Perspectives on the global economic changes

Altair · Post by **Altair** » 24 Aug 2015 21:14

The question is, Is the approach a good idea? We can be caught in a trap and spend all our hard earned reserves. But since we have no other better bad plans, we will have to do with the best bad plan at hand.

Altair · Post by **Altair** » 24 Aug 2015 21:18

FOREX reserves

1 China[2] 3,771,347 Jun 2015[1]
2 Japan 1,242,935 Jun 2015[2]
3 Saudi Arabia 672,106 Jun 2015[3]
4 Switzerland 600,180 Jun 2015[4]
5 Republic of China (Taiwan) 426,398 Jun 2015[5]
6 South Korea 374,750 Jun 2015[6][7]
7 Brazil 368,252 Jul 2015[8]
8 Russia 357,600 July 31, 2015[9][10][11]
9 India 353,461 July 31, 2015[12][13]
- Hong Kong 340,768 Jun 2015[14]
10 Singapore 253,280 Jun 2015[15]
11 Mexico 188,347 Aug 2015[16]
12 Germany 188,310 Jun 2015[17]
13 Thailand 160,274 Jun 2015[18]
14 Algeria 159,900 Mar 2015[19]
15 United Kingdom 153,894 Jun 2015[20]
16 France 141,692 Jun 2015[21]
17 Italy 139,829 Jun 2015[22]
18 United States 120,820 Jun 2015[23]
19 Turkey 119,608 Jun 2015[24]
20 Iran[3] 110,000 Dec 2014[25]
21 Indonesia 108,030 Jun 2015[26][27]
22 Malaysia 105,478 Jun 2015[28][29]
23 Libya 105,000 Dec 2014[25]
24 Poland 104,061 Jun 2015[30]
25 Denmark 96,495 Jun 2015[31]
26 Israel 88,339 Jun 2015[32]
27 Philippines 80,644 Jun 2015[33][34]
28 Canada 76,395 Jun 2015[35]
29 United Arab Emirates 74,700 Dec 2014[25]
30 Iraq 74,000 Dec 2014[25]
31 Norway 65,437 Jun 2015[36][37]
32 Sweden 60,100 Jun 2015[38]
33 Peru 59,202 Jul 2015[39]
34 Czech Republic 56,160 Jul 2015[40]
35 Spain 55,018 Jun 2015[41]
36 Australia 51,672 Jun 2015[42]
37 Lebanon 49,430 Dec 2014[25]
38 South Africa 46,829 Jun 2015[43]
39 Colombia 46,478 Jun 2015[44]
40 Qatar 41,036 Apr 2015[45]

A lot of these numbers will change pretty quickly!! So posting this for posterity for later comparision

ashashi · Post by **ashashi** » 25 Aug 2015 03:12

US markets are likely to be bullish for the next few days.....

chanakyaa · Post by **chanakyaa** » 25 Aug 2015 05:48

The problem is that most (maybe all) OPEC countries have budgeted for a $100+ oil price. With the exception of a handful (UAE, Kuwait, Qatar and the like) - the rest simply cannot afford to take a hit on the price to this level, not for several years on end, and not without having socioeconomic impact, which means of course political repercussions. In the Middle East, it means even more complications than the clusterf*ck it already is. None of this is disadvantageoous to the oil importers.

Oil from fracking producers will always be on standby to kick in the minute OPEC thinks of getting its head together and reducing production to increase price, which means OPEC has effectively lost its price modulating capacity; what it is now terrified of losing, in addition, is its market share. This is why there is total disagreement among the member states, and the bloc is disintegrating - because no one wants to be the one to lose market share to another OPEC member (or to anybody else, for that matter).

It is, therefore, essentially a question of whether the frackers can hold on and keep producing at least at some positive margin, and whether both their R&D and production capacity can outpace and outlast the ability of OPEC producers to keep pumping out oil at low prices and bear the attendant socioeconomic implications. My sense from general reading, and some indicators, is that the frackers can keep going at least for a couple of years at these prices. And it is also clear that, even if the frackers go out of operation, they can come right back in once the price goes up. It does not look like OPEC is ever going to get back their ability to modulate the price in the way they used to.

Only massive catastrophe can at this point take oil back to previous levels ...

