I live in the USA and I am concerned about the future. I created this blog to share my thoughts on the economy and anything else that might catch my attention.
Wednesday, October 14, 2009
Hoarding Behavior (Musical Tribute)
Low market interest rates should continue to induce savers to diversify into riskier assets... - Fed Vice Chairman Donald Kohn, October 13, 2009
I've been following your discussions on precious metals, inflation, deflation, hoarding, etc. You both make good points.
But it seems to me that the over-arching issue is a lack of faith in the current monetary and political systems. Hoarding CPI goods, precious metals, oil, stocks, etc. are defensive moves indicating an underlying lack of faith.
The credit crisis has exposed what many had seen for years - the massive amount of fraudulent credit in the system. Our money system is and has been a sham. It was totally perverted for the benefit of the few at the expense of the many. Animal Farm - you must work harder, we're ignoring the rules for YOUR benefit. And like any ponzi scheme, it was bound to collapse.
Most of the wealth accumulated over the past 10 years has not come from productive work. Rather, it has come from siphoning off the fruits of productive work through dilution (inflation) and from outright fraud.
To me, it's mind boggling how much senseless credit creation and fraud was necesary to keep the inflation rate positive. Issuing, trading and speculating on the massive amount of new debt required to keep cpi inflation positive was the biggest free lunch wind fall in history. Of course it wasn't a free lunch for the majority as they were absolutely ripped off. Productive work was devalued in order to support the issuance and value of fraud. And now we are down to printing money to devalue real savings even further in order to increase the value of fraudulent credit.
I don't foresee hyper-inflation, or a big deflation. Either of those would end the Fed, the banks and the current free lunch system. TPTB will never allow that. I do foresee very tough times ahead for the majority. Debt for CONsumption is the road to ruin. That bell can't be unrung.
One more point. Any measurement of the bailout costs should include the difference between the reported CPI (~2.5%) over the past decade and the deflation (say 3%) that should/would have occurred absent the trillions in non-economic debt issued.
My estimate of 3% deflation is based on MZM growth of ~ 8.8% less ~2.5% real growth, less ~2.5% cpi inflation, less 1% population growth.
Inflation was supposed to be a tool that more fairly distributed wealth, increased output and provided greater stability. The reality is that inflation ran counter to all the stated goals. Why am I not surprised? Animal Farm.
My personal "scam" radar goes off every time the powers that be speak of strong dollars vs. weak dollars. The truth of the matter is that billions of people and/or automated robots will work for far less than we will. The currency is just a side topic.
"To me, it's mind boggling how much senseless credit creation and fraud was necesary to keep the inflation rate positive."
It is amazing. There's a massive inflationary riptide negating much of the deflationary tidal wave. That brings me to a side topic.
My stagflation concerns (but not hyperinflation) have to do with at least some of the deflationary tidal wave fading at some point and thereby allowing the inflationary riptide to flourish. (It is my belief that the government has become addicted to "free lunch" inflationary policies.)
Made in USA -› Made in China (very deflationary) Made in China -› Made in China (not so deflationary)
We're about done with the former. Not much left Made in USA. Unless China can make goods cheaper in the future even as oil once again hits $76 a barrel, I'll be sitting it out in my stagflationary bunker!
"I don't foresee hyper-inflation, or a big deflation. Either of those would end the Fed, the banks and the current free lunch system. TPTB will never allow that. I do foresee very tough times ahead for the majority. Debt for CONsumption is the road to ruin. That bell can't be unrung."
I wouldn't be surprised if mab hasn't just nailed it.
Low market interest rates should continue to induce savers to diversify into riskier assets... - Fed Vice Chairman Donald Kohn, October 13, 2009
Oil prices are soaring. Mission accomplished!
That Fed statement bugs me to no end. It would be one thing if the Fed actually allowed these risky "assets" to be priced with a free market risk premium. Instead, they goad people into risky junk assets at artificially low rates. Greensham pulled a similar move and the results were ruinous for tens of millions of American families.
Savings bonds were created to finance World War I. In 2002, the Treasury Department started to gut the savings bond program by lowering interest and closing its marketing offices, although the program was very well known previously.
"Note to self: trade dollars for more bunker reinforcement products."
Been there, done that!
"In 2002, the Treasury Department started to gut the savings bond program by lowering interest and closing its marketing offices, although the program was very well known previously."
