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B4 the Bell, Weakender


Guest yobob1

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Let's win one for the gipper. Well they did. Rampant speculation continues in all markets as the swirling tornado of artificial liquidity touches down and sucks in every bit of loose change left on any table.

 

As Noland points out this week the deflation of the Nasdaq in 2000 - 2001 is really only going to be a foot note in the financial disaster that inevitably will unfold. The bursting of the dot.com and tech bubble will ultimately prove to be just a tiny percentage of the flood waters of the overall credit bubble. Not to worry, we're all insured thanks to the market smoothing mechanism of derivatives which by now have likely surpassed 300 trillion notational value. Thank God there's no chance of a problem with those.

 

IMO we are in the terminal build out phase of real estate. I'm seeing so many new retail mini-strips pop up so quickly that I have to believe that there is a great sense of urgency to get the things completed. This last group I'm watching appear to be purely speculative without any pre-signed leases. At the same time the majority of the retail and commercial buildings put up in the last few years are far from fully occcupied, appearing to average about 75% occupancy, while older developments are losing some tennants either from relocating to the newer units or from business failures. We will soon have 3 large furniture stores vacant, all on just a 2 mile stretch of the main business road here in this end of the valley. These haven't relocated, they went under over the last 2 years. In addition there is soon to be a giant craft store (about 75% the size of a typical Home Depot) vacant and inumerable small stand alone buildings already vacant. Most of that latter group have been vacant for 2 to 3 years now and even the for sale or for lease signs are starting to look shabby. All of this is right in the same area as a very large mall that is at least 75% vacant. That's a whole lot of dead capital generating negative returns.

 

I expect that within a few years the residential market will look the same. Already you have a high vacancy rate in multi-family buildings (eye-ball estimate 15%+) and there are tons of single family houses for rent - perhaps as many as that are offered for sale. The get rich by being a slum lord crowd is in for a rude awakening when the cash flows go negative and the underlying assets begin depreciating instead of appreciating. "Two years ago I was an unemployed garbage collector, but now thanks to Carlton Sheet's courses, I have a net worth of negative $500,000 and a negative cash flow of only $6,500 a month." The combination of increased supply and slowing sales is already causing a ballooning of inventories in most markets. Just a small whiff of fear amongst the speculators, get rich by being a landlord crowd, and the flippers will rapidly add to the supply which should make prices go soft. As inventories balloon, potential buyers (aka "suckers") will slow their purchase decisions as their choices expand and they see increasing price flexibility.

 

It would be akin to walking into your local grocer and finding only 10 boxes of corn flakes in the cereal aisle, and you find the grocer increasing the price hourly. Naturally you grab the first box of corn flakes you see. Two weeks later you walk into the same aisle and find 20 different brands of cereal, made from 6 different grains with variants of each and they are all on sale with prices falling hourly. No need to rush, you begin to compare contents and price per ounce. Heck you might even decide you have enough cereal for a while, so lets wait until next week to see if prices are lower. Sure enough prices have continued to fall, so you decide again to wait.

 

Meanwhile the grocer's warehouse has filled with cereals, the vendors are demanding payments and sales have inexplicably slowed to below where they were when there were only ten boxes of corn flakes on display. Panic mode - prices are slashed but alas the revenues generated won't cover what's owed to the vendors and the grocer goes under, and then the vendor goes under and then the vendor's lender goes under. That's how I see real estate over the next 5 years.

 

Meanwhile in the stock markets it appears as though the worse the prospects for tech companies become the more attractive they are. Or it could be just outright gambling - nah never happen on Wank Street. The disconnect between reality and the financial markets is increasing. There may not even be a chair in the room and yet they are trying to play musical chairs. When the music stops, not only will they all search in vain for a chair, but they will find themselves locked in a room that is filling with nerve gas. No one ever correctly expects a crash - they are always unexpected. They have to be. It is the "surprise" factor that causes the Pavlovian panic mode. We're ripe with "suprise" possibilities. However it may take a market price high enough to effectively wipe out the majority of the short positions, i.e. removing the last chair from the room, before we get the crash the insane financial markets so richly deserve.

 

Companies are lowering estimates, so they can once again beat by a penny. But what if they have miscalculated the extent and depth of the slow down? I could be wrong, but I suspect many of them have. I would also suspect that even those that manage to pull off the "surprise" beating are quite likely to disappoint Wank Street with their forward projections especially if they employed agressive booking tactics to pull the rabbit out for this quarter.