JEM, no disagreements to what you are saying. The argument is similar to what the oil/gas "experts" have been saying for the last 12-16 months. In fact, wyest has put the oil producers in the case of "Prisoner Dilemma", in which no producer has incentive to cut the supply and reduce the market share, if one believes that they can't speak with each other, the constraint for the producers is the burgeoning deficits and spending at home and potential distrust between each other. Also creating a perception that shale producers can be marginal producer, putting pressure on prices is clever, but the overall argument has some holes.

First of all, frackers can't just sit idle until margins improve and turn on/off oil production based on price. Intensive operations like oil production needs stable price and demand outlook. These firms have borrowed heavily against future cash flow; thus sitting idle is not what they can afford. Coupons are due on the debt they have taken against fracking operation.

Second, it seems very naive to believe that OPEK producers have started distrusting so much that they, collectively, are okay to leave $2bn/day on the table due to disagreement between each other. If the growing spending/deficits at home is a problem, that should be a great incentive for these members to get together, as they have done in the past, and adjust supply to recover billions they are leaving on the table. Most likely, uncle may have convinced Smoothie Barbaria to help them by agreeing to not cutting supply, potentially causing distrust between other OPEK members.

UlanBatori · Post by **UlanBatori** » 25 Aug 2015 08:14

What changed from, say, 2007 when Peak Oil was looming? Fracking. Why was fracking allowed despite its immense cost in GHG emissions, water pollution etc etc? Because of economic crisis.

So, if GHG concerns come back and Oiropeans and Canadians are forced to eat their own Kyoto Protocols again, fracking costs will zoom, and so will oil prices. Petroleum is still a very finite resource; it is heading for extinction. Arab, Venezuelan and North Sea crude, recoverable through reasonably inexpensive means, is finite.

The emphasis will shift then to recovering methane bubbling through the melting permafrost in Siberia and Canadian tundra. So there may be plenty of natural gas for a while.

So I think the present oversupply of petroleum is an artificial bubble. Demand for petroleum products will slowly rise, even as production declines. The concept of Peak Oil is still real, and we have marched along the predicted path quite a long way: the automotive industry has started shifting away from petrol, using hybrids, CNGs (most taxis in Korea are CNG for example) and fuel cells and all-electric (meaning nuclear). The next step is that refineries will start shutting down and no new refineries will be built, since the demand is not projected to justify those. So the old ones will start going down more frequently, causing supply disruptions.

Aviation jet fuel should zoom in price because there is no demand for automotive petrol to subsidize the low-mol.wt. aviation fuel that distills first.

I don't think these fundamentals have changed. Fracking is the anomaly, permitted because the US and Oiropen changed the rules to suit themselves. The cost will eventually be realized and fracking will end/ become much more expensive.

About gold, I have nooooo idea why gold prices are low. Makes absolutely no sense.
At the same time, those who invested big-time in wind and solar should be scratching their musharrafs now..

UlanBatori · Post by **UlanBatori** » 25 Aug 2015 08:20

Then again, all it takes is one good air raid or even one ship firing a few broadsides / cruise missiles into the oil fields and refineries of KSA to bring panic back. Or a couple of ship sinkings in the Straits of Hormuz / St. Lawrence waterway etc, plus a good Cat 5 hurricane slamming Louisiana/ Texas coastline and ports.

RoyG · Post by **RoyG** » 25 Aug 2015 12:07

panduranghari wrote:
RoyG wrote:
Not gold standard in the traditional sense. Simply put, for foreign transactions you need to peg to something to determine the fiat value. Gold parked in the vault is convenient simply because all major central banks have some quantity of it. Central Banks will start with the 1 ounce to 1 paper note and simply make the quantity of notes in circulation reflective. If the gov decides to print more than the gold stock, that's completely fine.

The point I'm trying to make is, we're going to reach a stage where the dollar peg will be no longer sustainable and OPEC will move away from it. Gold is simply the next best thing because its a common denominator of all major central banks.
Too deflationary. Politicians will be forced by the sheeple to print more. Its always the same situation.

BTW read this http://www.amazon.com/The-Leading-Indic ... 1451651228 to udnerstand economic numbers.

It isn't deflationary as long as the price is reflective of the stock. It just serves as a neutral peg for all the major central banks. What is going to be the standard peg once the dollar exits?

RoyG · Post by **RoyG** » 25 Aug 2015 12:14

All this BS with China started with the Fed. It will come back to the US, when it rips them apart. China will ride it over the next two years. They still have plenty of tricks to put off the inevitable for a while.

