496600 bbl/day = 181,259,000 barrels/year of oil

$15 billion dollars per year extra on import costs.

GDP (current US$) in Greece was $304,865,000,000 as of 2010

Additional Greek oil costs are roughly 4.8% of GDP. When you are in debt losing 4.8% of GDP hurts. And this does not include all the jet fuel used to fly in all those tourists which are a huge part of the Greek economy. And the tourists who are car commuters have less money to spend etc etc.

Worse than that the cost of oil ignores the value of work done by oil. Less driving means less shopping/visiting/holidaying and less industrial work of every kind. The tourists sit on the beach and don’t drive to the shops. I think the cost of oil is still small compared to the value of the work done by oil adds to the economy.

That is not evidence that financial crisis would not have happened anyway, but the cost of oil is a significant factor. The Greeks and Italians would have been able to pump up the bubble a few years longer without oil costs dragging them down. The cost of oil kills the promise of future growth that might lead to a credit fix today.

Subprime loans were perhaps part of the strategy of super low interest rates as a financial stimulus to spur growth that went on after oil/nat gas prices were rising after 2001, and causing recession then.

Lynford1933 said...

You asked ...

I came along about ten years after “The Greatest Generation” but I remember the times well leading up to the present. After the depression and WWII most people that I was around were individualists, not in the least politically correct, nor did they give much of a damn who knew it. They saved because they knew what it was like to be hungry for the necessities of life. Our country has become a nanny state during their (my) lifetime and they resent it.

I have noticed that with the season and the tension of possible doom from whatever quarter, the flames have been more pronounced here on TAE. The self proclaimed experts in various fields are trying to exert their influence on others in various field through ‘words’, not actions. Had they been actively trying to better themselves, they would not have time for long dissertations of semi intellectual comparisons of PM and the Federal reserve, etc, etc, etc. None of which any one of them has any control but really sounds impressive.

I see Snuffy, Stoneleigh and only a couple others here are doing something the survive the well known depression times ahead. There are so many tit sucking parasites around now that I fear the hard times will be exponentially worse than the depression faced down by the greatest generation. YMMV

Ilargi said...

Max said...
..... the cost of oil is a significant factor.


Really? Greek sovereign debt is 140%-160% of GDP right now, and an added cost of 4.8% of GDP is a significant factor? What, because it could have been limited all the way down to 155%?

Moreover, while oil prices started going up in 2001, Greek debt to GDP remained around 100% for years. It was only in 2008 that it exploded.

And here's your cherry: you remember what happened in 2008? There was a big oil price crash.

Look, I'm not saying that energy prices can't contribute to a recession. But what we are seeing today is many times bigger than a mere recession.

Most people can't believe that though, and can't see the forest for the trees of media and politics propaganda, and they won't until they run face first into a massive and unrelenting oak tree.


.

Ash said...

Lynnford,

"I have noticed that with the season and the tension of possible doom from whatever quarter, the flames have been more pronounced here on TAE. The self proclaimed experts in various fields are trying to exert their influence on others in various field through ‘words’, not actions."

There are a lot of big assumptions and insinuations contained in your last comment. Regardless of which "self proclaimed experts" you are actually referring to, I would suggest that you be a bit more open-minded about intellectual discussions and bit less presumptuous and judgmental about the "actions" of people which you could not possibly know. Your attitude of condescension doesn't help anyone, in any generation, get anywhere good.

bluebird said...

Most of us who read TAE have never lived thru a severe depression. Most people I talk with think that the lifestyle they are living today, is 'normal'. So it is very difficult to explain what is forthcoming and impossible to open their eyes for them. It would be nice if, like bosuncookie, I lived near like-minded people, but I don't. I can only hope that when the tipping point is reached to the other side, that then I can help educate them, and with our collective minds, be able to be creative and innovative for as long as we can to survive.

Lynford1933 said...

Ash:

My question is simple, Do you really know how to sharpen a knife by hand without electricity? WTSHTF I will be part of the solution for my family and neighborhood. Will you? Condesending, damn right.

Lynford1933 said...

PS: If you or anyone else should stop by, I will teach you how to sharpen a knife by hand without electricity. how's that for help?

Ilargi said...

