As most cab drivers in NY City plop their savings in the counter-fundamental, mostly sideways, mainstream media-driven gold "frenzy" (gold is up 7% over the last 21 months; silver is down 12%; platinum is down 38%) a lot of people ask me if I've changed my mind about the dollar continuing its surge higher, and consequently, asset prices continuing to crash.
The answer is simple: it's not my mind that needs changing. Objectively, the dollar trajectory remains on a 20 month-long rocket higher. Note, the next macro leg higher will last for years and be rather eye-watering; near vertical at times.
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Hi FDR, Please forgive my copy and paste of this giant rant, but I found it fascinating, I hope you do to. He seems to have a different take on how much QE/reflation can be done. Care to comment?
ReplyDeleteThe bottom line is this:
Rasputin - Fri, Nov 13, 2009 - 05:35 PM
The world's central banks and governments are now well aware that tens and tens of trillions of fiatscos of debt and derivatives have evaporated.
And to fight "Great Disintegration I", they have flung at least twenty trillion nightcrawlers in the form of monetizations, nationalizations, stimulations and "extend-and-pretend" programs.
So far, they have managed to stop the collapse dead in its tracks and even get stock markets to sky.
However, the rot continues on the balance sheets (and in the dark, dank, derivatives dungeons) of the failed financial gamblers.
And the "real economy" continues to deteriorate, with tens of millions of proles in the U.S. alone either thrown out of work outright or had their hours and wages cut.
As a consequence, the entire ten-trillion fiatsco McMansion market is now solely under the control of Uncle Sugar and the Fed, who are desperately trying every trick in the book to move McDebtors into McBoxes--or to try to keep the sheeps from moving out due to foreclosure.
Finally, our exporter/debt enablers need to keep shipping gimcracks and geegaws to the U.S. or world trade/"Bretton Woods II" continues to collapse.
So, the bottom line is this:
All the central banks and governments of the world know that they either:
Inflate
...or:
Die
...and they WILL continue to inflate/print/monetize/stimulate/backstop/nationalize until ALL currencies are burnt to the ground.
And you can forget about unwinding to any great degree any of the myriad "Alphabet Soup" programs instituted by the Fed and other central banks for probably the next ten years, at least.
So, I'm not particularly worried about Crimex shenanigans at this point.
Because the greater trend is:
"Weimar Meets Zimbabwe"
...on a global scale.
And even the central banks themselves are tacitly admitting it by piling into useless, barbarous, yellow rocks.
Which should be a huge hint that not even they trust their own fiat system.
I've basically given up on my "deep analysis" days.
Because no matter how many five-thousand word missives I carefully construct, it doesn't change the basic facts:
(continued)
ReplyDelete1. "Great Disintegration I" continues
2. So too does the government and central bank's fiat flinging to fight it
3. The general populace of all countries are basically clueless.
...however, since I'm waiting for my Twinkie-and-SlimJim casserole dinner to finish baking, I will take a little time to answer your questions:
(JJ): Why the Fed can inflate?
(Ras):Because if they don't, Congress will legislate the Fed out of existence. Therefore, Bernanke will be swallowin' heapin' helpin's of Uncle Sugar's debt in "Quantative Sleazing 2.0"
(JJ): How far can the monetization go?
(Ras):Bernanke stated in Congressional testimony that he would have, and I quote "No problem taking the Fed's balance sheet to TEN TRILLION fiatscos, on good collateral". I heard him say that with my own two rat-like Rasputin ears.
(JJ): What are the conditions to force the end of the money printing?
(Ras)Nothing less than the complete and utter collapse of the U.S. fiatsco.
(JJ): What exactly is "collapse"? The end of the monetization must lead to "collapse"?
(Ras):"Collapse" is what was happening back in September, 2008, before Uncle Sugar and the Fed stepped in and completely took over the entire financial system. And yes, the end of monetization/nationalization/stimulation will lead to the immediate resumption of "Great Disintegration I".
(JJ): How the different outcomes affect the financial markets and world power balance differently?
