View Full Version : Financial collapse??
Are we seeing a small hiccup or is the market finally correcting itself? Is the downward spiral starting or is there a little more time?
DOW is down about 670 points in less than a week.
http://theeconomiccollapseblog.com/archives/are-we-on-the-verge-of-a-massive-emerging-markets-currency-collapse
What are some of you smart guys opinion?
GratefulCitizen
01-29-2014, 16:50
My best friend just started taking short positions in a certain energy sector.
Last year the average annual return on his investments was almost 400%.
:munchin
Trucking tonnage would indicate that the real economy is doing well.
However, M3 (Shadowstats) is starting to drop.
Economic collapse and financial collapse aren't necessarily the same thing.
In the last "crisis", no real wealth was "destroyed"; it merely changed hands...
I am interested to know as well. I used to read theeconomiccollapseblog.com and have talked to the author a couple times through email. He's been predicting collapse for years. I've been assured by someone who knows a lot more about finance than the author of that blog, that long term, investment in the stock market is a good idea (he's not our financial adviser, he's a family member, so he's biased towards our benefit).
I think the market is readjusting personally, and I am kicking my ass for taking our money out of the market too early. The future is uncertain, but I'd pull out now if you're close to retirement, or even investing long term because I do think we're in a bubble. Based on my limited knowledge. Investing in tangible assets is probably a good idea, in moderate amounts, but I don't predict, with minimal knowledge a collapse is imminent based on advice from a family member.
I see a lot of negative things about the way our monetary system works, but so long as we can control the world's trade in oil, using the petrodollar, we don't have a lot to worry about. I have read that China and Russia have been talking to the Middle East about trading in their own currency, not sure if that's true or not. That would have a huge impact on everything here in the U.S.
But how much real wealth is there or is it mostly 0s and 1s? The whole derivatives market (I'm by no means an expert, I am just muddling through basic understanding) and the fact that Germany wants is gold back, plus all the turmoil in the developing markets, riots in the Ukraine, Greece and Spain deflation in multiple countries, a run on the bank in Russia and China having is own issues (who by the way own the majority of our debt and our current leaderships lack of experience doesn't give me much confidence.
I am interested to know as well. I used to read theeconomiccollapseblog.com and have talked to the author a couple times through email. He's been predicting collapse for years. I've been assured by someone who knows a lot more about finance than the author of that blog, that long term, investment in the stock market is a good idea (he's not our financial adviser, he's a family member, so he's biased towards our benefit).
I think the market is readjusting personally, and I am kicking my ass for taking our money out of the market too early. The future is uncertain, but I'd pull out now if you're close to retirement, or even investing long term because I do think we're in a bubble. Based on my limited knowledge. Investing in tangible assets is probably a good idea, in moderate amounts, but I don't predict, with minimal knowledge a collapse is imminent based on advice from a family member.
I see a lot of negative things about the way our monetary system works, but so long as we can control the world's trade in oil, using the petrodollar, we don't have a lot to worry about. I have read that China and Russia have been talking to the Middle East about trading in their own currency, not sure if that's true or not. That would have a huge impact on everything here in the U.S.
China and multiple countries are wanting to start using the yen to buy and trade oil which would take the US out of the middle. I don't know if it has happened yet but i think its coming.
China and multiple countries are wanting to start using the yen to buy and trade oil which would take the US out of the middle. I don't know if it has happened yet but i think its coming.
It could be coming but I don't think it is. If it happens I better have a stockpile of ammo and bullion.
http://m.financialsense.com/contributors/dan-collins/rise-petro-yuan
http://mobile.reuters.com/article/idUSL4N0J62M120131121?irpc=932
Ammo up
The U.S. is the world's largest supplier of oil and will be for many years according to Reuters. (http://www.reuters.com/article/2013/10/15/us-oil-pira-idUSL1N0I51IX20131015)
I'm not trying to prove anything FWIW, but I think a lot of people (including myself) are/were scared about the future of our monetary system. I am just trying to be helpful by showing it's not all bad.
The U.S. is the world's largest supplier of oil and will be for many years according to Reuters. (http://www.reuters.com/article/2013/10/15/us-oil-pira-idUSL1N0I51IX20131015)
I'm not trying to prove anything FWIW, but I think a lot of people (including myself) are/were scared about the future of our monetary system. I am just trying to be helpful by showing it's not all bad.
Our oil industry is the only thing that has a chance of saving us, but going back to our current leaderships rules, regulations, and downright hatred for the oil industry won't allow them to to take full advantage of our resources and technology. Look at ND and TX to see the possibilities. But all of their advances have only been on private property, no government land.
Stiletto11
01-29-2014, 18:29
The real danger is when the dollar is replaced as the reserve currency of the world. When Nixon took us officially off the gold standard we made a deal with the Saudis that we would protect the oil fields if they every country buying oil from them had to convert their currency to US Dollars The result is Petro Dollars and since the Federal Reserve Note "Dollar" is not backed by anything except full faith and credit of the US, it stands to collapse if another currency takes its place as reserve currency of the world. A dollar by law is one once of pure silver and it's still on the books (United States Code). A Federal Reserve Note denominated in a dollar is not a dollar. It is a debt equity instrument.
Wall Street was the direct benefit of QE so I would be careful calling this a normal correction (Usually 10%). I spent 15 years on Wall Street and have seen corrections for many reasons. Zero interest rates have forced people into the market chasing dividends that may not have the risk tolerance required. I saw this in the 90's when the rates dropped and banks started selling mutual funds. In the correction of 2000 they got slaughtered and some lost as much as 50% or more of their retirement savings. The Fed is an enemy of the Republic and that is why Jefferson and Jackson were so opposed to central banks.
So if you don't think this is a normal correction, what do you think it is, especially with every thing happening in the world.
So if you don't think this is a normal correction
It is.
Unless somebody told them the Fed was going to quit printing money.
It is.
Unless somebody told them the Fed was going to quit printing money.
Isn't the fed starting to ease up on printing money, which is one reason the market has g one down this week?
Stiletto11
01-29-2014, 19:05
It's complicated because there are many things going on. China is buying the piss out of gold and some countries like Germany are requiring that their gold be returned to them from the Federal Reserve in NY. If China stops buying our debt and makes a run (they are setting up for it) to be the reserve currency, the US is in a world of hurt. Like I said in another post; if you can't see it or touch it the money ain't yours. It can disappear overnight as it was the case in Cypress. Will it happen here? Who knows, but one must be prepared in any case especially with what is going on in the global economy. Another factor to look at is the Baby Boomers are getting ready to retire and will be pulling a shitload of money out of the market.
The best advice is to watch your portfolio and limit your risk by diversification. I like gold and silver in its physical form (Silver and Gold Eagles and bullion). Some will say that you run the risk of the government calling it in like it did in 1933. The difference between now and then was the currency in 1933 was backed by gold so they called it in to pay for the bankruptcy (IMF as the administrator: read Bretton Woods Act).
PM me if you have any questions ,more than happy to help.
spherojon
01-29-2014, 19:29
Gold is trending at $1264.4 US Dollar an ounce. If this was a crisis, it would be a lot higher.
Economic collapse and financial collapse aren't necessarily the same thing.
In the last "crisis", no real wealth was "destroyed"; it merely changed hands...
Nail on the head for this current stock situation. Some might call it a "transfer of wealth." We are in no way going back to the gold standard, but in the snowballs chance we are, the foreign exchange reserves would be the first thing our government would confiscate...from other countries...well that's what I would do.
Gold is trending at $1264.4 US Dollar an ounce. If this was a crisis, it would be a lot higher.
Nail on the head for this current stock situation. Some might call it a "transfer of wealth." We are in no way going back to the gold standard, but in the snowballs chance we are, the foreign exchange reserves would be the first thing our government would confiscate...from other countries...well that's what I would do.
Conspiracy time....What if gold has been falsely lowered so it can be bought up, and what if the gold in the fed isn't there?...conspiracy over
In all honesty I've heard solid arguments for both. Don't necessarily believe it but the arguments are interesting.
GratefulCitizen
01-29-2014, 19:40
The dollar will remain the world's reserve currency because of the rising hydrocarbon production of the US and Canada.
The fracking revolution will affect things in some strange ways.
Many of the wells using fracking are sub-economic producers of oil/natural gas.
They produce anyway because the condensate is profitable.
Condensate is used as a feedstock for the chemical industry and is also used in the production of oil from Canadian tar sands.
There are pipelines being built to pump this stuff north (there are some strange rules regarding the export of chemically identical condensate depending on how it was produced).
Otherwise sub-economic hydrocarbons are being produced both here in the US and in Canada because of condensate production.
All of this results in more production/distribution infrastructure being built.
As more infrastructure is built, many more otherwise sub-economic wells/fields become profitable because of proximity to new infrastructure.
The dominoes will continue to fall.
There are severe export restrictions on various unrefined hydrocarbons, but IIRC, Canada can import under some conditions if it is used domestically.
Hydrocarbons are fungible, so they just burn ours and export theirs overseas -- this is the same difference as if the US exported overseas.
Also, there is a growing export market for refined products (which is allowed).
Strangely enough, the domestic ethanol mandate makes exporting refined products relatively more profitable.
All of these exports, which will continue to grow, ensure the need for foreign economies to hold dollars.
The dollar will not be on a gold or silver standard, it will be on the energy standard.
I expect the 2020s to be a time of economic abundance -- for people who are still working.
For those who are retired, it is another matter...
The dollar will remain the world's reserve currency because of the rising hydrocarbon production of the US and Canada.
The fracking revolution will affect things in some strange ways.
Many of the wells using fracking are sub-economic producers of oil/natural gas.
They produce anyway because the condensate is profitable.
Condensate is used as a feedstock for the chemical industry and is also used in the production of oil from Canadian tar sands.
There are pipelines being built to pump this stuff north (there are some strange rules regarding the export of chemically identical condensate depending on how it was produced).
Otherwise sub-economic hydrocarbons are being produced both here in the US and in Canada because of condensate production.
All of this results in more production/distribution infrastructure being built.
As more infrastructure is built, many more otherwise sub-economic wells/fields become profitable because of proximity to new infrastructure.
The dominoes will continue to fall.
There are severe export restrictions on various unrefined hydrocarbons, but IIRC, Canada can import under some conditions if it is used domestically.
Hydrocarbons are fungible, so they just burn ours and export theirs overseas -- this is the same difference as if the US exported overseas.
Also, there is a growing export market for refined products (which is allowed).
Strangely enough, the domestic ethanol mandate makes exporting refined products relatively more profitable.
All of these exports, which will continue to grow, ensure the need for foreign economies to hold dollars.
The dollar will not be on a gold or silver standard, it will be on the energy standard.
I expect the 2020s to be a time of economic abundance -- for people who are still working.
For those who are retired, it is another matter...
Just curious but...why do you write everything in two sentence segments?;)
GratefulCitizen
01-29-2014, 21:12
Just curious but...why do you write everything in two sentence segments?;)
Started out as a way to make posts easier to read.
Later it turned into an arbitrary convention to force my (relatively) unstructured thoughts into a more structured form.
Stiletto11
01-29-2014, 21:17
Gold is trending at $1264.4 US Dollar an ounce. If this was a crisis, it would be a lot higher.
Nail on the head for this current stock situation. Some might call it a "transfer of wealth." We are in no way going back to the gold standard, but in the snowballs chance we are, the foreign exchange reserves would be the first thing our government would confiscate...from other countries...well that's what I would do.
Gold prices are minipulated by futures contracts. If all the futures contracts were called in there wouldn't be enough gold to cover them. They don't want gold to take the place of the FRN.
Stiletto11
01-29-2014, 21:19
The dollar will remain the world's reserve currency because of the rising hydrocarbon production of the US and Canada.
The fracking revolution will affect things in some strange ways.
Many of the wells using fracking are sub-economic producers of oil/natural gas.
