Financial collapse??

[Peregrino]

Originally Posted by Broadsword2004

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]

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]

Originally Posted by GratefulCitizen

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]

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.

[Dusty]

Originally Posted by Trapper John

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]

Originally Posted by Dusty

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.

[Max_Tab]

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.

[PSM]

Originally Posted by Max_Tab

...an "organized" mob.

You mean "a well regulated" mob.

Pat

[Mills]

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

[Lan]

Originally Posted by Mills

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!

[Max_Tab]

Originally Posted by Stiletto11

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]

Originally Posted by Max_Tab

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/ma...me-high-200249

[Max_Tab]

It closed today at 15,372. Down 7.26% for the year.

[GratefulCitizen]

Originally Posted by Surf n Turf

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/ma...me-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.

[Max_Tab]

Originally Posted by GratefulCitizen

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.