(Ras):There's a small chance that deflationary debt and derivatives collapse could overwhelm the efforts of the world's central banks and governments, but I doubt these guys will EVER give up flinging fiat in all directions to fight it.
Regarding the geo-political scene, I have also written dozens of jillion-word essays on the U.S., China, Russia, the EU--all to no great impact. Who knows what will light off World War III? However, I will say this much: global economic collapse, combined with the fall of an imperial power (such as the U.S.) AND the rise of a imperial power (such as China), usually lead to very bad geo-political outcomes. Mix in a little "Peak Oil" and you've got yourself a good plot for a disaster movie.
Ras Conclusion): We're scroomed, and the central banks and governments know it. This is why they have hijacked the entire credit creation/backstop process.
Because if they hadn't, then the world would have already imploded.
Now it's just a matter of time before all fiat currencies are burned to the ground in a valiant attempt to overcome tens of trillions of fiatscos of ADDITIONAL debt and derivatives collapse.
I cannot over-emphasize that the ENTIRE credit creation/backstop process for the ENTIRE economy now depends on Uncle Sugar and the Fed.
Period.
And when, not if, Uncle "hits the wall" in terms of how much our foreign debt-enablers will lend us at cheap rates, then it's either back to:
"Great Disintegration I"
...which was well underway in the Fall of 2008, before the Fed and Uncle stepped in, or:
"Weimar Meets Zimbabwe"
...when, not if, the Fed has to step in and institute "Quantative Sleazing 2.0" and buy up every single outstanding and new issue of NOT ONLY MBS and housing debt, BUT ALSO, tens of trillions of additional Uncle Sugar Treasuries.
(Ras Conclusion):To use a tired, worn-out analogy, we are now in the "eye of the hurricane" and the backwall of the storm is just now smashing into the economy.
(continued)
ReplyDeleteAnd the central banks and governments are furiously flinging fiat at the beast, and will continue to do so, until we either drown in a sea of fiatscos, or are flattened by the hurricane itself.
So, enjoy whatever few months (or, if we're REALLY lucky, a few more years) left there in the Bay Area.
Because life is going to become a living nightmare.
Sorry if this missive is less than my usual too-wordy responses. I'm just tired of typing my fingers to the bone when: "Inflate or Die" so succinctly sums up the situation, and besides, my Twinkie-and-SlimJim casserole is now finished baking.
"Weimar Meets Zimbabwe"
ReplyDeleteNeither is the case. The critical difference is this: the US is controlled by commercial thieves; our government cannot print one dime.
Thus, inflation is merely a for-profit exercise. No profit to be made? No inflation.
This is in distinct contrast to the Weimar Republic, who printed and traded government sponsored cash (not private notes like the USA's entirely private, Bank of NY owned and operated Federal Reserve currency).
That is why the privately held Federal Reserve has been massively reducing the USA's currency supply, and deflation continues to ravage asset prices spanning all classes.
Not a single asset class is inflating, all prices are collapsing.
I hope you don't believe you can make money using EW and fractal NONSENSE?
ReplyDeletePrechter and his SHORT followers are going to get fried.
Why did you choose to use the dol vs eur in the above chart?
ReplyDeleteThe dollar basket, dxy, or dollar futures, /dx, did reach a new yearly low?
"Not a single asset class is inflating, all prices are collapsing."
ReplyDeleteThis always depends on the time frame you are referencing.
Over the last year, yes assets have deflated.
Over the last 6 months, no. Assets have inflated.
Surge? That headline is sure to confuse the uninitiated.
ReplyDeleteDeflation is the word. But it is Gold that will become increasingly valuable, not currency!
ReplyDeleteGold is the best performing asset in a deflationary environment becasue by definition money becomes scarce in deflation, and Gold is Money worldwide.
"But it is Gold that will become increasingly valuable, not currency!"
ReplyDeleteYes, gold is definitely in a mostly-sideways bubble, up a few percent over the past year and a half.
Precious metals, as a group, have plunged with the deflation, as they must, metal is no different than any other "thing" priced directly by the quantity of paper cash in circulation.