What I'm really worried about is the social unrest and what governments do to divert all the attention. South Korea IMO, is ripe for the picking! As is Ukraine, Estonia, etc. They'll nibble at these smaller US and NATO outpost countries.

It's very easy to transition from currency wars to kinetic conflicts. India must be preparing itself.

JE Menon · Post by **JE Menon** » 25 Aug 2015 13:12

>>Second, it seems very naive to believe that OPEK producers have started distrusting so much that they, collectively, are okay to leave $2bn/day on the table due to disagreement between each other.

The key point here is "collectively"... right now, they are not thinking collectively. They are not looking at the $2 bn a day figure, but at what they are individually losing, and what that means for their own pockets, sometimes literally, and also thinking, shite, I can't wait for another few years, maybe another bloody revolution will happen. Let me make as much as I can right now, even at low prices... Something of that nature seems to be the psychology of it.

>>If the growing spending/deficits at home is a problem, that should be a great incentive for these members to get together, as they have done in the past, and adjust supply to recover billions they are leaving on the table.

Here the key phrase is "as they have done in the past". In the past the external environment has never been so unfavourable to them as it is now, and so unpredictable. Remember, these chaps are not making decisions with the independently sourced global realtime information (and absorption capacity) that the major oil companies, let alone countries, have.

>>Most likely, uncle may have convinced Smoothie Barbaria to help them by agreeing to not cutting supply, potentially causing distrust between other OPEK members.

Entirely possible, and most likely adding to the whole confusion. And there's also bits and pieces of new production likely to be coming on stream all over; even more variabilities being added to the mix.

But this is just my take, and it is not unique. I could very well be wrong, but I personally don't think we are going anywhere near that $100 mark until at least 2018 - barring a major scatastrophe. And by then, we can make another prediction.

chanakyaa · Post by **chanakyaa** » 25 Aug 2015 15:26

Yes, it is definitely not getting in 3 digit handle anytime soon. To make it sure that prices stay low, Eye-ran deal may have been reached is haste to create an appearance that this country that has been starved to produced oil and gas for decades may soon start putting few more billion barrels in the market once the deal is officially sealed.

JE Menon · Post by **JE Menon** » 25 Aug 2015 18:18

All sorts of factors are in play... gas substitution, new gasfields coming online, increasing use of renewable energy, you name it....

panduranghari · Post by **panduranghari** » 26 Aug 2015 13:29

JE Menon wrote: Oil from fracking producers will always be on standby to kick in the minute OPEC thinks of getting its head together and reducing production to increase price, which means OPEC has effectively lost its price modulating capacity;

OPEC had control over the pricing only in the era when oil was sold as a part of fixed price contracts. That ended in 1970's when 2 huge oil fields outside OPEC control came on line i.e. Alaskan fields and North Sea Oil fields. To counter it, the house of Saud demanded increase in gold that was being paid. What I mean to say is - Oil was $30 in open market. But in reality it was $30 + x gold. The increased supply lead to price dropping to $19. But in reality Saudi royalty demanded $19 + xx gold. To counter this, the US and UK introduced the futures market which controlled the price. And that was the case until recently. The shale is very much like the 2 major oil field discoveries of 1970's. It has added to the increase in the supply. However, there is a pronounced decline in demand in the west, while the demand in emerging asia is rising. Then why is the price falling? I think this is demand destruction. Its going to play out until the EROI - energy returns on invested equates the natural price discovery. Another 3 decades of petroleum economy is on cards. After that, I dont know.

JE Menon · Post by **JE Menon** » 26 Aug 2015 13:45

^^I was referring to price modulation, not control - i.e. they could not guarantee price behaviour, but could affect it pretty consistently. Strictly speaking, of course, control they never had. There was always someone who could pull their ears. Don't disagree with your post though.

chanakyaa · Post by **chanakyaa** » 27 Aug 2015 05:39

Why Government Hates Cash (Source: Mises)

In April it was announced that Greece was imposing a surcharge for all cash withdrawals from bank accounts to deter citizens from clearing out their accounts. So now the Greeks will have to pay one euro per 1,000 euros that they withdraw, which is one-tenth of a percent. It doesn’t seem very big, but the principle at work is extremely big because what they’re in effect doing is breaking the exchange rate between a unit of bank deposits and a unit of currency.