They produce anyway because the condensate is profitable.
Condensate is used as a feedstock for the chemical industry and is also used in the production of oil from Canadian tar sands.
There are pipelines being built to pump this stuff north (there are some strange rules regarding the export of chemically identical condensate depending on how it was produced).
Otherwise sub-economic hydrocarbons are being produced both here in the US and in Canada because of condensate production.
All of this results in more production/distribution infrastructure being built.
As more infrastructure is built, many more otherwise sub-economic wells/fields become profitable because of proximity to new infrastructure.
The dominoes will continue to fall.
There are severe export restrictions on various unrefined hydrocarbons, but IIRC, Canada can import under some conditions if it is used domestically.
Hydrocarbons are fungible, so they just burn ours and export theirs overseas -- this is the same difference as if the US exported overseas.
Also, there is a growing export market for refined products (which is allowed).
Strangely enough, the domestic ethanol mandate makes exporting refined products relatively more profitable.
All of these exports, which will continue to grow, ensure the need for foreign economies to hold dollars.
The dollar will not be on a gold or silver standard, it will be on the energy standard.
I expect the 2020s to be a time of economic abundance -- for people who are still working.
For those who are retired, it is another matter...
wanna bet?
Here's an interesting read.
https://archive.org/stream/NationalEconomyAndTheBankingSystemOfTheUnitedState s/NationalEconomyAndTheBankingSystem#page/n0/mode/2up
Richard
GratefulCitizen
01-29-2014, 21:23
wanna bet?
Long post.
To which part were you referring?
The Reaper
01-29-2014, 21:46
Gold is trending at $1264.4 US Dollar an ounce. If this was a crisis, it would be a lot higher.
IMHO, gold and silver prices are being artificially manipulated.
TR
Surf n Turf
01-29-2014, 22:40
Gold is trending at $1264.4 US Dollar an ounce. If this was a crisis, it would be a lot higher. .
I believe what you are seeing is a 2 door market in gold. One is the "paper gold", and is wildly speculative, and that is where the twice daily price is set (see below). The second is the physical Gold, and this appears to be a high demand, NOT (yet) reflected in the bid / ask price. Countries (China / India) purchase their gold in a Government to government transactions (recently in metric tons.) These purchases are NOT reflected in the markets.
SnT
Gold prices are minipulated by futures contracts. If all the futures contracts were called in there wouldn't be enough gold to cover them. They don't want gold to take the place of the FRN.
True, Very True
Every business day in London, five banks meet to set the price of gold in a ritual that dates back to 1919. Now, dealers and economists say knowledge gleaned on those calls could give some traders an unfair advantage when buying and selling the precious metal. The London fix, the benchmark rate used by mining companies, jewelers and central banks to buy, sell and value the metal, is published twice daily after a telephone call involving Barclays Plc, Deutsche Bank AG, Bank of Nova Scotia, HSBC Holdings Plc and Societe Generale SA.
Participants on the London call can tell whether the price of gold is rising or falling within a minute or so, based on whether there are a large number of net buyers or sellers after the first round, according to gold traders, academics and investors interviewed by Bloomberg News. It’s this feature that could allow dealers and others in receipt of the information to bet on the direction of the market with a high degree of certainty minutes before the fix is made public, they said.
A dealer who bought 500 gold futures contracts at 3 p.m. and knew the fix was going higher could make $200,000 for his firm if the price moved by $4, the average move in the sample. While the value of 500 contracts totals about $60 million, traders may buy on margin, a process that involves borrowing and requires placing less capital for the bet.
http://www.zerohedge.com/news/2013-11-25/how-gold-price-manipulated-during-london-fix
IMHO, gold and silver prices are being artificially manipulated.
TR
Following yesterday’s report that Bafin took a hard line against precious metals manipulation, after its president Eike Koenig said possible manipulation of precious metals “is worse than the Libor-rigging scandal“, today the response has trickled down to Germany and Europe’s largest bank, Deutsche Bank, which announced that it would withdraw from the appropriately named gold and silver price “fixing”, as European regulators investigate suspected manipulation of precious metals prices by banks.
Deutsche Bank is withdrawing its participation in the gold and silver benchmark setting process following the significant scaling back of our commodities business. We remain fully committed to our precious metals business,” it said in a statement.
In mid-December, German banking regulator Bafin demanded documents from Deutsche Bank under an inquiry into suspected manipulation of benchmark gold and silver prices by banks, the Financial Times reported, citing sources.
“These allegations (about currencies and precious metals) are particularly serious, because such reference values are based – unlike LIBOR and Euribor – typically on real transactions in liquid markets and not on estimates of the banks,” she said in a speech.
http://socioecohistory.wordpress.com/2014/01/20/german-gold-manipulation-blowback-escalates-deutsche-bank-exits-gold-price-fixing/
GratefulCitizen
01-29-2014, 22:45
Here's an interesting read.
https://archive.org/stream/NationalEconomyAndTheBankingSystemOfTheUnitedState s/NationalEconomyAndTheBankingSystem#page/n0/mode/2up
Richard
Excellent link.
The Cliff's Notes:
www.wfhummel.cnchost.com/hierarchyofmoney.html
"Why the dollar? Because the government's currency is the only legal means of discharging tax liabilities."
The Reaper
01-29-2014, 23:05
Look at the number of gold and silver American Eagles coined in the last year, what the demand is like, and what the premium is to buy them.
TR
Following yesterday’s report that Bafin took a hard line against precious metals manipulation, after its president Eike Koenig said possible manipulation of precious metals “is worse than the Libor-rigging scandal“, today the response has trickled down to Germany and Europe’s largest bank, Deutsche Bank, which announced that it would withdraw from the appropriately named gold and silver price “fixing”, as European regulators investigate suspected manipulation of precious metals prices by banks.
Deutsche Bank is withdrawing its participation in the gold and silver benchmark setting process following the significant scaling back of our commodities business. We remain fully committed to our precious metals business,” it said in a statement.
In mid-December, German banking regulator Bafin demanded documents from Deutsche Bank under an inquiry into suspected manipulation of benchmark gold and silver prices by banks, the Financial Times reported, citing sources.
“These allegations (about currencies and precious metals) are particularly serious, because such reference values are based – unlike LIBOR and Euribor – typically on real transactions in liquid markets and not on estimates of the banks,” she said in a speech.
http://socioecohistory.wordpress.com/2014/01/20/german-gold-manipulation-blowback-escalates-deutsche-bank-exits-gold-price-fixing/
This maybe related to Deutsche Banks change of heart
A Year Later, The Bundesbank Has Repatriated Only 37 Tons Of Gold (Of 700 Total)
http://www.zerohedge.com/news/2013-12-24/year-later-bundesbank-has-repatriated-only-37-tons-gold-700-total
Isn't the fed starting to ease up on printing money, which is one reason the market has g one down this week?
It'll be incremental because of the WS reaction to the trial balloon that barely got inflated a while back.
IMHO, gold and silver prices are being artificially manipulated.
TR
I agree. I don't think it's some New World Order/Bidenburg conspiracy but I think a few of the richest people in the world have been buying up gold, and now they are quietly getting out of the stock market and in the case of Soros actively working against the dollar. If this is true the question would be why are they doing this?
I agree. I don't think it's some New World Order/Bidenburg conspiracy but I think a few of the richest people in the world have been buying up gold, and now they are quietly getting out of the stock market and in the case of Soros actively working against the dollar. If this is true the question would be why are they doing this?
Because they see a worldwide monetary collapse coming.
Because they see a worldwide monetary collapse coming.
Exactly, but are they just being prescient or are they actively working to make it happen? I don't know exactly, but i do know Soros is no friend of America, and Bloomberg thinks he is smarter than all of us and we would be better off if we just let daddy take care of us.
http://www.glennbeck.com/2012/02/01/richard-poe-how-does-george-soros-collapse-countries/
Because they see a worldwide monetary collapse coming.
Great interview Dusty.
Stiletto11
01-30-2014, 09:59
It's not just Soros, state actors collapse economies, we did it to the Russians during the cold war. If you understand fiat monetary policies you will know that debt is debt. there's an old saying, "gold is the money of kings, silver is the money of gentlemen, barter is the money of the poor, and debt is the money of slaves." A Federal Reserve Note is a debt equity instrument derived out of thin air backed by nothing but the faith that the US will honor it's debts. What if no one buys our debt? This is why they have to keep raising the debt ceiling because they have to borrow money today to pay off past debts that are due from T Bills and Notes. It is perpetual debt and there is no mathematical solution out of it. Wimpy in the Popeye syndrome.
Having the hand that turns on inflation/deflation is powerful. They can create a depression and buy assets on the cheap and then inflate them and sell them at a major profit. Rothchild figured this out in the 1700's.
The bottom line is that out government did not have the authority to debase the currency(see Craig v Missouri) (Federalist Papers No.44). The US Treasury is not the Treasury of the United States of America. The Treasury Secretary is the Governor of The Fund (IMF).
Bottom line guys and girls, protect your wealth and buy some silver and gold and keep it where you can get your hands on it. If they do collapse it, it will be like the world had never witnessed because it will be global. No tinfoil just gold and silver.
Streck-Fu
01-30-2014, 10:01
No tinfoil just gold and silver.
..and copper and brass and lead...
Stiletto11, what percentage of someone's worth should be invested in physical bullion? Not the gold index fund...
What do the 1%er's have to gain by collapsing the global economy? If it happened, they'd be f%cked too.
Not if they are in on the ground floor or create the next monetary system.
+on the lead
GratefulCitizen
01-30-2014, 13:16
When people want to work less, they look for a way to store wealth for future use.
Gold is supposedly one of those ways.
At its root, this is a problem of demographics -- too many old people and too few young people.
There is no way to guarantee the future price of services.
Here is the problem:
Somebody else has to want what you have for it to have tradable value.
Old people can't trade gold to other old people to take care of them in their old age.
They need the services of young people.
If young people are frozen out of trade because of lack of access to gold (or some other form of money), they'll just use something else.
Maybe bitcoin, maybe barter; but they won't need gold.
Young people can conduct an economy among themselves without old people.
The converse is not true (health insurance is a perfect example).
If the old manage to hoard capital and goods in an attempt to control the young, the young will just make their own.
It will temporarily be a lower standard of living than they otherwise might enjoy, but they'll muddle through.
Eventually, the older people will die, and they can't take it (capital and goods) with them.
All the young have to do is run out the clock.
People are the real wealth in this world -- children in particular.
We reap what we sow.
Stiletto11, what percentage of someone's worth should be invested in physical bullion? Not the gold index fund...
As much as can be stuffed in a dead man's chest, matey. Aaarh.
My COA is to get where we can live comfortably with no money, bartering only when necessary.
Almost there. :cool:
Streck-Fu
01-30-2014, 13:56
Old people can't trade gold to other old people to take care of them in their old age.
They need the services of young people.
If young people are frozen out of trade because of lack of access to gold (or some other form of money), they'll just use something else.
I think you missed a connection....
Those without currency will have to trade for it. Either through service or barter. Perform enough service or barter enough and any one could obtain whatever the desired currency is.
It used to be gold and furs. Perhaps it will be bullets and paracord in the future.
Trapper John
01-30-2014, 14:19
The real danger is when the dollar is replaced as the reserve currency of the world.
Amen Stiletto :lifter If that ever happens then the economic collapse that follows will be unprecedented. Hyperinflation, stagnant then declining GDP, civil unrest like we have never seen. A true catastrophe of unfathomable proportions. In that apocalyptic future we would break up into regional agglomerations (states) that would establish there own economies. Anyone here actually believe that Texas or Wisconsin or Florida or South Carolina or Georgia would stay in the Union at that point? Who would want the burdens of a bankrupt Illinois or CA? Frankly, I think a second civil war is not out of the question if such a collapse occurred.