 

And now a few words from our sponsor, the doolar. First off as a US resident, I don't fear a buck drop causing massively higher prices. They won't happen in US markets simply because they can't. The sheeple have no more blood to give; their real incomes are falling and abundant supply will keep prices in line. With corporate debt levels where they are, the one thing they cannot allow is a decline in volumes. They have to have cash flow to service the debt. The fixed costs, of which IMO most debt is one component, have to be serviced. The variables can be cut some more perhaps. Advertising is one prime candidate and so are white collar employees, but overall a lot of cost cutting has already been implemented. Corporate America is considerably leaner than it was 4 years ago so even a tiny slow down in volume spells big touble. Just ask the auto makers. So I don't see a lot of danger in higher prices from most of our domestic suppliers outside of energy which I would argue is also vulnerable to a slow down for a period of time.

 

So what about the imports? Do you honestly think you'll see China-Mart's little smiley face character racing around the store "rolling up" prices? I don't. I think those that export to us are possibly even more vulnerable to declining volumes than our domestic suppliers. I think China will crash, just as the US did in the 1930s. When? A lot sooner than most that expect China to crash. A crash has to be unexpected and the expectations for a China crash are about as low as you can find.

 

Which brings us back to the dollar. I wouldn't hold dollars if I lived in Europe, Japan, or any other place outside of the US. I would argue that in our total fiat environment at this time, all currencies are likely to behave similarly in their respective domestic markets. I believe cash in hand will be a valid position no matter where you live. The forex markets may have a different opinion as to the relative values of each little piece of toilet paper from time to time, but to the man on the street, I don't think it's going to make much difference.

 

I believe we have entered the period of time where we see competitive devaluations keeping most currencies within ranges with no clear cut winners for a while, and possibly never. Ultimately when the buck dies it will take all of it's little buddies with it. It will be a total loss of confidence on a global scale and when the confidence in the money goes, so goes the respective government. Anarchy will rule the day virtually everywhere. That is how I see the end game, but I would be remiss in not saying that the end game may be a decade away or more. First we will have to endure a prolonged global depression the likes of which has never been seen before unless we go back to the Dark Ages.

 

And that brings us to gold, and to a lesser extent silver. Gold may not explode upwards in price. However if prices for goods and services begin declining even a stable gold price would make you a winner. Given the relative dollar value of the entire gold market, it is possible given the number of humans on the planet that even a tiny increase in investment demand could cause gold to move up. When I bought my majority position I felt gold was seriously undervalued. So far I haven't been proven wrong. IMO to fully correct for the last 70 years of inflation gold needs to rise into the $700 to $1,000 range. Whether it get's there or not is a moot point for the time being. The longer I have held it, I have come to appreciate it's true value as insurance against a total fiat world. It is the metal you want to have in hand for that day when the buck dies.

 

Silver is bit of a different beast. It has a certain duality in that is a vital industrial metal and to a lesser extent an investment metal. From an investment standpoint it might adopt the "poor man's gold" position. For me though the stronger argument for silver comes from supply and demand fundamentals. The supply continues to shrink and IMO will continue to do so almost without regard to macro economic conditions. Won't demand fall during a global depression? Certainly, but I believe production will fall right along with it. Most newly mined silver is conincidental to other base metal production. If less zinc, copper, etc. is mined less silver will be produced. Pure silver mines are relatively rare and need higher prices to justify their existance.

 

But digital photography is reducing demand by leaps and bounds. Yes but as, or maybe I should say if, photgraphic demand drops, supply falls at virtually the same rate since almost all of the silver used in photgraphy is recycled. In fact since silver is still needed in digital photgraphy if you plan on printing a lasting picture and is consumed in the production of the camera and of the various storage mediums, it is quite probable that the advent of digital photography has actually increased demand.

 

In time I expect silver to increase in price and we may even see a big spike to clear the markets. For now though I watch silver anticipating it's rise to fair value which is about one fifteenth the price of gold or about $25 at today's gold price or $45+ if gold were to rise to it's correct inflation adjusted price of $700+.

 

Finally, today is the 3rd aniversary of 9/11. At 8:46 am ET the first plane struck the towers and the world was forever changed. Since that time inumerable innocent Afghanis and Iraquis have died in the name of revenge. We could have handled it all so much differently. I mourn not only for those that lost their lives in the initial attacks on the towers and the Pentagon, but for those innocents we have killed and our soldiers who have been killed. The blood is on all of our hands. We are the government and our failure to recognize and enforce that makes us all responsible for those that have died needlessly since that day of infamy.

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Excellent opening, yobob.