Lynford1933 said...
Ash:

My question is simple, Do you really know how to sharpen a knife by hand without electricity? WTSHTF I will be part of the solution for my family and neighborhood. Will you? Condesending, damn right.


Yes, he will. Perhaps not in the same way as you, but then, one skill set alone won't pull us all through. Ashvin is young, very smart and in possession of an open mind. I'm sure he'd like to know how to sharpen a knife, if he doesn't already. Which is something that you don't know. And yes, that in itself does make your words somewhat condescending. It doesn't make them smart or deliver proof of an open mind.

.

Frank said...

Lynneford,

Why yes, I do normally sharpen knives by hand. I have a grinder but rarely use it.

_And_ I do find actual practical help in intellectual discussions. Getting a better handle on how things are likely to go is very helpful.

For instance, I got rid of my percherons last year, because I have now decided that, despite believing that peak oil is already biting harder than Ilargi thinks it is, I will still be able to afford the 5ish gallons of petroleum products per month it takes to do the irreducible minimum with my tractor and chainsaw. Feeding the horses through the winter cost the same as a gallon of diesel per horse per day. I didn't see much likelyhood of the ratio changing much any time soon. I couldn't afford both, and decided that the tractor is more useful to me. I'm prepared to reconsider when I meet a horse with a bucket loader.

Another important issue is expecting a slow grind down rather than a crash. I would have done much different in 2008-09 had I been prescient. I've now decided that, living where and how I do, I should expect more of the same slow grind down rather than a big crash in the next few years.

Both of these decisions were highly informed by reading and talking here and elsewhere, on and off line.

BTW, I'm not as impressed with the greatest generation as some. They indeed survived the great depression (largely as dependents) and won WWII, but then they, and the silent generation that followed largely coasted the rest of their lives. A few of the silents have had to deal with some of the recent crap, but mostly it is and has been boomers and gen X, despite the previous two generations being highly complicit in creating the problems. I'm not whitewashing us boomers, but Ronald Reagan was not our fault.

Lynford1933 said...

I am happy for Ash and his youth and open mind. But his initial response was to take offense rather than to think about what was said. I can tell he was offended and angry because he even misspelled my name which was plainly written in blue bold. Like a junior officer to whom I once gave an OER. "He is a fine young officer who will go through life pushing on doors that are plainly marked ‘PULL‘".

I have seen numerous youths with open minds that could not find their ass with both hands at parade rest. Since I don't know, and Ash may be different? I'll take your word for it.

The original question was to ask about the greatest generation and what to tell generation X-Y-Z. My response was part of that answer and to show, without much thought, an insight into that generation. I can almost but not quite call it my own. That generation was not impressed with talk. Most hardly had a high school education and were very independent. They enjoyed a good story, but not much about what ‘Should‘ be done to cure this or that. IMHO anyone who says we 'should' do this or that is a fake, a con or someone to is just trying to impress. Why do I not care for Al Gore who says we ‘should’ be environmentally conscious but flies around in private jets? His carbon footprint is more than my whole neighborhood. I do pay attention to a fellow down the street who bikes to the store and ride public transit. I got a bike and it is a good way to stay in shape.

So now. What have we solved? Nothing but made many ones into zeros and vice versa. I did make a couple walnut and rock maple pizza pulls this morning. Now that the glue has dried and I probably said too much and pixxed generation X-Y-Z off no matter how smart they are, I’ll go out and finish them. I use mine every time I make bread and a couple friends need them (including that guy down the street ;-).

Ash said...

Lynford,

"My question is simple, Do you really know how to sharpen a knife by hand without electricity? WTSHTF I will be part of the solution for my family and neighborhood. Will you?"

No need to get into a general "skills" contest with you, or pissing match about who will help others more, because

a) I'm confident you have more "practical hands-on skills" than I do. I know a few things, thanks in no small part to the wealth of information at TAE and similar sites and a few handy friends, but not nearly enough and not with nearly enough repeated experience, trial & error. I suspect that will be an ongoing part of my life for as long as I have it (life).

b) Unlike you, I am quite certain that I *cannot* quantify how many people I have helped or will be able to help in the future, and how much I have helped them. That is true whether we are talking about those around me or those I have had or will have contact with online, directly or indirectly. I only know that it is occurring, and it is something that requires a bit of humility and faith.

c) If I didn't think intellectual discussions ever helped anyone in their lives or the lives of people they know or have some form of contact with, I wouldn't engage in them. But I believe they do, and I feel your condescending dismissal of them as just "words" shows a lot of disrespect for A LOT of people who spend their time presenting you with valuable information and analysis at minimal or, more often, no cost, other than the time you freely choose to devote.

