From Wikipedia — Extraordinary Popular Delusions and the Madness of Crowds: (by Charles MacKay)
“Men, it has been well said, think in herds; it will be seen that they go mad in herds, while they only recover their senses slowly, and one by one!”
“Of all the offspring of Time, Error is the most ancient, and is so old and familiar an acquaintance, that Truth, when discovered, comes upon most of us like an intruder, and meets the intruder’s welcome.”
If you haven't read this book... it was published about 150 years ago, yet still rings true.
When will the American public (crowds) recover their senses? Wish I knew... but the matters with which we are dealing are truly economic madness.
Friday, January 30, 2009
Thursday, January 29, 2009
Lose-Lose Situation
The continuing lavish layering of debt-upon-debt-upon-debt by the US Congress and the FED mean only one thing to those with dollar assets: lose-lose.
Tuesday, January 27, 2009
PORKZILLA ---- eeeek!
Trashing through the US economy, like Godzilla smashing Tokyo, "Lookout, here comes Porkzilla!" This gargantuan monster, being created in Washington DC and otherwise known as the stimulus package, will make all previous exercises in government pork look puny. Porkzilla will, as advertised, be hugely bigger and more grotesquely larded than any previous spending monster unleashed from the masters of economic malfeasance in American history.
Porkzilla will be advertised as a friendly and helpful monster, but make no mistake. By it's sheeer size and magnitude, it will wreak destruction and chaos unmagined by it's creators.
The masters of debt, aka your government, is about to shove Porkzilla out the door and into your life and that of the entire economy. Imagine hundreds and hundreds of billions of dollars created out of purest fantasy being gleefully misallocated before your very eyes, smashing and trashing economic order into bungled chaos. Porkzilla! Beware...
Porkzilla will be advertised as a friendly and helpful monster, but make no mistake. By it's sheeer size and magnitude, it will wreak destruction and chaos unmagined by it's creators.
The masters of debt, aka your government, is about to shove Porkzilla out the door and into your life and that of the entire economy. Imagine hundreds and hundreds of billions of dollars created out of purest fantasy being gleefully misallocated before your very eyes, smashing and trashing economic order into bungled chaos. Porkzilla! Beware...
Wednesday, January 14, 2009
Terribly Serious
The link which follows is terribly and deadly serious.
Bernake's Certain Failure
It's a long read, quite detailed, yet cuts to the chase; gets to the heart of the matter. If you read nothing else this month about the crisis... READ THIS!
Bernake's Certain Failure
It's a long read, quite detailed, yet cuts to the chase; gets to the heart of the matter. If you read nothing else this month about the crisis... READ THIS!
It's Hitting The Fan...
Seems push is coming to shove. The devastating world-wide pile-up of unsold consumer goods has now spread to commercial goods. Not to be too alarmist, but this is without precedent since the 1930's.
Trade Crunch
And, Mr. Bernake and Co. are back at square one. With the erstwhile help of the US Congress, he and his DC spenders have now blown through about $3 Trillion since the summer of 2007. Yet... the toxic derivatives that are at the root of the systemic risks to the world's financial system remain! The FED and the Congress are trying to drive a stake through the heart of of these toxic monsters, but so far, all for nought.
Uncertainty About Value
What they are doing is throwing into the fan, more of what's been hitting the fan. Creating unprecedented amounts of government debt in the hopes of creating wealth is zombie economics: Prop-up the dead toxic debt and make it seem alive again.
And... zombie economics are being employed to prop-up zombie banks throughout the world. Rememeber, this is not about liquidity. It's about solvency.
Banks Spanked!
Trade Crunch
And, Mr. Bernake and Co. are back at square one. With the erstwhile help of the US Congress, he and his DC spenders have now blown through about $3 Trillion since the summer of 2007. Yet... the toxic derivatives that are at the root of the systemic risks to the world's financial system remain! The FED and the Congress are trying to drive a stake through the heart of of these toxic monsters, but so far, all for nought.
Uncertainty About Value
What they are doing is throwing into the fan, more of what's been hitting the fan. Creating unprecedented amounts of government debt in the hopes of creating wealth is zombie economics: Prop-up the dead toxic debt and make it seem alive again.
And... zombie economics are being employed to prop-up zombie banks throughout the world. Rememeber, this is not about liquidity. It's about solvency.
Banks Spanked!
Monday, January 12, 2009
500 Trillion Reasons
Collapse of Financial System?
The central banks around the world continue to pump unprecedented amounts of printed money into the financial system. Why? There are at least 500 Trillion reasons!
The vast, mysterious, and unregulated world of hyper-leveraged financial derivatives are conservatively estimated to total $ 500 Trillion. These remain off-books and constitute a huge black-hole that continues to suck-in all manner of central bank money. Yet, because of it's immensity, perhaps it cannot be satisfied.
So what happens? In the long run (1 to 4 years out) the US Dollar has to be devalued to the tune of about 40% +/-. Keep in mind, that's only if the central banks can manage this in an orderly fashion. If not, well, all bets are off. As mentioned in previous observations, so far the central banks are flying by the seat of their pants trying to stave off marking-to-market these $500 Trillion of exotic derivatives. Why not mark-to-market? Ah, there's the rub. Because these dandies are work only pennies on the dollar. And THAT will hit all asset classes (stocks, bonds, et.al.) like a Mack truck going 90 mph into rush hour traffic!
Summary: expect further deleveraging throughout 2009. It took decades to build the tower of debt, so expecting a quick-and-dirty solution is pure pollyanna! The stock market will test it's November lows. In the event the November lows are taken-out, keep a sharp eye out for just how low things go. A sub-4000 DOW could signal an imminent collapse: Simply too may stressors that are go beyond the systemic ability of central banks to control.