 

I thought I would offer some contrarian contrarian thought regarding peak oil and the implication that we are all DOOMED...DOOMED! by the end of cheap oil.

 

It is impractical to convert petrochemicals into hydrogen...but what about direct solar conversion to hydrogen? Hydrogen Solar Ltd. has developed a direct solar-to-hydrogen fuel cell with an efficiency of 8%.

 

http://news.bbc.co.uk/2/hi/science/nature/3536156.stm

"The key to the process has been the advances in novel coatings brought about by recent developments in nanotechnology.

...

When they are stacked in layers, the property of the substance changes to produce large surface areas.

 

"It turns out these devices work because we are using nanocrystalline layers. It is the move to nanotechnology which has brought this technology forward," explained Dr Auty.

 

He added: "If we look five years ahead and we have a few square miles of hydrogen farm in a desert, we think we could produce hydrogen that is competitive with coal and oil."

 

Once production costs have been scaled down, large hydrogen cell farms could produce hydrogen, untaxed, at $1.80 to $3 a kilo.

 

That is equivalent to a third of the price of the same amount of power produced from untaxed gasoline, he thinks.

 

There has been huge amount of work in fuel cells for buses, cars, houses, and other buildings.

 

But Dr Auty envisages the car industry making the best use of the technology in modified combustion engines.

 

"Using a 10% cell, we say that a seven-metre squared array will power a Mercedes A class car for 11,000 miles a year [in LA sunlight conditions] without going to power station," said Dr Auty.

 

If you could put a fuel cell on your garage roof and power your automobile without needing to go to a gas station...for a vehicle which produces water as a byproduct of hydrogen combustion...wouldn't that be a cheaper and better solution than our current arrangement?

 

For powering our cities, we'd have to think about solar power satellites. Terrestrial solar power is plagued by weather and the rotation of the earth, not to mention the environmental effects of covering large surface areas with photovoltaic cells. Putting large arrays of photovoltaic cells into space avoids these problems, but requires a robust space program. The energy collected is then beamed back to earth using microwave lasers. This idea has been in existence for 30+ years, since Oil Shock I.

 

http://www.space.com/businesstechnology/te...s_011017-1.html

 

http://spacesolarpower.nasa.gov/

 

http://www.spaceref.com/directory/future_t...wer_satellites/

 

http://www.freemars.org/history/sps.html

 

Interest in the SPS concept waned after the 1970's due to the end of the oil crisis and the failure of inexpensive launch systems to materialize. In recent years, there has been a renewed interest in the SPS, due to concerns about a possible global warming resulting from carbon dioxide emissions from fossil fuel combustion. A study commissioned by the Space Studies Institute (SSI) has shown that about 98% of the mass of the SPS can consist of materials mined from the moon. A lunar infrastructure would have to exist for this to occur. My own SSI-sponsored work, based on earlier work by Geoffrey Landis and Ronald Cull at the NASA Lewis Research Center, has shown that an SPS could be built using thin-film solar cells deposited on lightweight substrates. Such an SPS could deliver perhaps ten times as much power per unit mass as older designs. The combination of lightweight materials, inexpensive launch systems, and a space infrastructure can make the SPS a reality. No breakthroughs in physics would be required. However, a significant commitment to technology development would be needed.

 

We would still need petrochemicals for industrial applications such as pesticides and organic chemical production. The energy from an SPS could be deployed to extract these from Alberta's tar sands. Or tap previously uneconomical deposits.

 

It doesn't pay to be too pessimistic.

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'The Folly of Empire': Mission Abandoned

By JAMES CHACE

 

Published: September 12, 2004

 

THE debate over why the Bush administration launched the war in Iraq is now at full tide. The American people were told that Saddam Hussein possessed weapons of mass destruction, that the Iraqi regime was in contact with the international terrorists of Al Qaeda and that the most effective way for the United States to prevent Hussein from attacking America and its interests in the Middle East was to wage a preventive war. We now know from the Senate Intelligence Committee's report that the Bush administration's key judgments were wildly overstated and unsupported by the underlying intelligence information.

 

Now it is George W. Bush's hope to change the world for the better. As he said five days after the terrorist attack on the World Trade Center and the Pentagon, ''This crusade, this war on terrorism, is going to take a while.'' The decision the next administration is going to have to make is whether a crusade to create democracy in the Middle East and elsewhere is beyond America's capability. If so, how then are we to extricate ourselves from Iraq, and how is the war on terror to be waged?