Stiletto11
01-30-2014, 14:56
Stiletto11, what percentage of someone's worth should be invested in physical bullion? Not the gold index fund...
What do the 1%er's have to gain by collapsing the global economy? If it happened, they'd be f%cked too.
The rule of thumb is 10% under normal circumstances. The question is are we under normal circumstances? Here's some food for thought, in 1923 the national debt was 20% of the GDP today it is over 85% depending on whose numbers you look at. Don't forget that the government inflation numbers do not include food and fuel. How the F do you not include the two largest consumer categories in the inflation numbers?
Stiletto11
01-30-2014, 15:02
When people want to work less, they look for a way to store wealth for future use.
Gold is supposedly one of those ways.
At its root, this is a problem of demographics -- too many old people and too few young people.
There is no way to guarantee the future price of services.
Here is the problem:
Somebody else has to want what you have for it to have tradable value.
Old people can't trade gold to other old people to take care of them in their old age.
They need the services of young people.
If young people are frozen out of trade because of lack of access to gold (or some other form of money), they'll just use something else.
Maybe bitcoin, maybe barter; but they won't need gold.
Young people can conduct an economy among themselves without old people.
The converse is not true (health insurance is a perfect example).
If the old manage to hoard capital and goods in an attempt to control the young, the young will just make their own.
It will temporarily be a lower standard of living than they otherwise might enjoy, but they'll muddle through.
Eventually, the older people will die, and they can't take it (capital and goods) with them.
All the young have to do is run out the clock.
People are the real wealth in this world -- children in particular.
We reap what we sow.
What's the collateral on the National Debt? Who is the mortgage holder. The word mortgage comes from the root word Morte (Death) mortgage means death grip. You need to look at the big picture not the Obama Care crap with the young paying for the old. Anything of intrinsic value can be bartered or traded. In the 1st Civil War the confederate soldiers traded tobacco for coffee with the invading Federalists.:D
I say we put up the lives and assets of all our past and present congressional and executive politicians as collateral; declare bankruptcy and tell the lenders to come and collect 'em.
Stiletto11
01-30-2014, 15:43
BS2004 you don't understand the fraud, sorry.;)
Trapper John
01-30-2014, 15:49
I say we put up the lives and assets of all our past and present congressional and executive politicians as collateral; declare bankruptcy and tell the lenders to come and collect 'em.
Now that's a plan!
Actually I have a plan to revive CNN. They can host a new reality show or sitcom called Guillotine Island. The politicians run around the island trying to figure out where all our money has gone and once a week the viewers (democratically) vote them to the Iron Maiden.
Surf n Turf
01-30-2014, 17:11
Broadsword2004 --- Entire Post -----
Wrong on so many levels, almost a sentence by sentence de-construction required --- and I haven't the energy nor patience
SnT
The Reaper
01-30-2014, 17:20
For example, when the Nazis confiscated the assets of Jewish people and the Japanese invaded China and wealthy families were cut off from their assets, what proved to be of value to the wealthy was not gold but rather high-quality jewelry.
Well, I think this analogy is flawed, for one thing.
In 1939, gold was worth about $35 an ounce, so 100 pounds of gold was worth about $56,000.
100 pounds of gold can hardly be hidden, in addition to having sufficient bulk and weight to make it unwieldy to conceal or transport.
You could easily hide $50,000 of high quality gemstones (or a million dollars worth, for that matter) in the lining of a purse.
For people fleeing with what they could carry, the gems made more sense.
You are also forgetting the huge manipulation in the value of gems by certain entities, like DeBeers. The Fed has nothing on the artificial pricing of diamonds by DeBeers and the near monopoly they exercise and protect.
Just my .02.
TR
The thing is, gold has no intrinsic value itself. It is essentially a worthless metal whose value is derived out of thin air. I'd say it is gold that is more what so many claim that Federal Reserve notes are (i.e. value derived out of thin air and backed by nothing). The only reason it holds any value is based on faith and tradition. Gold would have a lot of industrial uses if it existed in much greater amounts, but it is in very limited supply, so it is not valued based on industrial demand.
Not true and you said it your self.
For instance Gold, Silver, Nickel, Bronze and Copper all have industrial uses and can be molded into various things for personal use, whereas if a Fed Note has no purchasing power it use is limited to fire tender, paper mach'e projects and ass wipe.
If the dollar bottoms out tomorrow will you get a better exchange rate on a bundle of Paper Fed Notes or a $20 Dollar Gold Piece?
Not if they are in on the ground floor or create the next monetary system.
+on the lead
I think a gradual shift would have to occur to protect them from us short term, so maybe that's the plan? Whether it's swift or surreptitious, the rich will get wrecked if The United States becomes a nation of rich and poor so I don't think the prospect is likely.
The rule of thumb is 10% under normal circumstances. The question is are we under normal circumstances? Here's some food for thought, in 1923 the national debt was 20% of the GDP today it is over 85% depending on whose numbers you look at. Don't forget that the government inflation numbers do not include food and fuel. How the F do you not include the two largest consumer categories in the inflation numbers?
Thanks for your insight. If precious metal tanks, I'll buy some :D
spherojon
01-30-2014, 18:08
Gold has a lot of industrial uses, but it isn't valued based on industrial demand. It exists in too small a quantity on Earth to be used for all of the things that it otherwise could be used for. Sure if a Fed Note has no purchasing power, it is just a piece of paper, but if the economy falls apart, gold, silver, copper, etc...don't have much use either, unless you have a functioning industrial economy, which means you will have a currency in place. If the economy falls apart, gold is just a shiny metal.
Petroleum has tons of industrial uses too, and exists in large enough quantities to be a real asset, but if the economy collapses, and you have a bunch of petroleum, you've just got a huge supply of sludge.
True, but the original question was inquiring if we are facing a financial collapse, not if Gold and Oil is valuable in a apocalyptic society.
Edit: I do not know why I included that last sentence in my original post...
Sure, but again, that's my point, no item has any intrinsic value. Things are only valued because humans decide to value them.
Not trying to split hairs here but water and food have intrinsic value :p
Gold has a lot of industrial uses, but it isn't valued based on industrial demand. It exists in too small a quantity on Earth to be used for all of the things that it otherwise could be used for. Sure if a Fed Note has no purchasing power, it is just a piece of paper, but if the economy falls apart, gold, silver, copper, etc...don't have much use either, unless you have a functioning industrial economy, which means you will have a currency in place. If the economy falls apart, gold is just a shiny metal.
Petroleum has tons of industrial uses too, and exists in large enough quantities to be a real asset, but if the economy collapses, and you have a bunch of petroleum, you've just got a huge supply of sludge.
That's why you don't put all your eggs in one basket. ..I actually like silver it is worth less, and in smaller denominations so its better to use for trade, think pre 64 quarters and dimes.
But in a total collapse barter items would be better, food ammo, guns or "sin" items.
The Reaper
01-30-2014, 18:53
But that is part of my point. Having a bunch of gold is useless if you suddenly have to flee the area you are in. It is not the safe store of wealth for emergencies many think it is. Regarding the Japanese in China, the Chinese families were trapped and couldn't flee, but they traded their jewelry for goods. In particular there was an interest from the girlfriends of Japanese officers for various jewelry, so it had a lot of value. Gold did not have much of any value. So even for people who could have stored it away, it wasn't of much value for barter purposes.
How do you make change for a 5 karat diamond when you want to buy a $20 item?
TR
How do you make change for a 5 karat diamond when you want to buy a $20 item?
TR
Silver :D
Ghost_Team
01-30-2014, 19:06
There is a documentary on Netflix called "End of the Road: How Money Became Worthless" that does a pretty good job explaining the gold standard and what is going on today.
There is also a series of books by James Wesley Rawles - "Patriots," "Survivors," "Expatriates," and "Founders." They deal with a catastrophic economic collapse and a second civil war.
I'm not into prepping for the avian flu pandemic or the Yellowstone supervolcano or a nuclear holocaust; in my mind, it's either your lucky day or it isn't when it comes to those scenarios. When people start discussing economic collapse, I pay attention. I can see for myself what is happening in other countries, and I dread that it ever happens here.
I watched an episode of "Doomsday Preppers" and one of the people had a pretty good outlook on this kinda thing. He said "People riot and loot when their favorite basketball team wins." The follow on to that was can you imagine what people will do if the world crashes around them?
The Reaper
01-30-2014, 19:12
There is a documentary on Netflix called "End of the Road: How Money Became Worthless" that does a pretty good job explaining the gold standard and what is going on today.
There is also a series of books by James Wesley Rawles - "Patriots," "Survivors," "Expatriates," and "Founders." They deal with a catastrophic economic collapse and a second civil war.
I'm not into prepping for the avian flu pandemic or the Yellowstone supervolcano or a nuclear holocaust; in my mind, it's either your lucky day or it isn't when it comes to those scenarios. When people start discussing economic collapse, I pay attention. I can see for myself what is happening in other countries, and I dread that it ever happens here.
I watched an episode of "Doomsday Preppers" and one of the people had a pretty good outlook on this kinda thing. He said "People riot and loot when their favorite basketball team wins." The follow on to that was can you imagine what people will do if the world crashes around them?
I maintain that we are 72 hours from a meltdown in this country.
Disrupt the power grid or the transportation network and watch things go critical.
Silver :D
That's a lot of silver. ;)
TR
GratefulCitizen
01-30-2014, 19:38
Not trying to split hairs here but water and food have intrinsic value :p
To a point.
Once you have more than you can eat/store/defend, how much is the excess worth?
What if many others have similar goods in excess as well?
The trading value of your excess is dependent on how much others need/want it, and whether they can find a better deal somewhere else.
Surf n Turf
01-30-2014, 22:57
Broadsword,
Think of precious metals as "repositories of wealth" awaiting a trading opportunity.
I person A has something to sell, and person B has PM, Person A will take precious metal "in trade" for the sale, as it has a high level of future trading potential. When things do not have a direct barter possibility the ability to "storehouse" the trade is made possible through PM (or anything equally valued by both parties). The beauty of PM is that it universally recognized as valuable, and is also universally accepted as payment, and has been for over 6,000 years. PM utility is part real and part legend, but its value is unquestionable.
Physical PM is difficult to forge or counterfeit. Some recent scandals of PM forgery have shaken the industry to the ground. Yet PM is bought, sold, and traded every day. The majority of these transactions are at arm's length, and require trust for the transaction to be successful. The reason for this success is that most PM is in forms easily recognized by everyone -- $20 gold eagle, $5 silver round, etc.. and the PM's value is available (daily) via every newspaper, internet, or brokerage house.
SnT
Toilet paper. The Wonder Bread kind, not that German prestained Rye kind.
Broadsword,
Think of precious metals as "repositories of wealth" awaiting a trading opportunity.
I person A has something to sell, and person B has PM, Person A will take precious metal "in trade" for the sale, as it has a high level of future trading potential. When things do not have a direct barter possibility the ability to "storehouse" the trade is made possible through PM (or anything equally valued by both parties). The beauty of PM is that it universally recognized as valuable, and is also universally accepted as payment, and has been for over 6,000 years. PM utility is part real and part legend, but its value is unquestionable.
Physical PM is difficult to forge or counterfeit. Some recent scandals of PM forgery have shaken the industry to the ground. Yet PM is bought, sold, and traded every day. The majority of these transactions are at arm's length, and require trust for the transaction to be successful. The reason for this success is that most PM is in forms easily recognized by everyone -- $20 gold eagle, $5 silver round, etc.. and the PM's value is available (daily) via every newspaper, internet, or brokerage house.
SnT
Good post. This is why people on this thread have said to supplement with gold and silver, not sell everything and buy only gold. Immediately after a collapse barter items will be the most valuable, nobody can eat PM, they don't keep you warm or put a cover over your head. Immediately after things like food, ammo, guns, magazines, boots, warm clothes, knives, medicine, shelter or protection will be the most sought after. And of course you can't forget the "sin" items; alchohol, cigarettes and drugs. They will actually be worth more than gold and silver.