Why would they do this? Why would they want to do this? Well, it’s one of the anti-cash policies that mainstream economists have vigorously been promoting.

PAVING THE WAY FOR NEGATIVE INTEREST

To make the calculations easier, and to illustrate the effect, let’s say that the Greek “surcharge” is ten dollars for every 100 dollars withdrawn. Now, instead of being able to convert one euro in your checking account into one euro in cash, on demand, you will only be able to buy one euro in cash by spending 1.10 euros in your bank accounts. That’s a negative 10-percent rate in some sense. That is to say that you can only take out one euro from the bank if you’re willing to pay 1.10 euros. So, you would only really get ninety cents for every dollar that you wanted to withdraw and that’s very significant because this means it will be more expensive to buy an item with cash than with bank deposits.

At the same time, the Greek government made it very clear that if you deposit the cash in the banks, you don’t get 1.10 euros of bank money for every euro you deposit.

So the system is now structured to lock the money in the banks. Now, what does that allow them to do? If you lose 10 percent every time you withdraw one euro in cash, they can lower the interest rate that you get on bank deposits to negative 5 percent, or negative 6 percent. You still wouldn’t withdraw your cash from the banks even if the interest rate went negative.

What we are witnessing is a war on cash in which governments make it either illegal or inconvenient to use cash. This, in turn, allows governments the ability to spy on and regulate financial transactions more completely, while also allowing governments more leeway in manipulating the money supply.

....(more in the link)....

Other reasons for suppressing cash are (1) to prop up the unstable fractional reserve banking system, which is in a state of collapse all over the world, and (2) to give central banks the power to impose negative nominal interest rates. That is, to make you spend money by subtracting money from your bank account for every day you leave it in the bank account and don’t spend it.

Best part was reading the comments of a poster to the article above

I think that the most significant reason for eliminating cash is that inability to provide cash is the system's principal act of default. What do banks fear most? Answer: A bank run. What happens in a bank run? Answer: A given bank (victim of bank run) eventually defaults by its inability to convert its deposit liabilities to cash on demand. There is a kind of perceptual retroactivity to it because under the criminal law the offence was complete when the bank issued the deposit liability without funding-in-fact, and the bank run merely exposes that offence (or aggregate offences) after the fact.

So if you are manipulating the system at the macro level, then to eliminate the problem, you get rid of the means by which the fraud is exposed.

I believe that you are correct about the role of nominal transaction fees. Currently, in addition to the $250 million per day (USD-equivalent) of "interest charges" called interest charges on outstanding credit card balances, the industry quietly collects another $500 million per day in concealed credit charges labelled "Merchant Service Charges" but which must be accounted for internally as credit charges received from card-users and not merchants. It works out to a 2% to 3% rake-off from the gross purchase-transaction throughput or about $3 per transaction (about a $200 billion annual rake-off from about $8 trillion of gross throughput).

So what happens if a genuine global competitor comes along charging only marginally more than its actual costs of two to three cents per transaction? Financial disaster for the existing card-issuing banks - unless they can orchestrate a preemptive strike against any potential competition by making their own credits into the new "lawful currency of whatever nation" that all financial contracts require for legal discharge. They get that by default by eliminating cash.

panduranghari · Post by **panduranghari** » 27 Aug 2015 12:04

Austin · Post by **Austin** » 27 Aug 2015 17:24

So even their Loss is like 2x Cap of other BRICS combined , Mind boggling

Does it have any impact on their economy or yuan ? Or its like their Stock Market work in its own parallel world

sanjaykumar · Post by **sanjaykumar** » 27 Aug 2015 22:01

Not really, it is a bubble. You can inflate it however you want with no bearing to reality. A Tokyo Chiyoda plot, near the imperial residence, was worth about a Manhattan block in the 1980s. Just as divorced from reality.

panduranghari · Post by **panduranghari** » 28 Aug 2015 13:00

Austin wrote:So even their Loss is like 2x Cap of other BRICS combined , Mind boggling

Does it have any impact on their economy or yuan ? Or its like their Stock Market work in its own parallel world

Read what ever you want to read in that. IMO US and China will go down together, so they will find a compromise to keep up the appearances. China to keep yuan a reasonable currency is selling treasury bills (nay they are dumping them).

I would watch this metric

http://www.bloomberg.com/quote/USGG10YR:IND

Rising T Bill yield is a sure shot indicator that the confidence in US economy is evaporating.