"Over the last year, yes assets have deflated.
ReplyDeleteOver the last 6 months, no. Assets have inflated."
Yes, down 54%, up 58% = down 38%
This is the just opening. Our depression is already more severe than the early 1930's, but it's only getting started. It will undoubtedly last longer than FDR's 25 year demolition of the US economy that didn't ease up until the Dow reclaimed 1929 levels in 1954.
A Surge in the US$ , I'm really confused!
ReplyDelete"more severe than the early 1930's"
ReplyDeleteGold and gold related went vertical during those times. What do you think is happening now?
If markets paralelled the 30's, we should have topped July-Oct this year. We have MULTI MONTHS on this run left, which should something about your count.
FDR- It seems as though your chart is about to implode on itself as the dollar takes out the recent fractal lows. Since deflation, in your opinion, is causing the rise in equity prices and gold what will inflation do? Bernanke said today that the dollar is strong still and should weaken over time as economic recovery continues. House prices are rising nicely in Chicago, about 5% YOY and continuing at a faster clip than I can remember. What do you think we need to see happen to see actual deflation occur again? It seems as though the FED has been very successful in creating another asset bubble. The market is rising about 5% per month
ReplyDeleteFDR, I don't think it will take long for this chart to be proven wrong after today's move.
ReplyDelete"A Surge in the US$ , I'm really confused!"
ReplyDeleteThat's how the man takes your money.
"Gold and gold related went vertical during those times."
ReplyDeleteIt's funny how people always say that.
Gold was pegged to the dollar in the 30s. It's price was fixed so it didn't budge a penny.
It is true that well after deflation bottomed in 1932, FDR sent his thugs door-to-door to steal Americans gold in the Gold Confiscation Act of 1934.
After, and only after FDR made gold ownership a Federal crime, and had completed the transfer of all American gold to the private Federal Reserve banks (see "Follow the Money, Part 3" above) was the dollar peg increased from $21 to $34 per ounce in a single, discrete crime.
No private citizen was permitted to participate in that event, which was well after the the 1929-1932 great deflation anyway. It is precisely FDR's transfer of American wealth from the poor and middle class to the ultra rich that prevented a recovery from the First Depression. After he robbed them blind, FDR ultimately had to resort to war to force the poor and middle class back to work under threat of death.
"It seems as though the FED has been very successful in creating another asset bubble. The market is rising about 5% per month"
ReplyDeleteThe price is rising; volume is falling.
So the price is falling too, sans the final suckers. The last two guys trading might agree upon Dow 50,000, but the price point for mass trading to reemerge remains beneath the last low.
You must understand the disbelief.
ReplyDeleteI keep thinking that this market move can't go any higher, but it does. The dollar keeps drifting lower.
The fed has assets (real estate and even stocks) on their balance sheet. I don't think they will want to take any dollars away. Did they have real estate and stocks in 1930's?
I think the fact that the fed swapped out treasuries for real estate and stocks is horrible.
What do you think?
It seems that all of our theories require two things:
ReplyDelete1) the rule of law
2) an electorate that cares
Since we have neither, the bubble will continue to blow.
That reference to the last two guys trading is epic FDR - so Omega Man. The vision of trading returning to a mass basis is more 28 Days Later.
ReplyDeleteEconomy will be in ruin after the current bubble pops. In order to fix this economy Fannie and Freddie need to be dissolved and the Fed goes next. Mass deflation is the only cure. It will be painful, but very necessary.
ReplyDeleteI think we are closer than ever to the fall as truly you are one of the only ones left saying stock prices will go down.
ReplyDeleteI think in the end we will realize that we are no different than ducks. The lead "duck" flies ahead of the pack guiding the others in a V shape formation.
The moves in fx and gold, today and this week, suggest something very big is going on.
ReplyDeleteWould you agree or disagree?
FDR
ReplyDeleteWith the dollar projected to go higher, does this mean that BubblesBen has know idea when he will raise rates?
I guess i am asking if you have a prediction when he will, or what will make him do so