 

http://www.nytimes.com/2004/09/12/books/review/12CHACEL.html

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First off as a US resident, I don't fear a buck drop causing massively higher prices.  They won't happen in US markets simply because they can't.  The sheeple have no more blood to give; their real incomes are falling and abundant supply will keep prices in line. 

Let me rewrite your statement, and let's try it on for size:

 

First off as a resident of Buenos Aires in 2001, I don't fear a peso drop causing massively higher prices. They won't happen in Argentine markets simply because they can't.  The sheeple have no more blood to give; their real incomes are falling and abundant supply will keep prices in line.

 

Bear in mind that after Brazil devalued in 1999, Argentina had been in recession for a couple of years. Unemployment was already in the 15 to 20% range before Argentina's devaluation in late 2001. Yet in the wake of the devaluation, in which the peso went from $1.00 to 33 cents in value, prices surged about 40% in the first six months.

 

Yes, if the economy had been strong, prices would have surged more. But the repeated examples of devaluations in Mexico, Indonesia, Russia, Brazil, Argentina, etc. have proven that even an economy in deep recession, with weak consumer demand and high unemployment, will experience sharp price rises for consumer goods after a devaluation.

 

When the currency you're counting in gets smaller in value, it takes more of it to buy a given item. And that effect TRUMPS the supply/demand situation, I assure you.

 

The U.S. has devalued three times before.

 

Once was during the War Between the States in 1863. The South's secession starved Uncle Abe's fedgov of revenues, and they started printing greenbacks. I haven't looked up the percentage devaluation versus, say, the pound sterling. But it was rather substantial, I think. Domestic prices surged, as you would expect in wartime. The U.S. went back on the gold standard in 1879, after a 5-1/2 year recession (the longest ever) squeezed out the wartime inflation.

 

The second devaluation occurred in 1933. Thanks to competitive devaluations by trading partners, the U.S. found itself a high-cost island in a low-cost world, with deflation running at a killer 10% during 1930-32. Frank Roosevelt devalued the dollar from .04838 ounce of gold to .02857 ounce of gold -- a 41% devaluation. He also outlawed private gold holdings. A vestigial gold standard was kept for overseas central banks, but the U.S. never went back on gold domestically. And as you would expect, the deflation stopped and prices actually rose slightly into 1937, despite horrendous unemployment which did not decline significantly during the Thirties.

 

The third devaluation occurred during 1968-1973. President Charles de Gaulle of France, a gold bug and probably no fan of U.S. president Lyndon Butthole Johnson, started cleaning out Fort Knox by redeeming excess dollars generated by the Vietnam War inflation for gold. This led to President Nixon closing the gold window in August 1971, and to free floating of major currencies in 1973. Although I haven't looked it up, I'd guess that the dollar's devaluation against the 'hard currencies' of Europe, from 1968 to 1974, was again in the 40% range. And needless to say, U.S. domestic prices surged.

 

With the gold standard gone, no formal devaluation is possible anymore. Instead of redeeming dollars for gold as France did, our Asian trading partners now 'redeem' dollars for Treasurys and Agencies, held in Mad Al's custody account.

 

However, we might observe that gold bottomed out in late 2001 at around $260, and is now up to $400. The euro also bottomed out around that time and started rising against the dollar. One could infer that a new secular period of dollar devaluation is underway.

 

What's inconsistent with dollar devaluation is low, low interest rates. Usually an external debtor country that's devaluing has to HIKE interest rates to attract capital. I'm not talking about 50 basis points; I mean several percentage points.

 

I believe that Mad Al's $1.25 trillion bond/dollar pool has artificially propped both the dollar and the bonds that back it. Like all pools, this one eventually will fail, even with official sponsorship. When it does, the dollar should fall rather dramatically -- let's guess 40%, based on the historical precedents. Bond prices will fall too, implying dramaticallly higher yields. And even though the U.S. economy will slide into instant recession as confidence is shattered, domestic prices will surge into double-digit inflation, even as unemployment rises.

 

Deflation owing to a weak economy is only possible if a monster debt liquidation exceeds the government's capacity to print currency. We are nowhere close to that, and I don't think it will happen. 95% odds for stagflation ... less than 5% for deflation.