Though the US central banks DUdley said the chances of rate rise in SEptember are remote, if the T Bill yield rises, there is a realistic possibility that many money market funds will move to cash, potentially increasing the velocity of money. Of course this is just my theory. And I am more wrong than right.

I actually agree with Mr Mulay and Mr. Abhyankar. The other 2 guys are clearly in promoting BJP. Now I am the biggest fan-boy of Modi. However, this pushing shares as a great way to invest in debt based paradigm with current interests at zero AND a realistic possibility of rising rates, there will be lots of margin calls, there will be lots of unwinding carry trade, will end up with an egg on the face. Modi should not be held responsible for this. In my uneducated political opinion, JEt LI will be sacrificed when time comes. Anyway, thats not for this thread.

chola · Post by **chola** » 28 Aug 2015 19:22

What a damn roller coaster of a week! Sh1t scary and exhilarating at the same time.

There'll be more turbulence coming from the Fed and China but we survived this week fairly intact.

chola · Post by **chola** » 28 Aug 2015 19:45

Austin wrote:So even their Loss is like 2x Cap of other BRICS combined , Mind boggling

Does it have any impact on their economy or yuan ? Or its like their Stock Market work in its own parallel world

Size and number is why moves by the chicoms affected market globally this week.

The stock market in chiniland traditionally been divorced from the wider economy. It was in the dumps when the economy was actually growing and then grew when the economy was slowing down. Things might have changed now because the Chicoms wanted to become a reserve currency. Not sure it wants to after the past month. It's a communist nation, the stock market is not opened to the outside world so it can remain peripheral until the commies makes it a true reflection of the economy.

I say again, if we need to learn anything from China, it should be their ability to create credit. Their bingo parlor stock market (and ghost cities) is not the important lesson for us (though it might be useful for nations that are already producing surplus credit.)

Nearly all third world nations are stopped dead at the point where they need to create credit to build worthwhile projects. They need to borrow from the established currencies (US dollars, Euros or Yens) or risk printing their own currency into hyperinflation. Every nation worth its salt wants to get to the point where they can finance their projects with paper they print themselves. The PRC is the only non-western outside Japan to reach this point. And they did it while still a p1ss-poor third world nation.

Altair · Post by **Altair** » 28 Aug 2015 20:28

FWIW, I was right when I posted about few rumors on last weekend of coming meltdown in "dot onion" networks. Now few are chatting away that "Monday Mayhelm Meltdown" is a cover to transfer large money before an even bigger event in September before "shemitah". There are supposedly 5 such bloodbath days planned before the actual D-Day supposedly coinciding with UN GA meeting in New York.

panduranghari · Post by **panduranghari** » 28 Aug 2015 22:06

Altair wrote:FWIW, I was right when I posted about few rumors on last weekend of coming meltdown in "dot onion" networks. Now few are chatting away that "Monday Mayhelm Meltdown" is a cover to transfer large money before an even bigger event in September before "shemitah". There are supposedly 5 such bloodbath days planned before the actual D-Day supposedly coinciding with UN GA meeting in New York.

link 1

link 2

Austin · Post by **Austin** » 29 Aug 2015 11:25

panduranghari wrote:

Wish Mulay had spoken more or rather given the chance to do so , Getting political people into economic discussion is certainly the best way to kill informed debate.

panduranghari · Post by **panduranghari** » 29 Aug 2015 21:37

The paper, co-authored by Valentina Bruno, a finance professor at American University, and BIS Economic Adviser and Head of Research Hyun Song Shin, serves as a follow-up to a report released by the bank in January that found firms outside the U.S. have borrowed $9 trillion in U.S. dollars, up from $6 trillion before the global financial crisis.

The new study aims to get to the bottom of what those companies have been using the money for. Perhaps surprisingly, the evidence shows that firms which tend to borrow in dollars are not cash-strapped and are actually in better financial shape than those that don't, suggesting that the motivation for the borrowing has less to do with funding actual investment projects or other types of spending.

Instead, it looks like they've been using the cash at least in part for "carry trades," a term used to describe a popular investment strategy in which traders borrow in one currency at a low interest rate and buy something denominated in another currency with a higher interest rate, profiting on the spread between the two rates and any depreciation in the currency that is being borrowed.