After awhile and things have stabilized a little bit that's when the gold and silver will come into there own. I would recomend starting with silver, because it's cheaper and easier to get a supply. Gold is 1200-1300 dollars an oz and silver is around 20. Get some 1 oz silver coins, and pre 1965 quarters and dimes which are .90 percent silver. About 5 quarters equal 1 oz. If you get some extra money buy 1/10 oz gold coins. It's a way to get some gold without having to save up for an entire oz. As TR said it's hard to make change for a 5 karat diamond for a couple gallons of gas, but 4-5 silver quarters are easy.
But for the immediate time after bullets, guns, food and most importantly a plan will be what keeps you alive.
It seems to me that the value of items in a collapse will depend on a number of things...including one's current inventory of consumables, time, and both sides to a transactions perspective vis-a-vis needs/responsibilities and the prevailing view as to the long term future (more than a year or two of economic chaos).
Historically, precious metals have held value - how much value might depend on how long you (and others) believe the collapse (whatever it may be) will last and how long you (and your trading partners) stores will last.
In a complete economic collapse if your food, water, ammo stores are solid (or at least capable of replenishment) AND you can see light at the end of the tunnel regarding a collapse - then you might take precious metal in trade for some of your stores. As has been mentioned, I think "sin" items may prove valuable in a short to long term collapse - precious metals could prove very handy and valuable in a short to medium collapse.
If, however, a more than a few months have passed and no reports of a return to civilization as normal and food and water and the means to obtain them become difficult to come by...you may not wish to deplete what you can eat, drink, shoot, over the next few months for what may be of significant value ( i.e., gold, silver, diamonds) in what might become a year or years.
On the other hand, fortunes have been made with the right gamble and a little luck in trade. Safe passage and other items of value might be purchased with precious items through denied territory as the provisional authorities have banded together to such a degree as to meet their hierarchy of needs and replenish the same to create excess - which they are willing to trade for non-consumable precious metals/jewels and the like.
You can't eat gold but those with excess consumables (and methods to replenish) AND a favorable perspective on the future will take gold (whatever the precious item) in trade.
Everything is a balance and psychology, perspective, and opportunity is also important to value.
In the end, the ability to protect whatever it is that you have of value may prove consistently valuable. YMMV.
One other item that people don't think about both for yourself and extremely valuable for trade is seeds esp if it's going to be long term situation.
Oldrotorhead
01-31-2014, 10:55
https://www.youtube.com/watch?v=9ROOi5xagxghttps://www.youtube.com/watch?v=9ROOi5xagxgDon't know to be honest. But that is what I have read happened. Different assets have their pluses and minuses I am sure.
Rare items stamps, diamonds, jewelery, or art ASS ume you can escape to a geographic location that values them. An example would be Jews in Germany before WWII. You could carry a few rare stamps or diamonds where the same value in gold or other heavy or high volume items would not work.
Coin silver coins pre-1965, food, water or the means to get potable water may be better options if you can't leave.
Todays prices for silver coins.
1942-1945 Nickel * $0.05 $1.0763
Barber Silver Dime 1892-1916
Barber Dime $0.10 $1.3838
1916 Mercury Dime 1916-1945
Mercury Dime $0.10 $1.3838
1964 Roosevelt Dime 1946-1964 Roosevelt Dime $0.10 $1.3838
1963 Silver Quarter 1932-1964 Washington Quarter $0.25 $3.4596
Stiletto11
01-31-2014, 11:36
There's a good blog called: SHTFschool.com where the guy lived through the Balkan Wars in the 90's. He details what it is like to live through a melt down. Of course it could never happen here but it is a good education on what could happen and what people turn into when SHTF.
http://files.meetup.com/196633/SILENT%20WEAPONS%20for%20QUIET%20WARS.pdf
Gold and silver can be seen as insurance in the event of a currency crisis. We buy fire insurance for our homes and at the end of the year are we pissed off because the house didn't burn down?
IMO, too many gold proponents have this nearly religious view of gold, when really gold is just another asset valued according to the whims of human desire and emotion.
lol That whim goes back a few thousand years, BS.
IMO, too many gold proponents have this nearly religious view of gold, when really gold is just another asset valued according to the whims of human desire and emotion.
Exactly! My thoughts for a long time. We haven't grown up using gold as a face-to-face exchange in a hundred years. If someone came to me and offered to buy some tomatoes, potatoes, and onions, how much gold will I ask for? Off hand, I'd say all of it since he's hungry and has to lug all the heavy metal around. We agree on a bit of what he has. Then what? What if no one wants to except it from me because we've developed a mutually excepted barter society? I'm out the vegetables and stuck with a worthless metal, at least in my community.
I heard Walter E. Williams say that dollar bills are just "certificates of performance". They show that you provided a service to someone who could not render an immediate service in return and handed you a fancy IOU. The community will decide how much value there is to this IOU and what products or services you will receive in return for them. I don't really see the value in gold. But those that do may well take your life for it. There's a Twilight Zone episode about it: http://www.cbs.com/shows/the_twilight_zone/video/622087129/rip-van-winkle-caper We may live in that time.
BTW, for those who want to go back to the gold standard, there's not enough gold in the world to do that now.
Pat
Sure it does. But that doesn't make it any more sound. Gold can be, and has in the past at certain periods for example, been subject to inflation.
Look. A guy who hasn't eaten in 3 weeks would probably trade a ton of gold for a T-bone. That's a given, BS. But in the event of a global financial collapse, money is going to revert back to a standard of gold/silver/gems as a new society emerges. That's how it's always been, and that's the way it's gonna be in that particular hypothetical future.
If you wanna save up Sweet Tarts or buckeyes, go ahead.
GratefulCitizen
01-31-2014, 19:06
Money will be whatever the guys with guns collecting "taxes" say it is.
If the guys with guns find that people are using polished gravel as a medium of exchange, the guys with guns will trade "protection" for polished gravel.
The dollar has value because the US government accepts it as taxes.
If you don't give them dollars when they demand taxes, guys with guns take your stuff and trade it to someone else for dollars.
Dollars = stuff because guys with guns say so.
I said that one should keep some gold and silver on hand, just not to believe it's the end-all, be-all. It could be a while before any new society emerges in such a situation, depending. I'd also think skill sets of various types would be a form of wealth too, as one can trade skills (services) for goods or other services.
BS,
You were bagging gold and precious metals in post #46 (http://professionalsoldiers.com/forums/showpost.php?p=539488&postcount=46)
Gold itself is a fiat currency, as gold itself has no intrinsic value either and were opting for jewels based on WWII
Post #56 (http://professionalsoldiers.com/forums/showpost.php?p=539526&postcount=56) you stated
but if the economy falls apart, gold, silver, copper, etc...don't have much use either, unless you have a functioning industrial economy, which means you will have a currency in place. If the economy falls apart, gold is just a shiny metal.
You've circled around on this one............imo :D
I said that one should keep some gold and silver on hand, just not to believe it's the end-all, be-all. It could be a while before any new society emerges in such a situation, depending. I'd also think skill sets of various types would be a form of wealth too, as one can trade skills (services) for goods or other services.
Let me make sure we're talking about the same thing. I was talking about a total monetary collapse. A stack of hundos won't be worth a penny. (Actually, they will be.) Bartering will lead to trading in tokens. The most valuable tangible for tokens is gold, silver and jewels.
That's been SOP since Noah landed.
Good post. This is why people on this thread have said to supplement with gold and silver, not sell everything and buy only gold. Immediately after a collapse barter items will be the most valuable, nobody can eat PM, they don't keep you warm or put a cover over your head. Immediately after things like food, ammo, guns, magazines, boots, warm clothes, knives, medicine, shelter or protection will be the most sought after. And of course you can't forget the "sin" items; alchohol, cigarettes and drugs. They will actually be worth more than gold and silver.
After awhile and things have stabilized a little bit that's when the gold and silver will come into there own. I would recomend starting with silver, because it's cheaper and easier to get a supply. Gold is 1200-1300 dollars an oz and silver is around 20. Get some 1 oz silver coins, and pre 1965 quarters and dimes which are .90 percent silver. About 5 quarters equal 1 oz. If you get some extra money buy 1/10 oz gold coins. It's a way to get some gold without having to save up for an entire oz. As TR said it's hard to make change for a 5 karat diamond for a couple gallons of gas, but 4-5 silver quarters are easy.
But for the immediate time after bullets, guns, food and most importantly a plan will be what keeps you alive.
Reposting... it won't take a society fully coming back before PM will be valuable, but it will take a little stability, where people have their basic needs met.
Peregrino
01-31-2014, 21:58
I'd say what you are talking about though is a monetary collapse where all of the things one needs to survive are available, and it's just a matter of having a medium of exchange to trade them. That implies that there hasn't been a total collapse though. The problem I'd say is that with a total monetary collapse, a lot of goods that people need will not be available in the areas that they are in, because much shipping and transport would likely grind to a halt. If they aren't, and people are desperate, they likely won't care whether one has gold or not. Where gold will come into play is once a form of society had been started back up (and that could be a big "if," if the collapse was great enough to actually cause society to revert to tokens).
Your arguments make me think you don't get out much. They totally ignore human nature, the normalcy bias and convenience. Have you ever had to set up a five-step barter to get what you wanted/needed? I have. It's a royal PITA, fraught with risk at every step. And each step frequently involves a loss, especially if you are in a hurry and can't leverage a good bargain. That's why money was invented in the first place, to facilitate trade. Paper money has been around a while but previous exchange markers, especially those with tangible value can easily supplant it in a societal collapse. At that point, anything both parties see as having intrinsic value that is highly portable (PMs, jewelry, luxury items, etc.) will once again become a medium of exchange. You can talk down PMs (or other similar articles of exchange) as a viable place to hold fungible wealth in a post collapse society, I'll continue to rely on people needing convenience and security when engaging in trade. I'll bet over the long term more people trade with me at a higher confidence point than will trade with you, simply because I'm offering a recognized medium of exchange that is portable, convenient, and relatively secure without the ass-pain of an extended barter cycle to get essential items. I'll put my faith on human nature, it's highly predictable and fairly easy to work with. Especially when they think you're trying to make it easy for them. MOO - YMMV.
ETA: Most societal collapse scenarios I've considered can be plotted using a 3-D model to chart the "misery index". The product looks like a terrain model; peaks for low misery, valleys for high misery. The representation is straight out of intel modeling and battlefield analysis. The resulting product tells you visually where to focus your trade and social interaction efforts. Even in a total collapse, some places will be better off than others. Those are the places where convenient mediums of exchange will be quickly and readily accepted. IPB is useful for lots of things.
GratefulCitizen
02-01-2014, 06:13
There is one critical difference between (much of) the US and the rest of the world when it comes to economic collapse scenarios:
Firearm ownership.
Widespread firearm ownership begets de facto enforceable property rights.
Enforceable property rights beget stable trade.
Regardless of laws on the books, people in this nation have a sense of fairness and obligation of contracts.
They also have a strong self-preservation drive.
Widespread firearm ownership and American culture tend to produce voluntary, mutually beneficial trade, rather than pillage.
Before the economy can be collapsed, private firearms must be confiscated, and cultural norms must be rewritten.
I will admit that these things have largely been accomplished in large, liberal cities.
They haven't been accomplished everywhere else in the nation.
atticus finch
02-01-2014, 07:55
There is one critical difference between (much of) the US and the rest of the world when it comes to economic collapse scenarios:
Firearm ownership.
Widespread firearm ownership begets de facto enforceable property rights.
Enforceable property rights beget stable trade.
Regardless of laws on the books, people in this nation have a sense of fairness and obligation of contracts.
They also have a strong self-preservation drive.