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Good lead off -Yo Bobby -you are in a mellow mood. No question the Real Estate bubble is bursting. Building permits in Greater Vancouver last month dropped 49% year over year. In Whistler where prices have gone straight up for years-to the point where a starter detached home is over a million $- prices have cratered. With the Winter Olympics in 2010 and the huge build in infra structure underway to prepare for it everything pointed to an acelleration in the real-estate boom yet the opposite is happening. Simply put the North American Housing market is over built and over saturated, those who needed to buy have. The Sheeple have been allowed to buy without adequate down payments and ponzi scheme mortgages. Everyone has a ARMS mortgage or as we call it variable rate mortgage or in many cases they have an interest only mortgage. Everything has been based on low rates and rising prices now the ice man cometh-Huh! ;)

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Could this be the beginning of the buyers strike that ushers in the dollah devaluation --

 

Treasuries prices turned lower in choppy trade on Thursday as an auction of U.S. government debt drew almost no private demand, leaving the dealer community holding a pile of paper.

 

The sale of $9 billion in reopened 10-year Treasury notes went at a high yield of 4.195 percent, well above expectations, and drew bids for only 2.12 times the amount on offer, down from August's 2.90 level.

 

Indirect bidders, including customers of primary dealers and foreign central banks, picked up only 2.8 percent of the issue. That compares to 54 percent in the original sale of the notes and 38 percent at the last reopening.

 

Direct bidders bought 32 percent of the five-year sale, a complete surprise to traders since they usually only take 1 percent to 2 percent.

 

With dealers now stuck with an excess of 10-year paper, anal cysts said there was a risk they would seek to sell it off  quickly to avoid even larger losses.

 

Ugly auction

 

Who in their right mind would want to lend money for ten years to a debtor whose net worth is deteriorating at $3 trillion a year ... and whose major CEO candidates don't consider that a problem? :huh:

 

What if Asian central banks have been contributing to the Fed's $1.25 billion custody pool based on some kind of 'private understanding' with Mad Al, scribbled on the back of a cocktail napkin in a girlie bar in Roppongi? When Al retires, or drops dead, or whatever, that 'understanding' goes up in smoke.

 

Are FUReign central banksters backing away early from the bond/dollar pool, before the rush starts? :mellow:

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Who in their right mind would want to lend money for ten years to a debtor whose net worth is deteriorating at $3 trillion a year ... and whose major CEO candidates don't consider that a problem? :huh:

MH - Credit is, IMO, just another resource which the US requires more of than any other nation. The US is running short of oil, and so they are simply sending their young men into hostile lands to take it.

 

What makes any other essential resource different than oil? When credit is no longer offered freely, the US will simply compell its "friends" to offer it. Truth be told, the "friends" won't need compelling. They understand that everyone is in this together. If the US goes down, everyone goes down.

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MH, in the case of Argentina and devaluations one and two, the US dollar was not the world's reserve currency. In the case of devaluation number 3, the dollar became the world's reserve currency, finally and totally replacing gold.

 

When the US dollar is rejected as the world's reserve currency, what you imply will come to pass, but not beforehand IMO. This is the end game I refer to. Whether that occurs next week or next century is not knowable by mere mortals, but I personally think we have a significant period of time ahead before that happens.

 

Deflation owing to a weak economy is only possible if a monster debt liquidation exceeds the government's capacity to print currency. We are nowhere close to that, and I don't think it will happen. 95% odds for stagflation ... less than 5% for deflation.

 

A weak economy is one symptom of the onset of deflation. The orgy of spending has left very few needs or wants unsatisfied (market saturation) and everyone neck deep in debt. You can print all the money you want, but you can't force people to spend it or borrow it. A credit bubble of this magnitude demands growth of that bubble in ever increasing size. Merely holding still or growing too slowly will implode the bubble. Initially debt liquidation is not a requirement.

 

I really think there is a major change in sheeple attitude occurring. IMO stagflation demands wages rising. What we are seeing instead is real wages falling. Companies in trouble are demanding and getting wage reductions because there are no alternative jobs. Companies not in trouble are not having to raise wages and indeed most have been able to pass the increasing cost of healthcare to their workers.

 

With so much US debt having become assets in the world's banks a collapsing dollar would collapse the global asset base. Instant global depression and severly restricted global debt issuance. Prices in the US primarily and most major consumer markets are directly linked to credit availability. Shut off the credit and the prices fall. Cash rules at that point.

 

Do me a favor, would ya? Throw out all of your college economics text books. :lol: It was pretty much all crap when it was written and has become even more useless as time has moved on. Economics is not a science - it is more akin to voodoo or the reading of tea leaves. Ronnies acusers of voodoo economics were not far off beam.

 

Doc if you're looking in, is there a reason my password for the anals is not working?

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What makes any other essential resource different than oil?  When credit is no longer offered freely, the US will simply compell its "friends" to offer it.