"Irrespective of the motivation of the firms concerned, our evidence therefore points to the greater incidence of financial decisions that bear an outward resemblance to carry trades," Bruno and Shin wrote.

"Since corporate cash holdings could be in the form of claims on banks, shadow banks or other financial intermediaries, the evidence points to non-financial firms playing the role of surrogate intermediaries, channeling external financial conditions into the domestic financial system."

The unwinding of this activity over the next several years, as the Federal Reserve raises rates and the U.S. dollar appreciates, will present another headwind for emerging markets, many of which are already in turmoil, as it sucks cash out of those countrie

Austin · Post by **Austin** » 30 Aug 2015 13:13

Brazil Economy Shrinks More Than Forecast

Neshant · Post by **Neshant** » 31 Aug 2015 01:37

Interesting view on bank bail-ins (aka deposit confiscation) from a lawyer.

Bank bail-ins have been quietly written into law in all western countries.

When you make a bank deposit, you are loaning the bank your money with no guarantee you will get it back.

chanakyaa · Post by **chanakyaa** » 31 Aug 2015 05:37

Nishantji, didn't the creation of fractional reserve banking system kill the meaning of *demand deposit*, in terms of its safety?

The case for retiring another ‘barbarous relic’

Neshant · Post by **Neshant** » 31 Aug 2015 07:30

Getting deposits on demand is one thing, watching deposits itself being vaporized is quite another.

In one case its a delay in getting your money back. In the other you don't get your money back period.

Its the latter we are talking about.

I've said it before and I'll say it again - Banking is a scam not an industry. It produces nothing of value. Since it produces nothing of value, it has to steal from those who do produce value.

Singha · Post by **Singha** » 31 Aug 2015 09:31

imo unless one wants to live 100% self sufficient in the woods, and use barter trade for what one does not grow or produce, there is always some level of trust implicit in "institutions" - whether it be currency (easier than barter , more portable, but who controls its producing and storing), village headman, police, big govt, army...all of them have ample power to destroy us, but people give up 100% freedom in exchange for the other benefits like safety, security, convenience, ease of doing business.

any country with dysfunction or rapacity in these higher level institutions will be in trouble. in western countries its financial cronyism...but there are countries like TSP where *all* the above are broken in some ways and yet it still marches along, picking up 30 AH1Z here, 50 trainers there, and seems indestructible

Neshant · Post by **Neshant** » 31 Aug 2015 13:21

We are not living in the stone age but the electronic age so where does the issue of barter even arise. Just about any entity can create currency out of nothing and trade it with the existing telecommunications infrastructure. There is no magic that makes 1s and 0s created by some banking dude in a suite sitting at a central bank any more real than the same being created by some guy in a basement.

The only difference is one has sought the monopoly status for their currency with govt bestowing legal tender status upon it while the other is being actively barred from doing so. We have competition in all sectors of industry creating better goods so why is the issuance of currency a monopoly. Its only breeding cronyism and corruption.

Banking should be an issue of risk vs reward. If there is risk, there should be reward. Reward is getting your money back + some fraction of the reward.

But in the present fiat money racket, not only is the principle stolen through inflation, but now they plan on stealing the capital itself. Thus there is no reward with the reward being eaten in bonuses & lavish salaries of banking crooks who are profiting off the monopoly status on the issuance of currency and not anything of value they are creating.

Banking is thus a useless middleman industry which produces zero value and merely lives off skimming cream from the productive elements of society.

The ideal system, in my opinion, is one of private competing currencies. Competition destroys monopolies that breeds corruption and rent seeking behavior detrimental to productive society.

panduranghari · Post by **panduranghari** » 31 Aug 2015 14:37

Singha wrote:imo unless one wants to live 100% self sufficient in the woods, and use barter trade for what one does not grow or produce, there is always some level of trust implicit in "institutions" - whether it be currency (easier than barter , more portable, but who controls its producing and storing), village headman, police, big govt, army...all of them have ample power to destroy us, but people give up 100% freedom in exchange for the other benefits like safety, security, convenience, ease of doing business.

any country with dysfunction or rapacity in these higher level institutions will be in trouble. in western countries its financial cronyism...but there are countries like TSP where *all* the above are broken in some ways and yet it still marches along, picking up 30 AH1Z here, 50 trainers there, and seems indestructible

Well said. To eliminate fiat currency will set mankind back by a few decades. Fiat is here to stay. Neshant ji if you do not like the current financial system, you are going to hate the next one.

