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#16 ShitEatingGrinner

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Posted 28 February 2003 - 01:32 PM

brilliant f'ing post.

perfect sense.

should borrow as much as possible to buy gold--after declaring bankruptcy first? hahahahaha :D

#17 BAREister

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Posted 28 February 2003 - 08:59 PM

Here's the crux of his argument, the FURgoing above it being what attorneys reFUR to ass "dicta" BARE's answers are in red ink:

When you run out of basis points from your supply of basis points or once consumers have consumed all that they can consume it is game over…

Game over?

The point at which you can not inflate debt any longer and debt deflation becomes unstoppable…

possibly: see below

Well then what?

Stage 2 of debt backed (Fiat) fractional reserve banking starts and if you can not reflate the system by lowering interest rates any more or the consumers have consumed all that they can consume then


the printing presses start rolling. BIG TIME. Or so say the inflationists. Then, if THAT fails to reflate, which HRFF thinks it will, you get Hyper's scenario
.

it will run to it’s maximum potential and stage 3 of debt backed fractional reserve banking will take place…

What’s that?

Stage 3 of debt backed (Fiat) fractional reserve banking is “Bank”ruptcy of the commercial banks and collapse of the economy…


or so says the inflationary school.

Personally, HRFF thinks we're all in FUR some perverse environment NO one has ever witnessed beFUR. Some crazed compination of deflation and inflation, no, snot STAGflation, either.

At a minimum a climate/milieu that will flummox all policymakers, evisercate and enrage the middle class, create all manner of chaos in our social fabric, our health care system, our fire and police FURces, governmental agencies of all flavors, and, it will coincide with the systemic corporate bankruptcies Weiss envisions.

Unless, of course, WMD's are used as an excuse to brush this all aside.

Will the corporations triumph in the end or will the middle class say ENOUGH already?

We're about to find out.
"The sphinx set riddles for people which they could not solve and the sphinx devoured them." Russian poet Ilia Ehrenberg reflecting years later upon the debacle of the Bolshevik Revolution and civil war

"In any case, experience shows people are unlikely to change their ways without a cataclysm of existential proportions" Meinhard Meigel, German economist and demography expert on his prophecy of a Wagnerian abyss of social and economic chaos

"We believe that here is no easy way out of this mess, and that the chance of a benign outcome, while hopefully possible, is quite low." Comstock Partners 3-17-2005

"Not without a shudder may the human hand reach into the mysterious urn of destiny." Junk email promoting the sale of Valium, Viagra, Soma and Cialis. Of course, we AMERICANS need not WORRY about such CLAPTRAP!!!

"The trouble about myths, or lies, is that those who foster them are stuck with them." Edward Crankshaw

"I don't buy the idea that a crash will come without warning. There are always warnings. All crashes have certain common technical preconditions." Doc (snorjt)

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"What should be clear at this point is that even huge fiscal stimulus and unprecedented financial excess are incapable of fostering a sound and self-sustaining economic expansion. The paramount issue, today and going forward, is the deeply maladjusted U.S. economy and its increasing unresponsiveness to even enormous yet misdirected financial stimulus. Both the Financial Sphere and Economic Sphere are severely maladjusted." Doug Noland's Credit Bubble Bulletin, Aug 24 '04

"U.S. dollar purchasing power relies almost entirely on the difference between interest rates in Japan and the higher rates in the United States." Warren Pollock, Prudent Bear essay circa 9-04

"What about your replacements? the Children. What do we tell them when the whole thing caves in?" HyperTiger

#18 Guest_alex_*

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Posted 28 February 2003 - 09:59 PM

Hyper, thanks for your brilliant post and leading this discussion.

I found this link in researching the correlation between housing prices/interest rates during the '80s: http://www.econedlin...cfm?lesson=EM36

Machinehead, I'm quite curious to hear from your firsthand experience how you fared based on buying in the early '80's. My sense is that, following the RE crash from '75-'82, RE prices started to rise again significantly. In other words, people who bought during the 75-82 correction have done quite well since.

Some other thoughts:

1) Isn't this time "different" in the sense that US dependence on foreign debtholders is greater than during last couple recessions? Does this add more fuel to the fire, or stabilize inflation?

2) If/when stock market crashes, why dont moneyflows head into RE? We saw this briefly after the 2000 crash; intuitively, I cant figure out why everyone w/ money left wouldnt be making a beeline for RE as an alternative to equities. In fact, this is already happening - what will reverse the trend?

Along these lines, noticed that some investment newsletters pushing the "Reflation" thesis are suggesting RE will benefit from reflation.

I'd LIKE to think that the RE bubble will end soon, but wonder if the dynamics of WHEN it will crash are fairly complex.