So, Lynford, I'm not angry with you, just as I don't get angry with the numerous people who have told me I am wrong about this or that and actually hurting those around me. I am simply of the opinion that you should think more carefully when you write generally condescending comments about people here before you hit "publish your comment". If not, that's your choice, but please don't be surprised when I respond.

el gallinazo said...

Gordon T Long is a superb financial analyst both fundamental and technical. He would run podcasts with a cohost three times a week until last month. His cohost, Ty Andros, was a pulpit pounding Ayn Rander, and while I would listen to the podcasts anyway, it took a lot of the "pleasure" out of them. Anyway, Long has an analysis which ZH picked up. He shows in great but clear detail what Ilargi has been warning us of for quite a while, the eurozone is about to blow sky high.

You can find TD's take on it here:
http://www.zerohedge.com/news/why-ecbs-ltro-wont-stop-collateral-contagion

or the almost full Monty as a pdf here:
http://www.scribd.com/doc/76610619/Article-Collateral-Contagion

For the true full Monty for the financial geek, at Long's web site.

Joe in NC said...

El G,

Yup, I thought the Gordon T Long paper was interesting too - I guess that's why I posted it yesterday. Your presentation of it is clearly superior to mine (no sarc just being honest). Maybe there will be a few comments on it now since you are quite deservedly well respected at TAE.

.

Joe in NC said...

Ash - You've helped my understanding of many things. Thanks.

Joe in NC said...

Former Fed VP Accuses Bernanke Of Bailing Out Europe Via Currency Swaps

Did the former Dallas Fed Vice President:

a) suddenly get a conscience
b) suddenly grow large testicles
c) forget meds while enjoying holiday events
d) other?

el gallinazo said...

To paraphrase former heavy weight champ Larry Holmes, when it comes to the title of being the most ornery old bird on this blog site, I might as well just hang up my jock strap. I'm not even a contenda :-)

Glennjeff said...

Annonymous hacks Strtfor -> Major Australian banks advise customers to cancel credit cards and check for unauthorized transactions on their statements.

memphis said...

Frank wrote:

BTW, I'm not as impressed with the greatest generation as some. They indeed survived the great depression (largely as dependents) and won WWII, but then they, and the silent generation that followed largely coasted the rest of their lives.

Really. Well, my folks were a part of that generation. "Surviving" the great depression as dependents meant having parents that had the wherewithall to provide for them. Are you not "impressed" with the photos that I & S often place at the top of each post? Do those depression era folks look like coasters to you?

Had it not been for my grandmother's sister and brother-in-law, my mother might not have survived. My mother's family raised nearly everything they ate, as did my dad's.

My dad's family farmed with Belgions. Too poor to attend college, my dad worked as a machinist. I think Dad retired when he was either 67 or 68. I recall him working seven days a week during some of my childhood years and then coming home to work on our farm.

My mother taught school in her day job. She started college in her 40s. She quit teaching to care for my dad when his health failed and I think she was abouy 67. When I was a kid, she and her folks planted and harvested a huge garden that fed us pretty much from one planting season to another.

All they ever knew was hard work, and I doubt they were the only ones. Out of curiosity, just what would it take to "impress" you if it isn't people who worked that hard?

p01 said...

Grandpa: fought in the war (on both fronts: with and against the nazis, imagine that) Built his own house with the help of his brothers mostly from straw and clay (chirpici). Not terribly politically correct (by any standards), but extremely correct in day to day life without having a book with old stories to tell him exactly what and when to react, who to trust and who not, and so on. He would single-handedly chase off 6-8 disorderly drunks from the street corner without a bpm raise in pulse. Lived through the depression, of course.

sumacarol said...

I would like to take this opportunity, as the year draws to a close, to thank the many people who have taken the time to make thoughtful, interesting, useful, sometimes entertaining, comments on this blog. I feel most fortunate to have the opportunity to ponder the ideas put forward here.