Singha · Post by **Singha** » 31 Aug 2015 15:06

no piece of paper (notes, stocks) has any value, unless people and traders are willing to honour that value.
even if some guy comes up with a thing like bitcoin, and you have a bag of them, if none accept your currency you are penniless.

i think the USA in its early phase did have some 15 states printing their own currencies. later they moved to common.

even gold or platinum are minerals, no different from iron or granite. if the world rejects gold as a valuable commodity, everyone would be nook nood overnight.

same goes for artwork, rare postage stamps, sculpture.....'priceless' is a human construct.

all depends on what people are willing to pay for it.

Neshant · Post by **Neshant** » 31 Aug 2015 22:01

Singha wrote:no piece of paper (notes, stocks) has any value, unless people and traders are willing to honour that value.

That is obvious. However value in the current fiat money racket is derived through violence - forcing society to pay tax and transact in a currency created by private banks on threat of imprisonment and impoverishment through confiscation and forfeiture. It's primary purpose is to guarantee profits to private banks. That's not a monetary system, its plain old gangsterism.

Private currencies require no violence as they depend on market acceptance by participants. No person accepted a bitcoin on threat of imprisonment for instance.

No matter what way the argument is framed, the only free, non-tyrannical monetary system is one where the people who earn the wealth choose the money, not govt and certainly not private banks. Hence private currencies.

When the market decides what is money, that is capitalism and freedom. All else leads to cronyism and corruption with "wise men" aka central planners\bankers deciding what's best for others when really all they end up doing is filling the pockets of their cronies.

panduranghari · Post by **panduranghari** » 01 Sep 2015 17:00

Neshant wrote:[
No matter what way the argument is framed, the only free, non-tyrannical monetary system is one where the people who earn the wealth choose the money, not govt and certainly not private banks. Hence private currencies.
.

The problem is we tend to look at a system as independent of the whole. Can the skeletal system be independent of the body? Ergo financial system cannot be independent of the economy? No? The economy is like an organism. Economy cannot be considered as an independent system unto itself. The super-organism includes things which we do not even quantify. As of now, there are 4 basic aspects of economic super-organism - agriculture, industry, service and government. All depend on the money to keep the system nourished, just like blood flows into every tissue within your body. The blood can never be too much nor too little. The body regulates it as it deems it needs it. Private currencies cannot function in the way independent of the super-organism. It’s at best a sticking plaster solution for a patient who needs a major surgery, where the patient is more or less going to die anyway. The people who choose the money are the ones who make money. So if you are hoping for a French revolution like solution, your private currencies argument does not solve the problem.

hanumadu · Post by **hanumadu** » 02 Sep 2015 04:46

Looks like predictions by some people on this forum of a recession around september are coming true, mainly fuelled by Chinese downturn.

Austin · Post by **Austin** » 05 Sep 2015 14:17

Max interviews Michael Hudson, author of Killing the Host, about how the Finance, Insurance and Real Estate sectors compromise our economies.

Keiser Report: ‘Frack now, pay later’

Austin · Post by **Austin** » 05 Sep 2015 22:22

Meet QT; QE's Evil Twin

panduranghari · Post by **panduranghari** » 06 Sep 2015 00:10

panduranghari · Post by **panduranghari** » 09 Sep 2015 17:06

Fed About to unleash deflation

Deutsche Bank wrote:
This reinforces our view that the Fed is in danger of committing policy error. Not because one and done is a non issue but because the market will initially struggle to price “done” after “one”. And the Fed’s communication skills hardly lend themselves to over achievement. More likely in our view, is that one in September will lead to a December pricing and additional hikes in 2016, suggesting 2s could easily trade to 1 ¼ percent. This may well be an overshoot but it could imply another leg lower for risk assets and a sharp reflattening of the yield curve.

This is nonsense. They are creating a logical fallacy.

Confusing asset-price deflation as general price deflation is nonsense. This is a typical deflationary thinking paraded in the newscycle. The flattening yeild curve is asset price deflation. Is any food getting cheaper? I dont see it. NOTHING is getting cheaper.