Widespread firearm ownership and American culture tend to produce voluntary, mutually beneficial trade, rather than pillage.
Before the economy can be collapsed, private firearms must be confiscated, and cultural norms must be rewritten.
I will admit that these things have largely been accomplished in large, liberal cities.
They haven't been accomplished everywhere else in the nation.
This, discounting the previously mentioned 'taxes' .
And that was a damn good summation of what the collection of 'taxes' amounts to......no more than theft of private property.....
Trapper John
02-01-2014, 08:19
Very interesting thread here. But a couple of things we are not considering: (i) time and (ii) location. I was going to add a third factor - the human domain, but Peregrino addressed that in his post ;)
By time I mean the time-line post-collapse. And by location, I mean urban, suburban, and rural. The effects from economic collapse will be different in each, the likely responses of people in these regions will be different, and the unmet needs in each will also be different. Therefore, the medium of exchange (what is valued) will be different and consequently the appropriate responses will be different.
In each location bartering for goods and services will be the only means of exchange. In the urban areas the rioting, looting, and violence will overwhelm the police forces and NG response in a matter of days. Martial law will be declared and will eventually be effective. I would think the most valuable goods and services in this initial "chaos phase" are the ability to organize local defense forces, guns, ammunition, food, water, and medical services/supplies and these would be in highest demand in urban areas where the violence is the greatest.
Violence would creep into the suburban areas once food supplies in urban were exhausted, but Marshall law would probably keep this to a minimum. Still the need to organize neighborhood defenses and barter for goods and services would be the dominant means of economic exchange.
Rural areas would be least affected by the initial violence and chaos from the economic collapse.
Disruption of public utility services, lack of fuel, internet and cell phone services during the chaos phase would be felt in all regions, but once again, more acutely in urban and suburban areas.
The Emergency Response by the federal government, aside from a declaration of Marshall Law, would be to nationalize utilities and other essential services. I would expect this to occur in the first week. The emergent monetary policy would be to go back on the gold standard and confiscation of all gold physically located in the US to include personal holdings and make it illegal to personally hold gold. This I would expect to happen within the first month post collapse.
Therefore, if you are hording gold at $1,240.00 an ounce your going to lose. In the post collapse environment your only option would be to surrender it to the government for $100 an ounce. Not a smart investment IMO.
This whole economic collapse scenario would have a chaos phase that lasted about a month and what is valuable during that phase depends entirely on your location and the situation in your AO.
Prepare accordingly and remember you only truly own that which you can carry on your back at a dead run. ;)
This whole economic collapse scenario would have a chaos phase that lasted about a month and what is valuable during that phase depends entirely on your location and the situation in your AO.
Not sure I agree 100% with your police work, there, TJ.
Trapper John
02-01-2014, 09:01
Not sure I agree 100% with your police work, there, TJ.
Not sure either Dusty. But I do think Marshall Law would have a violence suppressing effect and the 1 month estimate is probably best case. Worst case - 6 months, most probable case - 3 months. I base this upon the time it would take to nationalize utilities and critical service industries and restore basic services.
The thing about martial law in a true "financial/economic collapse" is who is going to do the enforcing? If no one is getting paid, or there pay isn't worth shit, then won't there be mad desertion from not only the police but the military? And if things get to be really bad won't those individuals be more worried about there families. Maybe large military bases will close in on themselves, bring families on base to better protect them, but a lot of supplies are needed to support them. What happens when they run out and nothing is coming in. Even if they can be resupplied their ability to project strength will be limited to the surrounding area. NG May get called up but very few will show up, they will be trying to protect their own family. Plus NG armories would be tempting targets for an "organized" mob.
...an "organized" mob.
You mean "a well regulated" mob. ;)
Pat
So I am sure some of you have seen it, but being that we are talking about financial collapse................I figured this video would give everyone quite the laugh. Its from a few years ago during the occupy boondoggle.
http://www.youtube.com/watch?v=kGdH7iGNqlY
So I am sure some of you have seen it, but being that we are talking about financial collapse................I figured this video would give everyone quite the laugh. Its from a few years ago during the occupy boondoggle.
http://www.youtube.com/watch?v=kGdH7iGNqlY
Peter Schiff for President!
Wall Street was the direct benefit of QE so I would be careful calling this a normal correction (Usually 10%).
So the Dow is trading at 15,394, which is down 304 since opening. I did some math and research, and on Jan 15, 2014 it was trading at 16,500. So in less than 3 weeks it has gone down 1,118 points, which in my math challenged brain is about 7%. 14,850 is the 10% mark. If we have a few more day's like today and it keeps going down we will hit that mark, sooner rather than later.
My question is (and I know, no one has the answer, I'm just speculating), has it started, or still to early to tell?
FYI gold is at $1,257 and silver is at $19.30 an oz.
Surf n Turf
02-03-2014, 15:03
My question is (and I know, no one has the answer, I'm just speculating), has it started, or still to early to tell?
MaxTab,
A more telling indicator is the "margin debt", which is at record levels.
That is professional traders are borrowing money (stock shares) to bet that the stocks will go down in value.
They are not betting on the stock going up (as most investors would buy stocks), and can leverage their "shorts" by 5 to 1 (i.e. 20%) on a trade.. That means that they can "sell" $5 million of a stock they do not own with only $1 Million to cover the trade.
This is an area where Soros has made so much of his wealth.
If the stocks go up --- they are screwed, and have to buy shares at a new higher price to cover their sale.(That is the margin call). But these people don't get rich by being stupid.
SnT
In the month of December margin debt on the NYSE surged by over $20 Billion dollars hitting a new all-time high of $444.931 billion.
The rise in leverage also sent investors net worth to a negative $149.358 billion which is also a record.
It is important to note that it is not the rise in margin debt that is the problem for the markets - it is the fall. When the ultimate reversal begins, and investors are forced to liquidate to meet margin calls, the market begins to feed upon itself.
This forced liquidation quickly accelerates downside reversions in equity markets leaving investors little opportunity to react. The last two peaks in margin debts have had nasty outcomes for this very reason.
http://www.investing.com/analysis/margin-debt-hits-all-time-high-200249
It closed today at 15,372. Down 7.26% for the year.
GratefulCitizen
02-03-2014, 15:51
MaxTab,
A more telling indicator is the "margin debt", which is at record levels.
That is professional traders are borrowing money (stock shares) to bet that the stocks will go down in value.
They are not betting on the stock going up (as most investors would buy stocks), and can leverage their "shorts" by 5 to 1 (i.e. 20%) on a trade.. That means that they can "sell" $5 million of a stock they do not own with only $1 Million to cover the trade.
This is an area where Soros has made so much of his wealth.
If the stocks go up --- they are screwed, and have to buy shares at a new higher price to cover their sale.(That is the margin call). But these people don't get rich by being stupid.
SnT
In the month of December margin debt on the NYSE surged by over $20 Billion dollars hitting a new all-time high of $444.931 billion.
The rise in leverage also sent investors net worth to a negative $149.358 billion which is also a record.
It is important to note that it is not the rise in margin debt that is the problem for the markets - it is the fall. When the ultimate reversal begins, and investors are forced to liquidate to meet margin calls, the market begins to feed upon itself.
This forced liquidation quickly accelerates downside reversions in equity markets leaving investors little opportunity to react. The last two peaks in margin debts have had nasty outcomes for this very reason.
http://www.investing.com/analysis/margin-debt-hits-all-time-high-200249
Early in the thread I referred to my best friend taking a particular short position.
He's had extraordinary investing success since 2008.
The short position he took that day made him almost 100% return on investment...in one day.
That was only a 35% margin short.
A financial crisis and an economic crisis aren't necessarily the same thing.
Wealth usually isn't destroyed in a financial crisis, it changes owners.
Early in the thread I referred to my best friend taking a particular short position.
He's had extraordinary investing success since 2008.
The short position he took that day made him almost 100% return on investment...in one day.
That was only a 35% margin short.
A financial crisis and an economic crisis aren't necessarily the same thing.
Wealth usually isn't destroyed in a financial crisis, it changes owners.
I don't think there is as much actual wealth out there as you think. Yes people who have actual products or resources have wealth, but what the problem is when banks or corporations or even individuals have a lot of wealth on paper but limited actual wealth.
-$212,525,587,000,000 - According to the U.S. government, this is the notional value of the derivatives that are being held by the top 25 banks in the United States. But those banks only have total assets of about 8.9 trillion dollars combined. In other words, the exposure of our largest banks to derivatives outweighs their total assets by a ratio of about 24 to 1.
When an individual uses his house as collateral for a loan, then the lender who doesn't actually own the house uses it and a couple other properties for collateral dor a larger loan, then the banks use those plus more for another loan. The house used for a ten thousand dollar loan is the start and ends being used for 100s of millions of dollars worth of loans. On paper it looks great but there is really nothing there. Its a house of cards.
What if the the entity who got the 100 million dollar loan defaults? They don't actually own anything. What are they going to liquidate?
Someone explain to me if my thinking or knowledge is wrong or faulty. Thats why I started this thread, I want to understand.
GratefulCitizen
02-03-2014, 16:38
I don't think there is as much actual wealth out there as you think. Yes people who have actual products or resources have wealth, but what the problem is when banks or corporations or even individuals have a lot of wealth on paper but limited actual wealth.
-$212,525,587,000,000 - According to the U.S. government, this is the notional value of the derivatives that are being held by the top 25 banks in the United States. But those banks only have total assets of about 8.9 trillion dollars combined. In other words, the exposure of our largest banks to derivatives outweighs their total assets by a ratio of about 24 to 1.
When an individual uses his house as collateral for a loan, then the lender who doesn't actually own the house uses it and a couple other properties for collateral dor a larger loan, then the banks use those plus more for another loan. The house used for a ten thousand dollar loan is the start and ends being used for 100s of millions of dollars worth of loans. On paper it looks great but there is really nothing there. Its a house of cards.
What if the the entity who got the 100 million dollar loan defaults? They don't actually own anything. What are they going to liquidate?
Someone explain to me if my thinking or knowledge is wrong or faulty. Thats why I started this thread, I want to understand.
When it comes to money, it's the percentage someone controls -- at a given point in time -- compared to the total everyone else controls.
Control and ownership aren't the same thing.
Delaying how quickly some people can move their money gives tremendous advantage to those who can move theirs (plus others) quickly.
It is true that the game is rigged.
The person I referred to checked out this thread and we exchanged a few emails about it.
An excerpt from one of them:
[My brother] complained that the stock market game was rigged...
It is...
Learn to play and be on the winning team, It's not that hard. You'll never do as good as those that control the game, but you'll do pretty damn good while everyone else moans about how unfair things are and stick their heads in the sand.
Even if what they say is true [referring to this thread],
it's a case of learn and adapt or die.
The economic/financial battlefield is what it is.
We don't control that.
Each of us does have some control over our own piece of the field.
Stiletto11
02-03-2014, 18:46
I don't think there is as much actual wealth out there as you think. Yes people who have actual products or resources have wealth, but what the problem is when banks or corporations or even individuals have a lot of wealth on paper but limited actual wealth.
-$212,525,587,000,000 - According to the U.S. government, this is the notional value of the derivatives that are being held by the top 25 banks in the United States. But those banks only have total assets of about 8.9 trillion dollars combined. In other words, the exposure of our largest banks to derivatives outweighs their total assets by a ratio of about 24 to 1.
When an individual uses his house as collateral for a loan, then the lender who doesn't actually own the house uses it and a couple other properties for collateral dor a larger loan, then the banks use those plus more for another loan. The house used for a ten thousand dollar loan is the start and ends being used for 100s of millions of dollars worth of loans. On paper it looks great but there is really nothing there. Its a house of cards.
What if the the entity who got the 100 million dollar loan defaults? They don't actually own anything. What are they going to liquidate?
Someone explain to me if my thinking or knowledge is wrong or faulty. Thats why I started this thread, I want to understand.