Cheers!
The central banks around the world continue to pump unprecedented amounts of printed money into the financial system. Why? There are at least 500 Trillion reasons!
The vast, mysterious, and unregulated world of hyper-leveraged financial derivatives are conservatively estimated to total $ 500 Trillion. These remain off-books and constitute a huge black-hole that continues to suck-in all manner of central bank money. Yet, because of it's immensity, perhaps it cannot be satisfied.
So what happens? In the long run (1 to 4 years out) the US Dollar has to be devalued to the tune of about 40% +/-. Keep in mind, that's only if the central banks can manage this in an orderly fashion. If not, well, all bets are off. As mentioned in previous observations, so far the central banks are flying by the seat of their pants trying to stave off marking-to-market these $500 Trillion of exotic derivatives. Why not mark-to-market? Ah, there's the rub. Because these dandies are work only pennies on the dollar. And THAT will hit all asset classes (stocks, bonds, et.al.) like a Mack truck going 90 mph into rush hour traffic!
Summary: expect further deleveraging throughout 2009. It took decades to build the tower of debt, so expecting a quick-and-dirty solution is pure pollyanna! The stock market will test it's November lows. In the event the November lows are taken-out, keep a sharp eye out for just how low things go. A sub-4000 DOW could signal an imminent collapse: Simply too may stressors that are go beyond the systemic ability of central banks to control.
Cheers!
Thursday, January 8, 2009
Do The Math...
$1.2 Trillion Defecit PLUS
$800 Billion Stimulus EQUALS
$2 TRILLION!
... and it's only January.
This is bearish for the dollar. And since you and I have our pay, our savings, our equity and assets in US dollars... beware.
Whether you cheer or jeer at the so-called "economic stimulus package"... hold this thought in mind: it's being financed by debt. These amounts of debt were until recently considered lunatic fringe but are now mainstream.
Again... this huge amount of dollar debt is not good for the dollar, your own personal wealth, or the prosperity of your country and your children.
Do the math...
$800 Billion Stimulus EQUALS
$2 TRILLION!
... and it's only January.
This is bearish for the dollar. And since you and I have our pay, our savings, our equity and assets in US dollars... beware.
Whether you cheer or jeer at the so-called "economic stimulus package"... hold this thought in mind: it's being financed by debt. These amounts of debt were until recently considered lunatic fringe but are now mainstream.
Again... this huge amount of dollar debt is not good for the dollar, your own personal wealth, or the prosperity of your country and your children.
Do the math...
Thuffering Thucotash!
(Apologoes to Yosemite Sam)
"The consumers suffer when the laws of the country prevent the most efficient entrepreneurs from expanding the sphere of their activities."
From PLANNED CHAOS by Ludwig von Mises
Thuffering... that's what consumers are experiencing. And who among us is not a consumer???
We are all now suffering from laws and policies preventing the most effecient from supplanting the least ineffecient.
Ineffecient bankers and ineffecient banks? Give 'em Trillions.
Ineffecient auto manufacturers? Give 'em Billions.
And so on and so forth.
So long as the central bank (FED) and the central government (US Congress) promote policies of rewarding inepitude, and in fact implement further permutations and combinations of inepitude, expect further thuffering.
"The consumers suffer when the laws of the country prevent the most efficient entrepreneurs from expanding the sphere of their activities."
From PLANNED CHAOS by Ludwig von Mises
Thuffering... that's what consumers are experiencing. And who among us is not a consumer???
We are all now suffering from laws and policies preventing the most effecient from supplanting the least ineffecient.
Ineffecient bankers and ineffecient banks? Give 'em Trillions.
Ineffecient auto manufacturers? Give 'em Billions.
And so on and so forth.
So long as the central bank (FED) and the central government (US Congress) promote policies of rewarding inepitude, and in fact implement further permutations and combinations of inepitude, expect further thuffering.
LOWEST RATE IN 315 YEARS
SINCE 1694!
Today's crazy news out of merry old England is: their central bank has now set interest rates at the lowest point in its history. That's since 1694.
Or, put another way, the lowest in 315 years.
As the discussion proceeds about the depths of this economic downturn, (for example: how deep, how long...) hold this thought: through all the economic ups and downs of the last three centuries in England, which does include both World Wars and The Great Depression, now the rates are set the lowest.
Again, watch bonds.
As the central bankers of the most of the world print paper like crazy, they fail to explain how this is going to play out. In fact, they are flying by the seats of their pants, and probably lighting candles down at the local cathedral while praying for a miracle.
Stay turned.
So far, they are finding it beyond their abilities to dispose of the hundreds and hundreds of trillions of dollars of off balance sheet derivative debt instruments. They are fighting a cancer that is not responding to their voodoo chemo.
Cheers!
Today's crazy news out of merry old England is: their central bank has now set interest rates at the lowest point in its history. That's since 1694.
Or, put another way, the lowest in 315 years.
As the discussion proceeds about the depths of this economic downturn, (for example: how deep, how long...) hold this thought: through all the economic ups and downs of the last three centuries in England, which does include both World Wars and The Great Depression, now the rates are set the lowest.
Again, watch bonds.
As the central bankers of the most of the world print paper like crazy, they fail to explain how this is going to play out. In fact, they are flying by the seats of their pants, and probably lighting candles down at the local cathedral while praying for a miracle.
Stay turned.
So far, they are finding it beyond their abilities to dispose of the hundreds and hundreds of trillions of dollars of off balance sheet derivative debt instruments. They are fighting a cancer that is not responding to their voodoo chemo.
Cheers!
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