Thank goodness I hoarded savings bonds starting in 2000. I managed to actually get close to 25% of my investments into them before they closed the barn door. My "weighted fixed rate" (my original bonds have appreciated a lot and earn a heftier interest rate) is currently 1.84%. They continue to earn interest tax deferred. Beats the heck out of my TIP fund that's currently paying just 1.11% (after the 0.2% annual expenses) and isn't tax deferred.
I won't have to start cashing my I-Bonds out until 2030 either. To play off of your words, Kohn can't unring my I-Bond bell! Horses have already left the barn!
Speaking of mixed metaphors, I heard a great one on the radio today. The news guy was commenting on the traffic problems today. His words reminded me instantly of our long-term economy. He said...
"It's going to pot... in a hand basket."
You can tell he knew he blew it because he paused and got a bit confused, but the saying is perfect. I love it! Hahaha!
Savings bonds were created to finance World War I.
Savings bonds were gutted to finance the war on savings.
It was only a matter of time. Seriously. If you are going to base your monetary system on fraud, deceit and theft, a safe store of value just can't be tolerated.
Thank goodness I hoarded savings bonds starting in 2000. I managed to actually get close to 25% of my investments into them before they closed the barn door.
"Savings bonds were gutted to finance the war on savings.
It was only a matter of time. Seriously. If you are going to base your monetary system on fraud, deceit and theft, a safe store of value just can't be tolerated."
I'm looking forward to restarting my Death of Real Yield series. That's always a hoot! I think I'll give oil a chance to hit $80 first though. There's nothing more fun as a saver than seeing real yields die as oil prices rise. Well, that and a sharp poke to the eye of course.
GYSC,
I wonder if the product mentioned would soothe the damage the Fed is doing to me as a saver. I've been taking it up the...
I really shouldn't go there! This blog should maintain at least some level of decency. Hahaha!
"See if you can figure out which of the following doesn't belong:"
b) Foreclosures soar to new record, again.
That's my pick! Okay, okay, truth be known I don't want to ruin my chances at becoming the next Chief Economist at the National Association of Realtors.
See if you can figure out which of the following doesn't belong:
Sadly, based on the way we manage our eCONomy it's abundantly clear the a, b & c are irrelevant. On the other hand, "d" is critical to keeping the system from collapsing. Only the best and the brightest are able to grasp this key point. We're really lucky to have so many talented people on Wall St. Just think how inefficient our markets would be without them. *Sigh*
Not to be confused with Squirrel Stew! (Another obscure Fallout reference. ;))
GYSC,
GOOG and BIDU?
1. Things you tell an infant to make him smile. 2. Things you tell an investor to make him smile. 3. Things said by robots in a Buck Rogers series of the past ("bidu, bidu, bidu").
Your call!
mab,
Strangely enough, "d" is also critical to keeping the education system from collapsing.
"If the School Board approves recommendations endorsed by Superintendent Maria Goodloe-Johnson, as well as most district high-school principals and counselors, a D average will be good enough to earn a high-school diploma. Student athletes would need to pass five of six classes with D grades or better."
Stag, GYSC,
ReplyDeleteI've been following your discussions on precious metals, inflation, deflation, hoarding, etc. You both make good points.
But it seems to me that the over-arching issue is a lack of faith in the current monetary and political systems. Hoarding CPI goods, precious metals, oil, stocks, etc. are defensive moves indicating an underlying lack of faith.
The credit crisis has exposed what many had seen for years - the massive amount of fraudulent credit in the system. Our money system is and has been a sham. It was totally perverted for the benefit of the few at the expense of the many. Animal Farm - you must work harder, we're ignoring the rules for YOUR benefit. And like any ponzi scheme, it was bound to collapse.
Most of the wealth accumulated over the past 10 years has not come from productive work. Rather, it has come from siphoning off the fruits of productive work through dilution (inflation) and from outright fraud.
To me, it's mind boggling how much senseless credit creation and fraud was necesary to keep the inflation rate positive. Issuing, trading and speculating on the massive amount of new debt required to keep cpi inflation positive was the biggest free lunch wind fall in history. Of course it wasn't a free lunch for the majority as they were absolutely ripped off. Productive work was devalued in order to support the issuance and value of fraud. And now we are down to printing money to devalue real savings even further in order to increase the value of fraudulent credit.