They monetize debt, bundle it and sell it. It's a game of hot potato. There is an old saying on Wall St. Don't be the third guy on the match. Take an IPO, The underwriter gets his cut prior to launch, The brokerage house and company floating the shares get their cut, and then the public gets theirs. Usually, once the stock goes public the first two guys sell to make their profit leaving Joe public with shares that go down in value. A good example was Snapple.
If the banks are gambling with 24x the money they have, what happens to our personal savings if they lose? To whom will they owe if they lose?
If the banks are gambling with 24x the money they have, what happens to our personal savings if they lose? To whom will they owe if they lose?
Ask Cyprus
GratefulCitizen
02-03-2014, 19:19
If the banks are gambling with 24x the money they have, what happens to our personal savings if they lose? To whom will they owe if they lose?
Banks are actually holding on to more than the required reserves.
Regardless, in the case of FDIC insured deposits, nothing happens to your personal savings (up to the limit).
Plenty if banks have failed already.
Life goes on...
http://www.fdic.gov/bank/individual/failed/banklist.html
Reserve balances:
http://www.federalreserve.gov/releases/h3/current/
Surf n Turf
02-03-2014, 19:43
Late getting this posted, Several comments between question and my opinion
SnT
A financial crisis and an economic crisis aren't necessarily the same thing
True, and the potential derivatives crisis would precipitate a world-wide economic calamity on an unimaginable scale
the exposure of our largest banks to derivatives outweighs their total assets by a ratio of about 24 to 1.
When an individual uses his house as collateral for a loan (To Receive a $ loan +1 to homeowner), then the lender who doesn't actually own the house uses it and a couple other properties for collateral for a larger loan (To Receive a $ loan +1 for lender), then the banks use those plus more for another loan.(To Receive a $ loan +1 for Banks)
The house used for a ten thousand dollar loan is the start and ends being used for 100s of millions of dollars worth of loans. (To Receive money +1)
On paper it looks great but there is really nothing there. Its a house of cards.
What if the the entity who got the 100 million dollar loan defaults? They don't actually own anything.
Someone explain to me if my thinking or knowledge is wrong or faulty. Thats why I started this thread, I want to understand.
MaxTab,
I think you are correct --- it is a house of cards
Example above, the "wealth" went to those that received the loans, cashed the checks, and SOLD the paper. Those holding the paper were SOL.
Your example is one reason that during the housing crisis, some housing foreclosures were ruled "illegal" as no-one could determine who "held the paper" on a particular property. Look for more of this type of activity as the government buys more paper from the remaining lenders.
When it comes to money, it's the percentage someone controls -- at a given point in time -- compared to the total everyone else controls.
I do not understand -------
Delaying how quickly some people can move their money gives tremendous advantage to those who can move theirs (plus others) quickly.
The economic/financial battlefield is what it is.
Absolutely correct. The professional on Wall Street has much more "time" than the investor in Topeka, Kansas. The game is rigged. Add to that "electronic arbitrage" and options, and it's like Las Vegas without the ethics.
SnT
GratefulCitizen
02-03-2014, 20:03
I do not understand -------
Just getting at the idea that money has no intrinsic value.
It is a claim on a percentage of the economy.
When people simultaneously use their claims on the same limited resource, their claim is a percentage of the overall claim.
This is reflected in the monetary price of that particular resource.
Many potential claims may exist, but it won't matter unless they're are all exercised at the same time.
If too many are exercised at the same time, we get price increases, for that resource.
Could expand on this idea further, but that was the general idea.
Surf n Turf
02-04-2014, 07:47
I wonder if these banks can spell DEFAULT, 'cause that's likely what is going to happen.
SnT
European banks have $3 trillion of exposure to emerging markets
LONDON (Reuters) - European banks have loaned in excess of $3 trillion to emerging markets, more than four times U.S. lenders and putting them at greater risk if financial market turmoil in countries such as Turkey, Brazil, India and South Africa intensifies.
The risk is most acute for six European banks - BBVA, Erste Bank, HSBC, Santander, Standard Chartered, and UniCredit - according to analysts.
But the exposure could be a headache for the industry as a whole, just as it faces a rigorous health-check by the European Central Bank, aiming to expose weak points and restore investor confidence in the wake of the 2008 financial crisis.
"We think EM (emerging markets) shocks are a real concern for 2014," said Matt Spick, analyst at Deutsche Bank. "When currency (volatility) combines with revenue slowdowns and rising bad debts, we see compounding threats to the exposed banks."
An emerging markets crisis could hit banks in a variety of ways - a collapse in local currency can hurt reported earnings or capital held in the country; loan losses can jump as interest rates rise; or income from capital markets activity or private banking can fall. ----my comment OR DEFAULT
http://finance.yahoo.com/news/european-banks-3-trillion-exposure-100904185.html
Stiletto11
02-04-2014, 08:03
It's all fiat, an illusion.
So if 10 percent is a normal correction, what does it mean when Japans is down 14 percent and falling. More importantly is how will it effect us? http://mobile.bloomberg.com/news/2014-02-03/japan-sees-worst-developed-stock-rout-as-nikkei-225-drops.html
The Reaper
02-04-2014, 21:51
Why did we allow Glass-Stegall to be repealed?
Would that not have prevented the derivative speculation by banks?
TR
Surf n Turf
02-04-2014, 22:18
Why did we allow Glass-Stegall to be repealed?
Would that not have prevented the derivative speculation by banks?
TR
It did for 66 years
SnT
FlagDayNCO
02-05-2014, 10:02
I just posted in the Europe section an article entitled Germany Announces Military Rearmament. Within the article, I quote this paragraph for this thread:
A key factor to sustaining this prosperity has been the German Bundesbank's control of the political and economic policies of the European Union through its dominance of the Frankfurt-based European Central Bank (ECB). Roughly 40% of German exports go to the 253 million in the other European countries that rely on the euro currency. But despite this German prosperity, the Bundesbank, through its control of the ECB, has forced the weakest continental economies of Portugal, Italy, Ireland, Greece, and Spain (PIIGS) to implement austerity spending cuts that have resulted in dramatically higher unemployment. With the Financial Crisis continuing, the ECB is now beginning to force the traditionally strong economies of France and the Dutch to also pursue austerity cuts.
Why did we allow Glass-Stegall to be repealed?
Would that not have prevented the derivative speculation by banks?
TR
Thank BJ for that. IMO, the repeal instigated the whole implosion.
Mysterious fire burns bank archives in Argentina http://m.washingtonpost.com/business/7-die-in-fire-destroying-argentine-bank-archives/2014/02/05/7c489abc-8e70-11e3-878e-d76656564a01_story.html?tid=auto_complete
Many other countries never had a Glass-Steagal and didn't have the financial crash that we did, so is this really true? Not saying you are wrong, just curious. I know the argument that other countries did not have a wall between investment and commercial banking is one of the arguments given for repeal of Glass-Steagal.
email Frank, Dodd and Raines; ask them.
GratefulCitizen
02-05-2014, 18:07
FWIW: http://scottgrannis.blogspot.com/2014/02/emerging-market-currencies-in.html
Emotions tend to push things higher than they ought to go, and lower...
A handful profit from the stampedes.
To be fair, the GOP was A-Okay with this law, as it was deregulation that was seen as okay.
Does that make it right?
Nope, but people/politicians you mentioned are all Democratic party.
To be fair, the political elite currently comprise elements of both major parties.
IMO, none of them are worth a rats ass. Period.
Hopefully, if there is a financial collapse, these folks are held accountable for their legacy of piss poor legislative decisions and economic policies. Maybe the "street" will help with their exit strategy.
To be fair, the political elite currently comprise elements of both major parties.
IMO, none of them are worth a rats ass. Period.
Hopefully, if there is a financial collapse, these folks are held accountable for their legacy of piss poor legislative decisions and economic policies. Maybe the "street" will help with their exit strategy.
A lot of good it will do then?
A lot of good it will do then?
True.
Personally, I have little faith in the current system holding political parasites accountable. Unfortunately, it may take a collapse for the country to actually wake up and for politicians to be held accountable.
I so hope I'm wrong on this one.
ETA the upcoming mid-term elections might telegraph whether there has been a wake up or not.
But much of the GOP overall (the grassroots) was okay with repealing Glass-Steagal. It wasn't just something the politicians were for. I still question myself if repealing it is what caused (or at least contributed) the financial crisis or not, and if it did, then I wonder why the same thing did not happen in other countries that lacked such a regulatory wall.
There are many reasons...including but not limited to cultural, simple greed and a distinct absence of ethics, here. Which countries are you referring to, specifically?
IMO, the one thing that we do know is that when the rules are changed the markets, the advisors, investors, etc., will respond.
That's not to suggest that we never change the rules but legislators must become more sensitive to the law of unintended consequences.
We are again seeing the unintended consequences with the implementation of ObamaCare and the reported loss of a significant number of jobs. We will see something similar with an increase in the government mandated minimum wage in this stalled economy.
Nevertheless, there is little doubt that government policy has played a significant role in contributing to the last financial crisis...mandatory lending, etc., etc., covered in any number of previous posts on this BB.
Long story short, political leadership (in both parties) have played a significant role in contributing to our lagging economy, huge national debt, increased government dependency, high real unemployment and general malaise.
And yes, the voters have failed, too.
Canada and the United Kingdom have no separation of commercial and investment banking; I think most countries have no such separation.
Interesting.
UK has certainly had their share of well documented financial problems.
It is reasonable to suggest that Canada is fiscally more conservative than the US (at least in my experience and my discussions with others who were on Wall Street during the 1990s and worked as investment bankers with their counterparts in Canada).
Canada's banking system is known for being conservative and stodgy and stingy from what I have read, and is more regulated than the U.S. system, but in different ways. It behaves more how bankers should behave (prudent) as opposed to the cowboy capitalism manner often seen in the American financial system.
Ah, you have touched on some cultural and regulatory differences.
To come back to the OP - I do not profess to understand today's financial markets. They are undeniably complex and if you ask 20 economists you get 20 different responses.
I do believe that it is fair to suggest that a number of our politicians (in both parties) have acted unwisely and supported legislation that has undoubtably hurt our economy. And yes, there was always grassroots support...that's typically how things pass.
On a positive note, the mid-terms are an opportunity for each of us to make a statement and perhaps turn this thing around.
Best I got -- Diversify.
And to borrow from a friend..."bring seeds..."
Stiletto11
02-06-2014, 13:41
http://hiwaay.net/~becraft/mcfadden.html
Read this if you want to understand the Fed.
Nope, but people/politicians you mentioned are all Democratic party.
RIght. Well, that's because I loathe dems.
Loathers gonna loathe.
GratefulCitizen
02-06-2014, 14:02
http://hiwaay.net/~becraft/mcfadden.html
Read this if you want to understand the Fed.
Power corrupts, no doubt.
The article argues that the government is enabling the Fed.
I think it's more the case that the Fed is enabling the government.
The current theft is going on with both banks and the federal government.
Specifically, QE and the paying of interest on excess reserves.
QE hides the true burden of government: spending.
The paying of interest on excess reserves is functionally equivalent to banks possessing their own money printing machines.
Money, from a technical perspective: http://www.wfhummel.cnchost.com
Stiletto11
02-07-2014, 15:59
All banks are under the Fed. Who is the Fed?
GratefulCitizen
02-08-2014, 12:49
Not worried yet:
http://scottgrannis.blogspot.com/2014/02/nothing-new-in-january-jobs-report.html
Private sector jobs are still growing while public sector jobs are declining.
Both of these things are good.
Unlike public sector jobs, private sector jobs require profitable productivity if the company wishes to remain in business.
The net result is more wealth created.
Some worry about the slow rate of real GDP growth.
This does not necessarily imply a reduced standard of living.
Improvement in the standard of living is a function of real GDP growth rate divided by population growth rate.