#19 FauxCaster

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Posted 28 February 2003 - 10:05 PM

The government really doesn't have a printing press. The FED is a private insitution whose memebers are the very same creditors in this mess. They are not about to let the printing run unthrottled and inflate their debts away. If the FED was actually staffed by the President or Congress, you could expect the mighty printing press to roar.

Of course, there's that silly clause in the consitution Article I, Section 8, Clause 5, but there are lots of silly clauses in the constitution worthy of ignoring.
"WE ARE BEING KEPT ALIVE by the Entropic movement of Dark Matter(Sino-Nippo-dollar purchasing of $UST)---as soon as there is a ringing sound,a sign of an clogged artriosclerotic wormhole on the emergency fiat-meter it will end--dynamic equilibrium,will have been achieved;better known as death" -- beardrech (Mar 15 2006, 01:17 AM)

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It's like you're dreamin' about Gorgonzola cheese when it's clearly Brie time, baby. -- Hitchhiker (S.A.M. 1998)

Mar 28 2003: July 2003 is the time I have identified as the low of the bear move...then the first leg of the bear is over ...many will be caught by surprise to see the market near it's all time high again within 3-4 years [2007] ..."depression" similar to 1932 doesn't come until 2010. -- blackbelt (Mar 28 2003, 10:05 PM)

#20 mjkst27

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Posted 03 March 2003 - 03:19 PM

Hyper - did you record your 2nd MP3? I just want to make sure I didn't miss it.

#21 StrawDaddy

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Posted 18 March 2003 - 12:18 AM

double digit debt inflation barrier is broken and low interest rate debt inflation began…


Hypertiger, this is just starting to sink in. Told you it would take a while. There are so many factors at work I am just now starting to see the big picture that you've drawn for us.

I'm the world on a treadmill, a race to pay off debt, but with a finish line that keeps extending over the next hill, but I'm not sure how to define the term 'low interest rate debt inflation.'

It seems to me that what your saying is that while low interest rates spur along creation of new debt to refinance the old debt, we've reached the point that lower interest rates are unable to refinance the old debt AND that the old debt is about to become unservicable, that is, it's getting to the point where that debt cannot be repaid? Am I catching on here? If that is in fact what you are saying. What proof do you have of impending default?

I appreciate your patience with explaining this to an old stool.

#22 ShitEatingGrinner

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Posted 18 March 2003 - 05:28 PM

what then, hyper? what then?

return to gold backed currency?

assets seized by govts/banks to "pay off" the loans?

What about credit card debt? How does it get repudiated?

Banks explode? Or do credit card debts get securitized ex post facto?

Or is a major world war initiated to cover up the mess?

Martial law?

When does the miracle arrive? :D

#23 stiffed

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Posted 18 March 2003 - 07:46 PM

what then, hyper? what then?


It'll be the start of a new bull market in digging sticks! :blink: :D

stiffed

#24 tpark

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Posted 18 March 2003 - 08:16 PM

I suspect that bankruptcy laws would be tightened somewhat for one thing.

In any event, when the bubble bursts on the housing market, I suspect that
a lot of banks will be in real trouble, like with the S&L fiasco a while
ago. Recovery of funds from people who purchased lots of stuff on their
credit cards could prove difficult, as the money has essentially been pissed
away, and they may be few assets to scavenge from the hapless, jobless consumer.

My suspicion is that issuers of credit cards will take a beating.

I also question whether the FDIC will cover much in the even that the banks start
to croak - it's not like the government is awash in cash to cover such events.

Another thing that scares me about this whole business is that the debt incurred is
used to finance consumption - it's not like people are using the money for
building production capacity. I don't know if this is true or not, but it seems
that borrowing money to make stuff would be better overall than borrowing to
consume stuff.

I doubt that there would be a return to gold backed currency - for that matter, would
you trust the government to actually cough up gold for you if you asked for it?
During the last depression, the government confiscated gold, and I think they
could do it again, except that probably people using it as a hedge would have it stashed
at some place other than a bank. With honest gold back money there wouldn't be any
seignorage, governments wouldn't like that. I wouldn't think there would be enough
gold around to support a large economy anyway.

What additional preperations people should should make for when the bubble bursts?
Also, I would be interested in what others have done in preperation for the coming
crash, besides taking all the equity out of the house and spending it on a large screen
TV :)

#25 DogBoy

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Posted 18 March 2003 - 09:07 PM

Fear, loss of job, and downright unavailability of imported goods due to World Chaos ('er War) will bring an end to the "Era Of Consumerism".

And with the end of the consumer (by definition an individual who borrows and spends to satiate his appetites like no other people in the history of the world) will come the end of the credit bubble, millions of bankruptcies.

It's just a matter of time but the writing is CLEARLY on the war for all to see.

The modern consumer is as you aptly pointed out the CORNERSTONE of our society and economy.

When Mr Consumer can't always get anything he wants but has to wait until he ACTUALLY has the dough then the JIG IS UP.