I don't foresee hyper-inflation, or a big deflation. Either of those would end the Fed, the banks and the current free lunch system. TPTB will never allow that. I do foresee very tough times ahead for the majority. Debt for CONsumption is the road to ruin. That bell can't be unrung.
One more point. Any measurement of the bailout costs should include the difference between the reported CPI (~2.5%) over the past decade and the deflation (say 3%) that should/would have occurred absent the trillions in non-economic debt issued.
My estimate of 3% deflation is based on MZM growth of ~ 8.8% less ~2.5% real growth, less ~2.5% cpi inflation, less 1% population growth.
Inflation was supposed to be a tool that more fairly distributed wealth, increased output and provided greater stability. The reality is that inflation ran counter to all the stated goals. Why am I not surprised? Animal Farm.
Stag, GYSC,
ReplyDeleteMish has a post echoing some of my thoughts above.
http://globaleconomicanalysis.blogspot.com/2009/10/financial-coup-detat-and-reaction-of.html
All us bears are on the same wave length it seems. We're all FED up.
mab,
ReplyDeleteMy personal "scam" radar goes off every time the powers that be speak of strong dollars vs. weak dollars. The truth of the matter is that billions of people and/or automated robots will work for far less than we will. The currency is just a side topic.
"To me, it's mind boggling how much senseless credit creation and fraud was necesary to keep the inflation rate positive."
It is amazing. There's a massive inflationary riptide negating much of the deflationary tidal wave. That brings me to a side topic.
My stagflation concerns (but not hyperinflation) have to do with at least some of the deflationary tidal wave fading at some point and thereby allowing the inflationary riptide to flourish. (It is my belief that the government has become addicted to "free lunch" inflationary policies.)
Made in USA -› Made in China (very deflationary)
Made in China -› Made in China (not so deflationary)
We're about done with the former. Not much left Made in USA. Unless China can make goods cheaper in the future even as oil once again hits $76 a barrel, I'll be sitting it out in my stagflationary bunker!
mab said:
ReplyDelete"I don't foresee hyper-inflation, or a big deflation. Either of those would end the Fed, the banks and the current free lunch system. TPTB will never allow that. I do foresee very tough times ahead for the majority. Debt for CONsumption is the road to ruin. That bell can't be unrung."
I wouldn't be surprised if mab hasn't just nailed it.
Stag,
ReplyDeleteUnless China can make goods cheaper in the future even as oil once again hits $76 a barrel, I'll be sitting it out in my stagflationary bunker!
Yikes! As I'm typing this, oil is at $77.60, up over 3% on the day. :(
The dollar inflation game had its perks when oil was priced in dollars. Now that dollars are priced in oil, it's a real bummer.
Note to self: trade dollars for more bunker reinforcement products.
Stag,
ReplyDeleteLow market interest rates should continue to induce savers to diversify into riskier assets... - Fed Vice Chairman Donald Kohn, October 13, 2009
Oil prices are soaring. Mission accomplished!
That Fed statement bugs me to no end. It would be one thing if the Fed actually allowed these risky "assets" to be priced with a free market risk premium. Instead, they goad people into risky junk assets at artificially low rates. Greensham pulled a similar move and the results were ruinous for tens of millions of American families.
http://en.wikipedia.org/wiki/Treasury_strips#Series_I
From the above Wiki link:
Savings bonds were created to finance World War I. In 2002, the Treasury Department started to gut the savings bond program by lowering interest and closing its marketing offices, although the program was very well known previously.
What a great idea!
mab (& watchtower),
ReplyDelete"Note to self: trade dollars for more bunker reinforcement products."
Been there, done that!
"In 2002, the Treasury Department started to gut the savings bond program by lowering interest and closing its marketing offices, although the program was very well known previously."
Thank goodness I hoarded savings bonds starting in 2000. I managed to actually get close to 25% of my investments into them before they closed the barn door. My "weighted fixed rate" (my original bonds have appreciated a lot and earn a heftier interest rate) is currently 1.84%. They continue to earn interest tax deferred. Beats the heck out of my TIP fund that's currently paying just 1.11% (after the 0.2% annual expenses) and isn't tax deferred.
I won't have to start cashing my I-Bonds out until 2030 either. To play off of your words, Kohn can't unring my I-Bond bell! Horses have already left the barn!
Speaking of mixed metaphors, I heard a great one on the radio today. The news guy was commenting on the traffic problems today. His words reminded me instantly of our long-term economy. He said...