I have one comment to add on the point of the hard-working depression-era folks, because this just came up with my better half and my father. On the one hand, I can’t help but recognize the tremendous work of the depression era folks, but at the same time I am aware of the tremendous work required today of people living in the third world with much less to show for their efforts (no land of their own or resources to adequately look after themselves, no matter how much sweat equity they put out). Then, looking at the circumstances faced by the depression-era people once the depression ended, it looks like these folks had the benefit of living through the biggest real estate and stock market bubble ever, in addition to the build-up of the military industrial complex and all of the job opportunities that represented, cheap energy, and the implementation of much of the social safety net that was implemented to fend off communism. For sure, life was tough for the depression-era folks at the beginning, but later in life the cards in their hands improved, due to these other factors. It really drove home for me the importance of circumstances , in addition to the contributions of the individuals involved.

Robert 1 said...

Lynford1933, Ash, etal.

I just watched a classic Laurel and Hardy film on a national Art channel called "The Electricians". In this film Laurel and Hardy opened a store selling newfangled electrical appliances next door to a small grocery store. It turns out that the proprietors of the two stores had met each other before and the small man running the grocery told them to get out of his store when L and H went over to introduce themselves. Well one thing led to another and they started exchanging insults and objects and eventually started to trash each others store.

At the end of this film, the neighborhood policeman, who had been watching all of this from the side, intervened in the latest fray and said "Hasn't this gone far enough? Its time you guys make up and shake hands - which they did.

I have been enjoying this blog for some time and have learned and gained a lot of useful information from the various contributors including those above. Mostly comments have been intended to be constructive and usually been polite(exception Cheryl). Lets continue to keep this tradition.

BTW L. I have been sharpening knives and axes by hand (with sharpening stones and files of course) for over 60 years and using these tools to clean fish, small game and chop firewood. These are indeed useful skills that may become more important once again.

The various contributions re the economic disaster and resource depletion are valuable information for preparation for what is coming - and so are those that discuss, nearly forgotten, survival skills.

Have a prosperous and healthy New Year all. I will be traveling for the next 6 weeks in an area where people still live much like they always have and I won't have much chance to follow what is going on in the world. Hmmm, why am I not sorry?

Cheers,

Robert 1

peripety said...

"Ashvin is young, very smart and in possession of an open mind. I'm sure he'd like to know how to sharpen a knife, if he doesn't already. "

I assume Lynford1933 was speaking metaphorically.

Lately I have been wondering about all the time spent by what seems to be a younger set who spend much time writing about financial matters and becoming so very wrapped up in them that I doubt that they spend much time learning the skills that will be necessary for their real future lives. There are legion bits of knowledge and if left unlearned too long will be the very devil to learn in haste. For merely one, the skill of such a simple item as how to drive a nail is quite beyond most these days. I learned that sort thing, at the age of 12 0r 13, building tree forts and clumsy canoes. Try this sometime, ilargi, ask some kid of 20 or 25 who has not been trained as a carpenter to drive a nail for you along side a carpenter, I promise you it will be worth your time paid out in amusement.

jimmyjames said...

well--

Since everyone is feeling sentimental and sharing something of themselves-i will give a profile of myself-

I have a big wart on my nose and i illegally charge all the peasants a fee to cross my bridge-

4 months away from pension eligibility-quit school at 15 in 1968-worked in various oilfield jobs and still do-loved being judged guilty by association with the hippy world-
Always had a Harley-
Farmed/cattle for 32 years (bought and paid for)
Married for 34 years (still)

Both parents depression/WW# 2 vets-

Have hunted since time began-can easily field dress a moose or a steer in 15-20 min-

When i was a kid-all my friends could hit a navy bean at 50 yards with a 22 cal.

Generally find more interest in younger people who have drive and want to "know"

Not bragging or bitching-it;s just the way it is-

Ash said...

peripety,

"Lately I have been wondering about all the time spent by what seems to be a younger set who spend much time writing about financial matters and becoming so very wrapped up in them that I doubt that they spend much time learning the skills"

Oh yeah? And who exactly would this "younger set" that "writes about financial matters" be? Are you "wondering" or worrying? Or both? And why either? What are "the skills"? From where and whence do these doubts arise?

I'm asking these questions because... I'm having a hard time understanding where all of this general anxiety over the lives, preparations, skills, etc. of young financial writers, "wrapped up" in current matters, suddenly emanates from. I'm really curious to know.