And though the economy will switch to a war footing oyu need to recall a saying I heard on FoxNews by a marine: "we're trained to kill people and break things".

War is not productive, there is no ROI (Return on Investment), ok maybe you can steal some Oil but it's doubtful since along the way you make sooo many enemies that the cost of guarding the oil wipes out most of the "theft bonus".

And the BOTTOM LINE is that it's all in the charts. As Doc correctly points out it's only a matter of time 'til Uncle Buck and his little paper ass-wipe bonds fall oout of bed permanently.

And who will save U.S. ? Like Enron U.S. Inc. is TOO BIG TO FIX.

The lesson friends is that LTCM was fixed, Enron was just folded and everyone lost everything -- we'll expect Kenny Boy and his pals who got out the door with the loot.

U.S. Inc. will not be fixed, not inmy lifetime, not in your grandkids lifetimes.

And it will have nothing to do with terrorists or the assortment is US haters scattered around the world.

Folks, this thing is in AUTOMATIC PILOT and can't be reversed ---- tooooo late.

------------------------------------------------------------------------------------

"what then, hyper? what then?

return to gold backed currency?"

Yes, yes, yes.

And just for those Eurozoners (so they don't get toooo SMUG) the Euro is headed the way of the mood ring --- no more to be heard from.

"assets seized by govts/banks to "pay off" the loans?"

What ? No loans will be paid off cuz there won't be any currency or legal method of doing so.

"What about credit card debt? How does it get repudiated?
First folks started getting behind a few months (already happenning now). Then their interest rates get jacked up to 35% (Cap One has already done this to some folks) and all CC's allow for this when your late --- I would send your payment registered mail from now on cuz Da Bonkers will be gunnin for ya to be late just once --- Ok Make My Day debtor, just be late and I'll ream Yo ass with 35% rates.

Then they go to court and lose their homes and most everything and then it's over. Whatever the bonkers can get they get, they end up owning MOST HOMES in the country and charge exhorbitant RENTS to get back their dough.

"Banks explode?"
No.

"Or is a major world war initiated to cover up the mess?"
Maybe but the smart folks like here on the Stool site will not be fooled and neither will future historians.

"Martial law?"
Maybe, but wouldn't you want that so your property is protected ? Ok if a commie like Hillry gets in their then she'll just take your shit and give it to some knuckleheads, then I'm against Martial Law, otherwise I'm FOR IT BIG TIME.

"When does the miracle arrive?"
Just like in stock trading --- when things look their worst and everyone is selling eveything for dirt cheap then it's THE BOTTOM and we go up from there --- first very gradually (no bubble mania in al of HISTORY ended with a hysterical V-shaped bottom like we're seeing now) then bulding over decades to another BUBBLEMANIA.

---------------------------------------------------------------------------------------
"My suspicion is that issuers of credit cards will take a beating."

Not, They'll end up holding most houses and real estate and virtually ALL vacation property. They'll sell them later or rent and get their dough back. Plus by the time most people actually file for bankruptcy they've paid most or all of the principal back. And with interest rates at 1.5% the bonkers aren't losing much.

"I also question whether the FDIC will cover "
It's just worthless paper. They'll print whatever they need. The days of bank runs ended when Gold backing was removed.

What's the point in fighting shoulder to shoulder at some stupid ass bank for some worthless little pieces of paper --- OK the pictures are pretty but thwta's the fornicating poinr here ?

"debt incurred is used to finance consumption "
That's right --- it's friggin GONE as sure as a coke head can snort up 1000's of $$$ in a New York minute.

"that borrowing money to make stuff would be better overall than borrowing to
consume stuff."
Sounds like a SANE world which doesn't currently exist.

"What additional preperations people should should make for when the bubble bursts?"
Remain C-A-L-M. Cooperate with authorites --- unless it's a commie like Hillry then fight or else she'll take everything you own right down to the family pets. Store soe food and water, put your wealth in REAL things like Gold, Silver, real estate.

#26 anoscope

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Posted 18 March 2003 - 09:17 PM

example:

1000 shares QQQ $26
1000 shares SPY $87

banks collapse as the head, if/when the banks open... what are the stocks going to do? will companies be worth the same relative amount as compared to cash?

also, assuming ira's are cashed out (tax gets paid by the billions), ppl are stuck in 401k's unless they quit their job. What do ya'll think sheeple/congress will do?

also, will they again let ppl deduct interest paid on other than mortgage from tax?

#27 Sphinxter

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Posted 18 March 2003 - 09:33 PM

Great thread.

Dogboy - great post.

Hyper - I assume you've read Billions for the Bankers, Debts for the People. I For those who haven't, highly recommened this as a start to understanding how the system is rigged and why it will ultimately collapse as surely as an octogenarian chubby at a polar bear swim meet.