"It's going to pot... in a hand basket."
You can tell he knew he blew it because he paused and got a bit confused, but the saying is perfect. I love it! Hahaha!
Mark and all,
ReplyDeleteI would point you to a FailBlog post about a news anchor slip (video), but in the interest of decency I will not, unless asked!
GYSC,
ReplyDeleteFeel free to provide a link. It certainly can't be any more indecent than what the Fed is doing to those of us who are savers, lol.
Stag,
ReplyDeleteSavings bonds were created to finance World War I.
Savings bonds were gutted to finance the war on savings.
It was only a matter of time. Seriously. If you are going to base your monetary system on fraud, deceit and theft, a safe store of value just can't be tolerated.
Thank goodness I hoarded savings bonds starting in 2000. I managed to actually get close to 25% of my investments into them before they closed the barn door.
Well played! Kudos.
Here it is:
ReplyDeletehttp://tinyurl.com/yj488ze
so funny!
Still need some videos for friday night video fights!
mab,
ReplyDelete"Savings bonds were gutted to finance the war on savings.
It was only a matter of time. Seriously. If you are going to base your monetary system on fraud, deceit and theft, a safe store of value just can't be tolerated."
I'm looking forward to restarting my Death of Real Yield series. That's always a hoot! I think I'll give oil a chance to hit $80 first though. There's nothing more fun as a saver than seeing real yields die as oil prices rise. Well, that and a sharp poke to the eye of course.
GYSC,
I wonder if the product mentioned would soothe the damage the Fed is doing to me as a saver. I've been taking it up the...
I really shouldn't go there! This blog should maintain at least some level of decency. Hahaha!
Its a family blog!
ReplyDeleteGYSC,
ReplyDelete"Its a family blog!"
It's okay. The "family dog" likes to lick her own...
Good grief. Look what you started! Shame on you! ;)
Stag,
ReplyDeleteAnother record bites the dust!
State Tax Revenues Show Record
Drop, For Second Consecutive Quarter
http://www.rockinst.org/pdf/government_finance/state_revenue_report/2009-10-15-SRR_77.pdf
The new eCONomy rocks! Again!
See if you can figure out which of the following doesn't belong:
a) State tax revenues plummet by record amount, again.
b) Foreclosures soar to new record, again.
c) U-6 unemployment soars to new record, again!
d) Wall St. set to pay record bonuses, again.
Mark,
ReplyDeleteWhen you are reduced to eating squirrel, you've got plenty of bait.
mab,
ReplyDelete"See if you can figure out which of the following doesn't belong:"
b) Foreclosures soar to new record, again.
That's my pick! Okay, okay, truth be known I don't want to ruin my chances at becoming the next Chief Economist at the National Association of Realtors.
Charles,
ReplyDeleteSplendid! Hahaha! ;)
Squirrel on a stick is a favorite in the 'Capital Wastelands'.
ReplyDelete(Obscure reference to a food that may be eaten in Fallout 3, uh, nevermind.)
Silly rabbit, jobs are for show, not go!
ReplyDeleteGOOG and BDI are up 200% since march, whats with the bunker mindset?
sorry, BIDU
ReplyDeleteStag,
ReplyDeleteSee if you can figure out which of the following doesn't belong:
Sadly, based on the way we manage our eCONomy it's abundantly clear the a, b & c are irrelevant. On the other hand, "d" is critical to keeping the system from collapsing. Only the best and the brightest are able to grasp this key point. We're really lucky to have so many talented people on Wall St. Just think how inefficient our markets would be without them.
*Sigh*
watchtower,
ReplyDeleteNot to be confused with Squirrel Stew! (Another obscure Fallout reference. ;))
GYSC,
GOOG and BIDU?
1. Things you tell an infant to make him smile.
2. Things you tell an investor to make him smile.
3. Things said by robots in a Buck Rogers series of the past ("bidu, bidu, bidu").
Your call!
mab,
Strangely enough, "d" is also critical to keeping the education system from collapsing.
http://seattletimes.nwsource.com/html/localnews/2009873682_grades16m.html
"If the School Board approves recommendations endorsed by Superintendent Maria Goodloe-Johnson, as well as most district high-school principals and counselors, a D average will be good enough to earn a high-school diploma. Student athletes would need to pass five of six classes with D grades or better."
Watch out Asia! We're coming for you!