Interest rate rise will destroy many pricing models of most assets. And this is what the banksters fear. The Fed wants to do the near impossible- Deflate asset prices and at the same time prevent price inflation. Money has to flow constantly. And as asset prices collapse (aggravated with rate rises), the only credit which is destroyed is money that has been stored in assets (asset deflation) and the ability of people to draw money into the present from their future productivity (credit cards, financing, etc...). The destruction of those do not reduce the money supply. They create "asset deflation", but not monetary deflation more commonly known as "price deflation". But what we need to see is where will the money flow when this asset deflation proceeds. Institutional investors apparently are heavily in cash, awaiting the right time to enter the markets (in reality there are no markets left, only interventions) Never before have stocks and bonds have risen simultaneously, as they are doing now. Stocks are rising because of buy backs. Bonds because the yeild for 30 year bond is close enough to a 3 year yeild. Why would you park money for 30 years if 3 years would do? Rising rates will deflates these 2 markets. So where will the money go? into cash is my theory. This will turn this deflationary feeling into inflationary feeling.

I remember these quotes from USAgold website. Very pertinent;

"Somewhere in the 1970s era I was exposed to the thinking of several different deflationists. It seemed that all of their conclusions came to the same end: that dollar deflation would rule the day, no matter what. Mind you now,,,,,, most of them were split on the finer points of the issue, but for all of them; Deflation was always the final outcome."

"My friend, debt is the very essence of fiat. As debt defaults, fiat is destroyed. This is where all these deflationists get their direction. Not seeing that hyperinflation is the process of saving debt at all costs, even buying it outright for cash. Deflation is impossible in today's dollar terms because policy will allow the printing of cash, if necessary, to cover every last bit of debt and dumping it on your front lawn! (smile) Worthless dollars, of course, but no deflation in dollar terms! (bigger smile)"

What is a deflationist? It is one who looks very closely at the present structure of everything, the laws, the rules, the regulations, what is supposed to happen, who should fail, etc… but ignores the political (collective) will that backs it all up. The same political will that always changes the rules to suit its needs as surely as the sun rises. And it is this political will that makes dollar hyperinflation a certainty this time around.

It is beyond frustrating to watch all the bailouts of banks at a time like this. They should be allowed to fail! Right? But this ugly sight is only a symptom of the real problem. And it was never even a choice. These bailouts were always baked into the cake. They are a mandatory function of the political will that backs the entire system. This is the main element that all of the deflationists miss.

The deflationists never saw the bailouts or the QE coming, and they refuse to believe that it will keep on coming as long as ANYTHING keeps failing. States, pension funds, large companies, foreign entities, whatever. It's all gonna be papered over.

I tend to agree with 99% of what the deflationists write. For the most part they are masters at analyzing the minutiae and then painting it into a grand macro picture. I like the Kondratieff cycles and I agree we are in the winter cycle. In fact, almost everything most deflationists describe will probably happen, in my view.

But they all miss the hyperinflation that is coming. And they miss it because they don't understand how perfectly it fits with a deflationary collapse. In fact, they argue vehemently against it the same as they argue against inflation, which is how I know they don't understand hyperinflation. And they miss it because they are so meticulous in their observations and calculations that they can't see that the collective will always changes the rules when things get really painful. The political will (which is the same as the collective will in my lexicon) always does whatever will lessen the immediate pain, even if it will most certainly cause greater pain later. This is the part that is as reliable as the sun rising.

So will the rates rise? Yes they will. When. No one can say for sure. But what happens afterwards. QE4. You can see where this is going.....hyperinflation. Watch the 10 year US treasury bond. Rising yeild signifis a high chance of interest rate rise.

TSJones · Post by **TSJones** » 09 Sep 2015 19:54

Is any food getting cheaper? I dont see it. NOTHING is getting cheaper.

fuel is certainly lower in the US because unlike Europe we don't tax the hell out of it(we do tax it some). so the price of fuel responds quite rapidly in America compare to europe. Thus economists would say fuel is relatively inelastic in Europe compared to the US.

what about food?

Agriculture is highly politicized around the globe by a lot governments. therefore it is comparatively inelastic to electronics, consumer durables, etc. Agriculture is subject to price supports, market limits, tax disincentives, conservation efforts, and outright import limits and restrictions. this was a major result of the great depression of the 1930's and these policies swept the globe.

for your perusal and basic edification please refer to the following link:

http://www.agmrc.org/business_developme ... of-demand/

this gives a very basic idea of the inelasticity of demand of agriculture. it can be a whole lot more complicated, but that is beyond my poor abilities for proper presentation and understanding.