In the meantime, let me say my peace about these generational issues. One generation is not any more to blame for our current predicaments than one race, ethnicity or gender is to blame. There are no "better" generations just as there are no "better" races or nationalities. There are just people - malicious people, loving people, handy people, "smart" people, wise people, famous people, "poor" people... you get the picture, with most people being a combination of many different things.

Glennjeff said...

The only skill required in driving a nail is the ability to not hit your thumb ;}

jimmyjames said...

Ash--

Sounds to me like those condescending attitudes jar your ass as much as they do mine-

imo--either try and prove your own point of view or disprove the others-with as much fact as possible-

Simple shit really-

All of us are nothing but irrelevant students groping around under the awesome shadow of the market-trying to understand the many tongues that it constantly telegraphs to us-its intentions--

http://www.youtube.com/watch?v=DFrDXlKiGw0

peripety said...

Ash why do you worry so about this current economic system rather than how our lives could be? Do you plan to fix that broke down machine you study so assiduously. It is a junker and that's that. Better you should learn to pound sand in a hole you will at least develop the musculature to help you handle what the future could hold for you. There is more intellectual rigour and honesty in a farmers rough hands in dealing with his land than in all that vapid front lobe bankers philosophy you seem to be making yours. You eshew the good that could could be preserved in order to bath in the old brine of a tired iniquitous economic system.

BTW a litle intelectual honesty, please! Would you make mention when you alter the use of my words when quoting them.

---------

Glennjeff said...

" The only skill required in driving a nail is the ability to not hit your thumb ;}"

That is one, but another is to be able to pound nails fast enough to get your house built before the winter winds bite your ass;)

-------

jimmyjames said...

Ash--

"Sounds to me like those condescending attitudes jar your ass as much as they do mine-"

Sorry kid I ain't your pa, you will have to go home if you want to have your ass 'jared'.

jimmyjames said...

Sorry kid I ain't your pa, you will have to go home if you want to have your ass 'jared'.

*************
You and your always little juvenile girly snips-

Pick any economic subject you wish to debate and i can guarantee that i will "jar" your ass from one end of the economic spectrum to the other-

A Fall Guy said...

@ Ash

I for one appreciate the service you provide at TAE and have no doubts that your own approach to preparing is as good a path to follow as any. There is no safe path, just ones with slightly lower risks. You have good insights, and I've learned lots from your posts and comments. I think it's important to plant trees, grow food and build community as well as to understand history and systems dynamics (among other things). Many kinds of skills, physical, intellectual and emotional, will affect our ability to navigate future events and conditions. If we are balanced and at peace within ourselves, we are more likely to be resilient in the coming storms.

Glennjeff said...

Illargi, Stoneleigh, Ash, VK, TAE Daily.

We have some raised vegetable beds, made from wood, that are collapsing (termites). We need to rebuild them and have allocated April to this task. We get very good yields from this system, which incorporates a bit of originality in design.

I could make a video series of the whole process; construction, basic theory, soil husbandry / chemistry and basic plant nutrition, planting, compost heap manufacture, pest considerations, and the use and maintainence of both hand and electrical tools.

Would that be of any use to your web site.

Sincerely Glenn.

Jeffrey said...

Glennjeff,

I for one am interested in hearing about your system.

I notice the bulk of commentary in this blog concerns past and current political and news events particularly in the economy. The lesser content is on practical information about what to do with your hands to prepare for an economic collapse. Both have their value but the way the site is set up with posts in chronological order not by subject it is difficult to access information.

A forum type UI with searchable topic threads would be a great help to this valuable site. This may well be in the works for the new site. Could we get some word on what is in store for the new site and when it might be online?

Ash said...
This comment has been removed by the author.
Ash said...

@A Fall Guy, jimmyjames & others

I appreciate the support, and I am quite confident in my own path in this world, however shaky and uncertain it is and will become. What confounds me, or "jars my ass" so to speak, is the level of presumptuousness underlying commenters who have now taken it upon themselves to drag us "intellectual" bloggers out from our "ivory towers" of pure academia kicking & screaming, and into the "real world", supposedly out of some general concern for our future welfare. Well, just one commenter now...