What this paper points out, better than most I've read, is just how mindbogglingly stupid this all is. There's no reason for this to collapse. When it does, skilled and productive people will be locked out of functional factories while consumable resources will rot away unused. Kinda stoolpid, no? And all because money is debt based.

And there's NO REASON WHY MONEY HAS TO BE DEBT BASED! &#@%&@#!

Oddly, I learned none of this in high school. Or in college. Or during my MBA. I learned this stuff here and other places on the net. Somebody is going to have to shut this net thingy down. It conflicts with all those many expensive years of brainwashing. I mean school.

I imagine there's some collectivist JD Rockefeller type looking over my recent posts shaking his head as one would at a formerly good draft horse that's decided to give up pulling plows. What a waste.

#28 stormydaze

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Posted 18 March 2003 - 11:45 PM

Great thread.  

Dogboy - great post.

Hyper - I assume you've read Billions for the Bankers, Debts for the People.  I For those who haven't, highly recommened this as a start to understanding how the system is rigged and why it will ultimately collapse as surely as an octogenarian chubby at a polar bear swim meet.

What this paper points out, better than most I've read, is just how mindbogglingly stupid this all is.  There's no reason for this to collapse.  When it does, skilled and productive people will be locked out of functional factories while consumable resources will rot away unused.  Kinda stoolpid, no?  And all because money is debt based.

And there's NO REASON WHY MONEY HAS TO BE DEBT BASED! &#@%&@#!

Oddly, I learned none of this in high school.  Or in college.  Or during my MBA.  I learned this stuff here and other places on the net.  Somebody is going to have to shut this net thingy down.  It conflicts with all those many expensive years of brainwashing.  I mean school.

I imagine there's some collectivist JD Rockefeller type looking over my recent posts shaking his head as one would at a formerly good draft horse that's decided to give up pulling plows.  What a waste.

Spinxter,
Was just about to post this article myself, glad to see you beat me to it, now I can go and do something constructive like earn a living. Working nights :angry: still pulling the plow :lol:

Regards
"Normal people worry me"....
"And you shall know the truth, and the truth shall make you free."
John 8:32

#29 StrawDaddy

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Posted 19 March 2003 - 12:18 AM

I suspect that bankruptcy laws would be tightened somewhat for one thing.

In any event, when the bubble bursts on the housing market, I suspect that
a lot of banks will be in real trouble, like with the S&L fiasco a while
ago. Recovery of funds from people who purchased lots of stuff on their
credit cards could prove difficult, as the money has essentially been pissed
away, and they may be few assets to scavenge from the hapless, jobless consumer.

My suspicion is that issuers of credit cards will take a beating.

I also question whether the FDIC will cover much in the even that the banks start
to croak - it's not like the government is awash in cash to cover such events.

Another thing that scares me about this whole business is that the debt incurred is
used to finance consumption - it's not like people are using the money for
building production capacity. I don't know if this is true or not, but it seems
that borrowing money to make stuff would be better overall than borrowing to
consume stuff.

I doubt that there would be a return to gold backed currency - for that matter, would
you trust the government to actually cough up gold for you if you asked for it?
During the last depression, the government confiscated gold, and I think they
could do it again, except that probably people using it as a hedge would have it stashed
at some place other than a bank. With honest gold back money there wouldn't be any
seignorage, governments wouldn't like that. I wouldn't think there would be enough
gold around to support a large economy anyway.

What additional preperations people should should make for when the bubble bursts?
Also, I would be interested in what others have done in preperation for the coming
crash, besides taking all the equity out of the house and spending it on a large screen
TV :)

My suspicion is that issuers of credit cards will take a beating.


I'm in the Credit Card industry. In the past few weeks I've noticed an increase of credit tightening among major banks. I've talked to people who've had their lines of credit cut with no notice other than a letter advising them of the cut and the reason. These cuts are appearing from the major banks and it is appears to be a growing trend. The major banks are still offering the ZERO percent balance transfer offers but many of the small players seem to have backed out. Local banks are winning customers with loans based on variable prime (4.25). While the FED has warned banks to cut back on what is esentially interest bearing loans, those loans where 0 principal is payed, one bank in particular seems to be laughing in the face of the FED warning. This particular bank is (imo) notorious for extending huge credit lines, taking on all of a consumers debt, and then raising the rates :-> I expect those practices to bite that particular bank the hardest. These are just my impressions and I'm sure they are slanted because of my closeness to the industry and the fact that it provides my livelyhood.

#30 StrawDaddy

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Posted 19 March 2003 - 12:30 AM

To sustain high interest rate debt inflation you have to keep raising interest rates...forever, no dice the federal funds rate only reached 1,908 basis points before it became unsustainable and then the US had to switch to low interest rate debt inflation to survive...

There are only 124 basis point's left... default happens when borrowing stops...

Thanks HT, that tells me I'm absorbing it all.





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