Credit, whose Latin root means "to believe," exists partly in the collective consciousness.

 

Yesterday I was thinking about the four-year panic from 1929 to 1933, when there were succeeding waves of withdrawals from banks.

 

What scared the sheeple so badly? Bank panics occurred throughout the 19th and early 20th century, but typically they were one-shot events ... tornados that swept through and then were gone.

 

Even the severity of the stock crash doesn't explain it. There was a solid recovery into April 1930, taking the Dow back to 300. But in Fall 1930, the bottom dropped out again, the first of several times.

 

Numerous books analyze Depression I, but none has ever explained to my satisfaction the mass psychological backdrop -- the extreme fear that took hold of the collective consciousness. Economics focuses on quantifiables -- econ phD's have to be heavy-duty statisticians these days.

 

Mass psychology is half of valuation, in my opinion. (Funnymentals being the other half.) With little understanding of mass psychology, other than primitive sentiment surveys, it is very hard to forecast market movements. We can only rely on hoodoo and voodoo. And I divine a credit-induced crash coming. :lol: ;)

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When the dollar is repudiated as the world's reserve currency, foreigners will "sell Mortimer sell" U.S. dollars. This will happen when the deficits get a little higher--maybe the "admitted" 1 trillion a year type that will really be more like 3-4 trillion a year. All those dollars coming back onto the market will drive prices higher--merely because of the dollar's loss of value.

 

The RE bubble is in blow-off mode in some places, but is collapsing elsewhere. Prices are lower here in Dallas--the peak was 1-2 years ago. However, I read an article somewhere on CS about how further arrangements are being made to help the underpriveliged get together down payments for new homes--sponsored by the taxpayers, of course. The bubble could go on for awhile. The Nasdaq bubble went on about a thousand points higher than I thought it should, after all. They must be rounding up the homeless, Old English-addled derelicts and filling out their loan applications for them. Aren't these just the most charitable and Christlike folks you've ever heard about? Imagine...helping the poor like that? A win-win situation. The bubble gets pumped and the poor get "helped!" Next, they'll be lining up loans for low-income housing in third world countries. KBHomes Bangladesh will begin operations to keep the credit bubble inflating.

 

40% loss of value is way too optimistic, MH. I thought you were a bear. ;) 60% devaluation from here is my guess.

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You can print all the money you want, but you can't force people to spend it or borrow it.

In less developed economies (the former Yugoslavia might be one example), hyperinflation occurred because the government simply printed paper currency to pay its bills.

 

The U.S. is a highly "banked" country. Most people hold deposits in electronic digits, as you have pointed out before.

 

It is still possible to hyperinflate such an economy, and to FORCE people to accept the money.

 

The mechanism is that the USG sells Treasury debt directly to the Federal Reserve. Unlike the current $50 billion rate of monetization, I'm talking about monetizing an entire trillion-dollar deficit. The Fed credits a trillion dollars to the U.S. Treasury account, created out of thin air.

 

The Treasury then pays pensioners (Social Security), contractors (Medicare, Medicaid, defense, highways, etc.), and employees (civilian and military) with those electronic dollars from its account at the Fed. No paper or printing presses are involved. But the monetary base will have doubled, and the dollar's purchasing power would be chopped roughly in half. And the recipients aren't going to refuse the money -- it's exactly the same way they get paid now.

 

The annual rate of Federal Reserve monetization -- which you can easily check weekly in the top line of the Fed's H.4.1 statement -- is the key. When $50 billion goes to $100 billion and then $500 billion, prices will skyrocket. The dollar will crack like a rotten oak tree branch in a windy lightning storm.

 

http://federalreserve.gov/releases/h41/Current/

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40% loss of value is way too optimistic, MH. I thought you were a bear. ;) 60% devaluation from here is my guess.

Maybe 40% loss of value against the euro ... other fiat currencies will be forced into some competitive devaluation too, as yobob pointed out.

 

In purchasing power terms, the devaluation should be about two-thirds.

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Actually the 1930s bank panics are the one relatively easy thing to divine from the Great Depression. Simply put banks were failing, initially rural banks mostly. Once one bank fails in any area the others are immediately suspect. If you had your money in the New York Rippoff and Trust and the New York Gougem and Plunder next door went belly up, wouldn't you be wondering if your money was safe? Of course now we have the FDIC. My guess is it will fail, just like the Pension guarantee will fail and the implied backing of the GSE isn't worth the paper it isn't written on.

 

The primary cause of the banking failures was real estate. Dejavu.

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