@peripety

I apologize for cutting your quote short - merely a casualty of hasty copy and paste. No "altering" or dishonesty involved. As Robert Plant once sang, the questions remain the same. However, I think it best if we agree to drop this whole issue and move on to more important things, like...

@Glennjeff

That could be a good submission for the "Diamonds in the Rough" series, which, btw, will resume with the new site. Of course, that involves a poll and what not. I'm sure everyone here would be interested in watching your videos either way.

p01 said...

I've been re-reading flame-starting comments last night then again this morning. Honestly, it does not seem to me that Lynford attacked Ashvin personally at all. Maybe a bit to grandiose about the "Greatest Generation". Honestly, my grandparents did not even know it was a "depression", there were just abnormal hard times at the moment for them, so here Asvin really has a point.
Which brings the question of why exactly did Ashvin react like this? It's not the first time he does (I remember another outburst concerning something about his race or color, completely unrelated to what the original commenter meant).

I'll take a sabbatical from reading TAE, and I cannot contribute financially through donations anyway, and at this point I wouldn't, even if I had the means, because of the arrogance of one of the above mentioned editors.

Happy New Year, and best of luck, all!

Nassim said...

Gold tarnished in dash for US dollar

Gold tumbled below $1,600 an ounce for the first time in more than 10 weeks and silver fell almost 7 per cent as the precious metals bore the brunt of a dash for dollars among investors and traders.

The sell-off in the bullion markets intensified on Wednesday afternoon, recalling the darkest days of the 2008 financial crisis when prices fell as traders were forced to liquidate their positions.
More

"This is very reminiscent of the second half of 2008," said Tom Kendall, precious metals analyst at Credit Suisse. "There were similar funding stresses, a squeeze on liquidity, and heightened counterparty risk " and gold behaved in a similar manner."

Gold fell as much as 4 per cent to a low of $1,562.99 a troy ounce, in the process clattering through a series of closely watched price levels. Silver dropped 6.9 per cent to $28.66 a troy ounce.

Crucially for investors who watch so-called "technical" indicators to inform their trading strategy, the metal fell below its 200-day moving average, which stands at $1,618, for the first time since January 2009.

Bankers said that hedge funds and other investors had unleashed a wave of selling as they aimed to preserve profits " or minimise losses " ahead of the end of the year.

The drop in gold prices was the steepest since late September, when the metal tumbled 15 per cent in a week as hedge funds dumped their holdings to meet losses in other markets and redemptions from their investors.

Most prominent among them was John Paulson"s Paulson & Co fund, which revealed last month that it had sold a third of its $4.6bn position in SPDR Gold Shares, the largest gold exchange traded fund, in the third quarter.

The sharp drops in precious metals prices have come as a disappointment to investors who had bought them as a form of insurance against a deterioration of the eurozone crisis.

Many investors are wary of re-entering the gold and silver markets, fearing further liquidity-driven tumbles.

Demand from India, the largest buyer of physical gold, has been relatively weak in recent weeks as prices remain near record levels in rupee terms, removing a crucial backstop from the market.

At the same time, European banks have been exerting downward pressure on the gold price by lending the metal out in exchange for much-needed dollars.

Gold leasing rates " the implied return for lending gold for a specified period " have tumbled to record lows in the past week.

Nonetheless, most analysts and traders still believe that, as happened in 2009, at some point next year gold"s strong fundamentals will propel the metal back towards its record high of $1,920.

Central banks are on track to purchase about a fifth of mined gold production this year and investors" faith in currencies and the governments that back them continues to wane.

"There are going to be those that step up and call an end to this bull market," added Mr Kendall.

"But you have to consider what has been driving the 10-year gold bull market and whether any of the fundamentals have changed."

Nassim said...

I put up that FT article in its entirety because it brings up a number of points that TAE has been plugging for some time:

1- People, banks (including central banks), hedge funds and traders will at some point have to sell gold to get cash.

2- The preferred cash is the US dollar.

3- When choosing what to sell, banks and hedge funds will sell their best-performing assets first.

It is for insights like this that I read the TAE - and the comments - at least once each day. :)

Of course, none of this detracts from the long-term fundamentals. Precious metal prices are certain to rise as the fiat money Ponzi scheme comes to an end. However, the dips and spikes on the way there are going to make many people poorer.

Ilargi said...

New post up






Trends 2012: The End of the Euro, The End of the Investor





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