Population growth rate has slowed.
Standard of living doesn't look to be a problem from an macroeconomic perspective.
However, age demographics may create some interesting distribution skews which could result in social unrest (particularly if it is actively stoked...).
Stiletto11
02-09-2014, 08:04
Oh? I guess you don't get it. No problem drive on.
The Reaper
02-09-2014, 10:28
Not worried yet:
http://scottgrannis.blogspot.com/2014/02/nothing-new-in-january-jobs-report.html
Private sector jobs are still growing while public sector jobs are declining.
Both of these things are good.
Unlike public sector jobs, private sector jobs require profitable productivity if the company wishes to remain in business.
The net result is more wealth created.
Some worry about the slow rate of real GDP growth.
This does not necessarily imply a reduced standard of living.
Improvement in the standard of living is a function of real GDP growth rate divided by population growth rate.
Population growth rate has slowed.
Standard of living doesn't look to be a problem from an macroeconomic perspective.
However, age demographics may create some interesting distribution skews which could result in social unrest (particularly if it is actively stoked...).
How about the participation rate for the work force?
Numbers of young people still living at home and un- or under-employed?
TR
GratefulCitizen
02-09-2014, 12:37
How about the participation rate for the work force?
Numbers of young people still living at home and un- or under-employed?
TR
Certainly a social problem and a problem for the affected individuals, but not necessarily a macroeconomic one.
The young, inexperienced workers currently not working are at the edges of marginal productivity.
Adding them to those working wouldn't help the economy much, in the short run.
The time will come when older, more productive workers will either decide to retire/work less or failing health will force them to do so.
At that point, while new, less productive workers are brought in, the economy may be hit with some inflation.
Suspect that the inflation will start somewhere around 2019-2021.
Anyone who is on a fixed income around then will be hurt by it.
The Reaper
02-09-2014, 13:22
With ever decreasing numbers of people actually working, and ever increasing numbers of people on the public dole, how do you think this is a sustainable economy?
TR
Team Sergeant
02-09-2014, 13:29
"The trouble with Socialism is that eventually you run out of other people's money" — Margaret Thatcher
:munchin
Hey Greece is that true?????
GratefulCitizen
02-09-2014, 13:29
With ever decreasing numbers of people actually working, and ever increasing numbers of people on the public dole, how do you think this is a sustainable economy?
TR
Productivity increases.
Distribution of the created wealth among the working and non-working is another matter.
Productivity increases.
Distribution of the created wealth among the working and non-working is another matter.
How is productivity increasing?
Companies are not hiring. When there is turnover, they often don't backfill the position. Existing employees are asked to handle a larger and larger workload.
There is a certain percentage of workers (in my experience, <20%) who will try and manage the new load, thinking it is "temporary" because they're told things will get better "soon". But as they get more and more stressed, tired, resentful, their productivity exponentially drops. The product or service, as presented to the customer, becomes sloppy or inconsistent. Customer loyalty is lost.
The larger percentage of workers just rebel passive-aggressively, doing the bare minimum to get by, and often subverting the efforts of the 20% who are trying to get things done.
I've seen this cycle over and over in jobs I've worked. Often I was one of those trying to carry the load, or I was managing those I asked to carry a larger load. People intuitively know this isn't fair, and will only take this for so long. In a bad economy they might take it longer, if they are unsure what other job opportunities they have. But I still think your premise is false.
Work harder not smarter :rolleyes:
GratefulCitizen
02-09-2014, 14:09
How is productivity increasing?
Companies are not hiring. When there is turnover, they often don't backfill the position. Existing employees are asked to handle a larger and larger workload.
Fewer employees doing more work is pretty much the definition of increased productivity.
There is a certain percentage of workers (in my experience, <20%) who will try and manage the new load, thinking it is "temporary" because they're told things will get better "soon". But as they get more and more stressed, tired, resentful, their productivity exponentially drops. The product or service, as presented to the customer, becomes sloppy or inconsistent. Customer loyalty is lost.
The larger percentage of workers just rebel passive-aggressively, doing the bare minimum to get by, and often subverting the efforts of the 20% who are trying to get things done.
Corporate anorexia.
Know exactly what you're talking about, I've lived it.
This is the sort of thing that will drive older, more productive workers to retire.
They will be replaced by younger, less productive workers.
There will be a transition period while the new workers gain experience and increase their productivity.
Inflation will be the result.
I've seen this cycle over and over in jobs I've worked. Often I was one of those trying to carry the load, or I was managing those I asked to carry a larger load. People intuitively know this isn't fair, and will only take this for so long. In a bad economy they might take it longer, if they are unsure what other job opportunities they have. But I still think your premise is false.
This is part of what will drive inflation once the corporate anorexia hits bottom (baby boomers retire).
Employers will bid up wages across the board in competition for the best workers.
At this point, productivity is not increasing, but wages are.
Inflation is the result until the new workers become more productive.
So who takes the hit?
Those who aren't able to increase their income (the non-working) will take the hit.
The baby boomers worked very hard to create great wealth for this nation.
When they retire, they're gonna get screwed over by a temporary inflation spike that their retirements won't be indexed to match.
This does not amount to a macroeconomic problem for everyone.
It is a big problem for some.
I'm not arguing that any of this is fair or just.
Just saying what I think will happen.
Fewer employees doing more work is pretty much the definition of increased productivity.
I think we're talking past each other on this, or at least I'm viewing it from a different perspective.
For example, you have 2 Design/Production employees covering 5 tasks each, or 10 total. Let's call them employees X and Y. Employee Y leaves the company and is not backfilled. X is now given 10 tasks to complete.
Twenty percent of X's will diligently try to do the 10 tasks, till they give up from exhaustion. You have a temporary increase in production from them.
Eighty percent of X's, who were only doing their original 5 tasks marginally, will now do 5-7 tasks poorly and ignore the rest. This will translate to the product. It will be produced poorly, full of missed (or not dealt with) quality issues.
Multiply this X and Y scenario throughout the whole company...
Your escalations from customers will increase and it will send the Service group into 10x or 20x the cycles they had before. If you could solve a customer issue by one phone call (no on-site visit) before, now it will take 10 phone calls, and the irate customer demands more on-site support. Since your Service X employees also lost their Y's, they not only suffer from the poor job their Sales X's perform (setting sloppy customer expectations or making false promises), but they also start dropping more of their 10 service tasks. Your service costs grow exponentially, and worse, customer loyalty is lost.
Your Marketing group then spends 100x the cycles they had before to get customers back to trusting the company again. But since some of the Marketing employees are also X's, who've been burdened with more tasks when the Y's left, and now they have their 5 tasks + the 5 Y tasks + the huge challenge of winning back customers, something they didn't have to focus on before. Marketing costs sky-rocket.
That's what I mean by "false premise". You might have gone from 50,000 employees down to 20,000 and execs pat themselves on the back for reducing headcount costs on the P&L and temporarily maintaining productivity. But in the long run, whatever dollars those headcount savings represented will be lost many times over from the increased service and marketing cycles to gain your customers back and keep them happy. The total picture on the P&L does not represent "increased productivity," and even though it is difficult to quantify, it has a big effect on the economy too. ;)
Corporate anorexia.
Know exactly what you're talking about, I've lived it.
This is the sort of thing that will drive older, more productive workers to retire.
They will be replaced by younger, less productive workers.
There will be a transition period while the new workers gain experience and increase their productivity.
Inflation will be the result.
I haven't found it's related to age. I have seen workers of all ages buckle under the strain of being unrealistically asked to maintain their level of productivity with less help on their team.
This is part of what will drive inflation once the corporate anorexia hits bottom (baby boomers retire).
Employers will bid up wages across the board in competition for the best workers.
Ironically, I don't believe this response from employers will bring the results they're after. You don't have to have a fleet of top notch MBAs, at top salaries, to 'fix' a company's product, their processes, or their culture. The execs need to set a pattern of treating their existing employees realistically (I hate the word "fair"), putting enough butts in chairs to get all the critical jobs done in 8 hours a day, and the right tools to keep people feeling engaged and a sense of pride/ownership in their workday.
I saw this at a former company. When everything went south, and sales were lost, customer loyalty plummeted, profits drastically down....we knee-jerked by randomly laying off large groups of employees (not even culling out the good ones to keep), went to all the best MBA schools in the nation and hired their brightest MBA grads. Now these MBAs, for all their brilliant book smarts, didn't have a lick of street sense, and when they entered into a chaotic company culture of poor morale, poor company image, etc, they got just as lost and demoralized as everyone else. Apparently MBA school does not teach you how to deal with that. :D
And there I agree with you, the mid-skilled workers will lose, will not be competitive in a bidding war, but I think should never have been fired to begin with.
Bottom line, in my experience, companies shouldn't fall for the "false premise" that if you clean out the headcount you will miraculously maintain productivity and a healthier P&L statement. You don't need all the "best workers," but you need to treat the ones you have honestly, with direct/timely information during bad times, and keep them engaged in owning your company's success. Try and find a way to reduce your product offerings, your R&D, your internal costs, your service offerings, etc, before going down the path of headcount reduction for "increased productivity."
I think you're brilliant, GC, but I do view this differently from you. And I also believe the number of people no longer looking for work, i.e. the reduced labor participation rate, is a much bigger deal than you suggest. :)
Bottom line, in my experience, companies shouldn't fall for the "false premise" that if you clean out the headcount you will miraculously maintain productivity and a healthier P&L statement.
Makes sense to me. :cool:
GratefulCitizen
02-09-2014, 16:19
Bottom line, in my experience, companies shouldn't fall for the "false premise" that if you clean out the headcount you will miraculously maintain productivity and a healthier P&L statement. You don't need all the "best workers," but you need to treat the ones you have honestly, with direct/timely information during bad times, and keep them engaged in owning your company's success. Try and find a way to reduce your product offerings, your R&D, your internal costs, your service offerings, etc, before going down the path of headcount reduction for "increased productivity."
I think you're brilliant, GC, but I do view this differently from you. And I also believe the number of people no longer looking for work, i.e. the reduced labor participation rate, is a much bigger deal than you suggest. :)
Your entire post brings up many issues.
The general theme seems to be one of production vs production capacity.
I agree that increased productivity from reduced staff is temporary.
The lack of investment in productive capacity (human capital in particular) will hurt many businesses.
Enter the creative destruction of capitalism.
The businesses that do it right will remain, and overall productivity will be better.
WRT the labor force participation rate:
The economy enjoyed some one-time benefits from favorable demographic changes (boomers) and women joining the workforce. **
Those benefits have already been captured.
The promises made in exchange to those who created the benefits will not be kept.
Many businesses were built by the labor of employees who traded their time for deferred compensation (pension and retirement health benefits).
This collective debt will undergo nation-wide stealth default through inflation, financial repression, and some bankruptcies.
Many people will absolutely get a raw deal.
Not everyone.
All I'm saying is that economic injustice for some isn't the same thing as economic collapse for all.
**
Labor force participation rate was less than 60% from 1948-1968.
Since 1969 it has been above 60% and, on average, it rose until 1997, peaking around 67%.
It stayed around 67% until 2001.
On average, it has declined since then to the current level of 63%.
http://data.bls.gov/timeseries/LNS11300000
Select dates 1948-2014 for the data.
GratefulCitizen
02-09-2014, 19:43
Well, that was timely.
Just showed up on Drudge.
http://nypost.com/2014/02/08/thanks-to-aging-population-its-all-downhill-from-here-for-usa/
Your entire post brings up many issues.
The general theme seems to be one of production vs production capacity.
I agree that increased productivity from reduced staff is temporary.
The lack of investment in productive capacity (human capital in particular) will hurt many businesses.
Enter the creative destruction of capitalism.
The businesses that do it right will remain, and overall productivity will be better.
I agree we're talking about different things. My point is not production vs capacity. No worries though...
WRT the labor force participation rate:...<snip>...All I'm saying is that economic injustice for some isn't the same thing as economic collapse for all.
I agree. Some good people, that were productive employees, are caught up in this mess and now un- or under-employed.
I know the effects of the boomers retiring are anticipated to be felt in 2017 and beyond. I think if we don't get our unemployed working by then that will be a worse disaster because of the ripple effect it has on entire families.
Thanks for your feedback.
Regarding orion5's and GC's discussion, I think one problem a lot of companies face is the obsession with short-term profits due to being publicly-traded companies. If they are privately-owned, they can then focus more on the long-term.
Completely agree. The company I worked for did the employee layoff shuffle to please Wall St.
However, companies can control that messaging much better. For example, my company finally had a lightbulb moment and realized they were over-communicating with Wall St., and giving them too much guidance in advance of quarterly earnings reports. Which made Wall St hyper-sensitive to any variance in predicted vs actual. Once my company decided to quit setting high or false expectations, they had an improved relationship with Wall St.
I know if Wall St is heavily investing in your company and recommending BUY, BUY, BUY, they feel entitled to know everything about what you're doing. In my experience, there are times you need to tell them, "No, that's all you're getting until our results come in."
Thoughts? Is this a legit concern our more fear mongering?
http://www.marketwatch.com/story/scary-1929-market-chart-gains-traction-2014-02-11
Surf n Turf
02-12-2014, 13:22
Thoughts? Is this a legit concern our more fear mongering?
http://www.marketwatch.com/story/scary-1929-market-chart-gains-traction-2014-02-11
I do see many similarities between the 1928 era and today. High unemployment (reported or not), Banking problems, Currency mis-management, irrational exuberance in the stock market, national moral decay (think flappers), seductive low interest rates, no borrowing, and if you include the 1930's a severe drought.
History influences and sets the context for the present - "What is past is prologue"
SnT
"the savings of the European Union's 500 million citizens could be used to fund long-term investments to boost the economy and help plug the gap left by banks since the financial crisis, an EU document says." What is left unsaid is that the "usage" will be on a purely involuntary basis, at the discretion of the "union", and can thus best be described as confiscation.
http://www.zerohedge.com/news/2014-02-12/europe-considers-wholesale-savings-confiscation-enforced-redistribution
http://www.reuters.com/article/2014/02/12/us-eu-banks-savings-idUSBREA1B1ZI20140212
GratefulCitizen
02-15-2014, 14:25
Thoughts? Is this a legit concern our more fear mongering?
http://www.marketwatch.com/story/scary-1929-market-chart-gains-traction-2014-02-11
2013-2014 chart varies over a range of roughly 12500 to 16500.
1928-1929 chart varies over a range of roughly 200 to 375.
(16500-12500)/((16500+12500)/2) = 4000/14500 = ~28%
(375-200)/((375+200)/2) = 175/287.5 = ~61%
Not the same.
Is China dropping our debt?
http://theeconomiccollapseblog.com/archives/china-starts-to-make-a-power-move-against-the-u-s-dollar
Another provocative economist shares his thoughts.
Martin Armstrong Warns Civil Unrest Is Rising Everywhere: "This Won't End Pretty"
Submitted by Martin Armstrong of Armstrong Economics
ZeroHedge.com
The greatest problem we have is misinformation.People simply do not comprehend why and how the economic policies of the post-war era are imploding. This whole agenda of socialism has sold a Utopian idea that the State is there for the people yet it is run by lawyers following their own self-interest. The pensions created for those in government drive the cost of government up exponentially with time. The political forces blame the rich and this merely creates a class warfare with no resolution for the future. Even confiscating all the wealth of the so-called rich will not sustain the system. Consequently, we just have to crash and burn and start all over again.
The Guardian reported that some 50,000 people marched in London to protest against austerity. They cried: “Who is really responsible for the mess this country is in? Is it the Polish fruit pickers or the Nigerian nurses? Or is it the bankers who plunged it into economic disaster – or the tax avoiders? It is selective anger.”
The exploitation by the bankers has been really a disaster. They have been their own worst enemy and in the end, they have become the symbol that inspires class warfare if not revolution. They are not the representatives of those who produce jobs. They are merely those who wanted to trade with other people’s money for free. When they win, it is their’s, but any losses are passed to the taxpayers. Bankers should be bankers – not hedge fund managers who keep 100% of the profits using other people’s savings.
The repeal of Glass Steagall was the final straw that broke the back of the world economy. That was the single worst act that could have ever been done and we are now paying the price in spades. The collapse from 2007 has wiped out even the liquidity of the markets. The second worst act was the creation of the euro when the real goal was the federalization of Europe from the outset. That undermined the entire European banking system and has led to a serious undermining of the entire global economy.
The solutions from politics will always be the same – grab more power. We are in a downward spiral of liberty and how far we go down this path to the future will be determined by the people and if they at least wise up and see this is not class warfare, it is the people against government. This is why I say career politicians are dangerous for they can be bought way too easily as Clinton was to open the flood gates for the bankers.
This is not going to end pretty. The question is when does society wake up? Just how high will this price be that we have to pay? They will blame the rich and the idiots will cheer – get them. What will happen when there is no more wealth to hunt? We end up with a communist state by default – no wealth, just career politicians who blame everyone but themselves.
http://www.zerohedge.com/news/2014-06-28/martin-armstrong-warns-civil-unrest-rising-everywhere-wont-end-pretty
SigmaAaron
07-02-2014, 14:58
Not sure the exact number (somewhere around 70), every country that printed more money than should saw financial collapse. many top financial advisors are predicting collapse by 2016, could this be linked to the 8 semi truck loads of brand new martial law signs delivered to Ft.Jackson?
atticus finch
07-02-2014, 15:24
Not sure the exact number (somewhere around 70), every country that printed more money than should saw financial collapse. many top financial advisors are predicting collapse by 2016, could this be linked to the 8 semi truck loads of brand new martial law signs delivered to Ft.Jackson.
Where did you get this information about the signs? Was it something you saw yourself or from a source? I'm not saying it's BS, given the way things are it's possible, just would like to confirm such a thing.
SigmaAaron
07-02-2014, 15:35
I know a first hand witness, but not the only one, google it. I am not SO and as such I try to watch what I say online, don't want to be black listed.
Update: I just googled it and didn't find much, 2 weeks ago there was a video on youtube showing them being unloaded on some U.S. base. along with those videos of the U.N. APC's in GA; But my mother and step-father saw them on a trip to the commissary recently.
I know a first hand witness, but not the only one, google it. I am not SO and as such I try to watch what I say online, don't want to be black listed.
Update: I just googled it and didn't find much, 2 weeks ago there was a video on youtube showing them being unloaded on some U.S. base. along with those videos of the U.N. APC's in GA; But my mother and step-father saw them on a trip to the commissary recently.
I am Blacklisted because I belonged to NORAID back in the 1990's. I have a Blue Reflective Disk on my mail box.... :munchin
ZonieDiver
07-02-2014, 19:39
Not sure the exact number (somewhere around 70), every country that printed more money than should saw financial collapse. many top financial advisors are predicting collapse by 2016, could this be linked to the 8 semi truck loads of brand new martial law signs delivered to Ft.Jackson?
I know a first hand witness, but not the only one, google it. I am not SO and as such I try to watch what I say online, don't want to be black listed.
Update: I just googled it and didn't find much, 2 weeks ago there was a video on youtube showing them being unloaded on some U.S. base. along with those videos of the U.N. APC's in GA; But my mother and step-father saw them on a trip to the commissary recently.
Geez, is it a full moon tonight?
So, to review, you are saying that your mother and step-father are the ones who saw the EIGHT, count 'em... 8, "semi truck loads of brand new martial law signs" being delivered to Ft. Jackson?
Did they see the trucks? Did they see the signs being unloaded? Was there no security for such a nefarious activity?
As for the videos that I Googled - I saw NO pictures of any trucks carrying any signs. In fact, the only ones I saw were some YouTube videos of some 20-something in his bedroom speaking sotto voce into his computer about some Facebook post some guy made, which was followed up with an interview of said guy who was told by a friend... etc, etc, etc.
Is that it?
SigmaAaron
07-02-2014, 19:43
I am Blacklisted because I belonged to NORAID back in the 1990's. I have a Blue Reflective Disk on my mail box.... :munchin
I was impressed with the knowledge the Brits had to share on IEDs from their experience with IRA.
ZonieDiver
07-02-2014, 20:18
Yes sir that's it, my parents are highly moral people and I was raised as so, words not to be taken lightly, and care more about where their souls go than to make up lies for entertainment. I know my stepfather is a hunter and likes to drive around and see sites.
I did not question the integrity of your stepfather, or his vision. All I asked was IF they (your mother and stepfather)were your 'first hand witness', and WHAT they had actually seen. (You mentioned 8 semi truckloads of said signs. Again, I'll ask: Did they see 8 semis? Did they actually see the signs in those 8 semis? Were they at Ft Jackson?)
The security question referred to the fact that IF I were going to impose martial law, and needed 8 semi trucks of signs at various locations (I think it was 8 in Houston, and 8 in S. Illinois... I cannot recall, and WILL NOT review those videos again to ascertain. Once IS enough.), I would certainly conduct the operation out of the view of prying eyes, and most likely have some kind of jack-booted, TSA/DHS/etc. thugs providing some modicum of security. Wouldn't you>
You didn't call it a 'nefarious act', I did. I think that IF 'our' government is planning a massive declaration of martial law around the country, and distributing vast quantities of signs so stating, that would constitute a 'nefarious act'.
SigmaAaron
07-02-2014, 20:27
Roger, I follow you...
Yes, Ft. Jackson, they saw the trucks stopped and soldiers unloading them. It was away from main post. He didn't say where exactly I didn't ask. they live right outside columbia.
I'll call tomorrow and get more details.
It wasn't my plan to take the focus off of the original thread topic.
ZonieDiver
07-02-2014, 20:29
Thank you.
SigmaAaron
07-02-2014, 20:33
Yw
Maybe I read to deep into your post.
...could this be linked to the 8 semi truck loads of brand new martial law signs delivered to Ft.Jackson?
Hunh. This one and its newer variants (now being delivered to and hidden away on military reservations) have been making the rounds since 1993. Old rumors are like trying to get rid of kudzu - once they're planted...
http://www.snopes.com/politics/conspiracy/martialsigns.asp
And then there are the many on-going varieties of 'eyewitness reports' :rolleyes: burning up the Internet of UN forces supposedly occupying US soil - like this one. :eek:
http://beforeitsnews.com/alternative/2013/03/unnato-troops-delivering-dhs-armored-vehicles-usa-2585082.html
http://beforeitsnews.com/conspiracy-theories/2013/01/road-signs-marked-martial-law-in-effect-found-during-routine-drug-stop-in-houston-tx-video-2448004.html
You and these 'alternative news' sources sound like one of my nephews who has the innate inability to evaluate the reliability of information and sources, is someone who has never met a conspiracy theory he couldn't embrace, remains convinced that 9-11 was an 'inside job' by 'the government', and who was recently trying to convince me that the HQs for the Federal Reserve Bank is in Puerto Rico and that the American banking system wants martial law declared so they could further profit from the inevitable crises it would create.
Y'all seem to have a lot in common - I remain skeptical.
Now, back to the original theme of this thread.
And so it goes...
Richard
The Reaper
07-03-2014, 10:30
Yw
Maybe I read to deep into your post.
You need to slow your roll and consider what you are posting before clicking "Submit Reply."
I think your cyclic rate is exceeding your headspace and timing settings.
TR
Team Sergeant
07-03-2014, 11:18
You need to slow your roll and consider what you are posting before clicking "Submit Reply."
I think your cyclic rate is exceeding your headspace and timing settings.
TR
LOL
I'm thinking his tinfoil hat got in the way of his typing......:rolleyes: