QE "The Subsidy"

[cottonpicken]

I basically agree with both of you .

Except it maybe more of a slow gradual thing like the frog in boiling water analogy.

If it happens overnight your talking mad max scenario.

The reset can not not happen.

[errolanderson]

cotton . . . sensing the equity volatility to be excessive for several weeks ahead as these adjustments occur. The VIX index will be rockin 'n rollin

[cottonpicken]

Ya,the vix might be something a guy could put a little into,capital should start sloshing.

Velocity is another thing we could talk about,pretty important in the scheme.

Anyone want to freak themselves out,take this test.

http://www.globalrichlist.com

[cottonpicken]

Quite poignant



Submitted by James E Miller via Mises Canada,

Back in the early 1960s, financial journalist Henry Hazlitt warned against efforts to create an international system to help facilitate the smooth transfer of currencies. Representatives from the world’s leading governments were attempting to increase liquidity in global markets. They wanted to make sure the banking system and sovereign governments would never had a lack of funds. Hazlitt was not fooled. “In plain English” he wrote, “they are pushing for more world inflation.” His words, though accurate, went unheeded. The International Monetary Fund, which was established decades earlier, was to play a role in facilitating endless inflation.

Half a century later, the IMF has overseen a tumultuous business cycle that came to a screeching halt in 2008. Big, overleveraged banks were on the verge of collapsing; millions of people lost their jobs and their homes; governments spent billions of dollars to maintain their welfare safety nets. The end result, which is still ongoing, is stagnant economic growth with dim prospects for recovery.

The IMF not only failed to stop the financial crisis from occurring, it encouraged the coordinated credit expansion that allowed housing bubbles in various industrialized countries. But now, the global financing giant appears to be having a “repent thy sinner” moment. In the Fund’s recent bi-annual report, the organization warns that the ultra-low interest policies of central banks is setting the stage for a new bust. According to the Guardian, the IMF says that “more than half a decade in which official borrowing costs have been close to zero had encouraged speculation rather than the hoped-for pick up in investment.”

Does this sound familiar?

Austrian-minded economic observers have been issuing the same warning for years. In the lead-up to the collapse of Lehman Brothers, mainstream commentators were aglow at the new prosperity. They thought the good times were here to last. Investment expert Peter Schiff was famously mocked on national television for saying that U.S. housing prices were unsustainable. Few economists sensed that anything was amiss, even as the Dow Jones Industrial Average hit historic highs. They were all doing their best Irving Fisher impressions; convinced that the market would never plummet but only keep rising.

The housing bubble, of course, came and went. Austrians foretold its bursting and were roundly ignored by most in the econ profession. Brad Delong dismissed the Austrian theory of the 2008 downturn, while calling fear of credit expansion a product of homophobic anti-semitism. Paul Krugman – maintaining his image as an unserious curmudgeon who moonlights as an economist – provided the New York Times with a nice strawman of what constitutes the Austrian explanation of business cycles. Noah Smith recently said Austrians are victims of brain worms.

Now the IMF appears to corroborate what Austrians have been saying all along: if you give banks cheap money, they will invest it in endeavors that aren’t always sustainable. This includes commodities and capital goods. Central bank monetary policy pumps up bank balance sheets, providing the incentive to drive up prices in goods that are deemed profitable. Not all of this investment is reflective of consumer demand. Inflation begets inflation, until the money spreads wide enough in the economy to raise prices at the consumer level. Central banks have two choices at this point: keep printing money or cease the expansion. If money keeps flowing into the system, the currency will soon lose all value. Should the central bank stop printing, there will be a recession of sorts. There is no alternative.

The Austrian theory of the business cycle has never been a radical premise. It only stipulates that any workaround of the natural cycle of economic growth must come with ensuing costs. It’s a simple law: you can’t get something for nothing. A majority of economists believe the opposite. In other words, they believe in magic.

The IMF may finally be waking up to the damage wrought by reckless credit expansion. Its warning couldn’t come at a better time. As Michael Pollaro of Forbes points out, money expansion is decelerating in the U.S. The slowdown in growth could explain the stock market sell-off seen in recent days. When it comes to whacky, out-of-sync monetary policy, a bust is always imminent. When or how the next will occur is unknown; but it will happen.

The IMF’s proposed solution fails to fix the core of the problem. The Fund wants new regulations to curb excessive risk-taking and bubble activities. But the answer isn’t tougher regulation or more vigilant supervision. The only way to stop the relentless boom-and-bust cycle is to allow the market to coordinate individual time preferences with the supply of money. Interest rates can form on their own through the voluntary buying and lending of currency.

So if the Austrian school was so prescient in predicting the housing collapse, and the international body responsible for supervising the global banking system agrees with its theory, where are the apologies? Why haven’t Paul Krugman and his statist comrades, at the very least, acknowledge some merit in the Austrian argument?

The answer is obvious. The second that expansionist, counter-cyclical monetary policy is seen as mere procrastination and not a solution, it will lose all credibility. The big banks will lose their lender of last resort. And sovereign governments will lose their most prominent financier. Ambrose Evans-Pritchard, The Telegraph’s house inflation worshipper, wants permanent, massive money printing to keep the world economy afloat, even as five straight years prove its uselessness. Some people never learn; or won’t let the truth of things interfere with their secondary agenda.

Nobody in the economic intelligentsia is implying that the IMF is staffed by paranoid cranks. They continue to ignore and belittle the Austrian school. This pompous and undeserved behavior will go on until it’s too late. In the process, the ivory tower disciples of Keynes will only further prove their intellectual bankruptcy. The average person never trusted them to begin with. And things certainly won’t change now.

[farmaholic]

I don't understand how governments can expect economies to grow for ever regardless of the rate of growth. I would think at this moment of time the very most they should expect or hope for is a stable economy.

Cotton talks about exponential growth, for economies to double and double again even over longer periods of time doesn't seem realistic to me. Nothing can grow for ever. So, if it today's
economic predicament is a result of trying to maintain unrealistic growth rates, its easy to say maintenance would have been a more astute goal. But what the **** would I know, I'm not an
economist.

These are interesting times.

Cotton, I watched the Rickard link you provided.
-Not near enough capital to support massive debt, severly overleveraged
-not enough gold to satisfy everyones request if they demanded what paper says their entitled to.
-the velocity of money
-.....

I don't think this is going to end well.

[checking]

Expansion of the universe is an example of something that can grow forever.
Wealth fits there.(lol)

I'm positive that as old men you will still be talking your cave"bear" language of doom.

Geez, you guys could spoil a beautiful fall day. "Fall" not representing a market.

[farmaholic]

There was a point in time Man thought the world was flat. There is likely way more to learned about the universe than is known. They have only scratched the surface. To say it will expand forever is an assumption. Change, it probably will but no one knows how for sure.

Sorry if you feel the topic at hand sounds like its being disussed by a bunch of doomsday sayers. To ignore it is your choice. If you have capital you worked hard to earn and save why wouldn't you think about trying to protect it? Or at the very least reduce the deflationary impact on it? Nothing is immune but some "investments" will fair better than others and that was part of the point of my posts here.

Good luck.

[farmaholic]

Cotton, I don't know if the last "40 year experiment" erased the history preceding it. But it certainly appears to have failed. It is a system of money creation by simply over leveraging the base capital. The foundation can't support what's been built on it.

How could they continue to use the finite supply of gold to support the system they've created? If they did what would an ounce be worth today? I don't think they could have manipulated the gold standard system as easily.....

But WTF do I know?

[rkaiser]

Expansion is not the problem, it is very natural and the ultimate truth. The problem and the worst crime on the planet is suppression by those in power; or who feel they are in power due to money. False money created out of thin air and ridiculously charged interest. Those of you who do not believe that corporations and our current "capitalist" system has not be high jacked by monopolistic corporate giants who even direct govern mente - the self proclaimed mind controllers need to wake up. There is so much room on this planet for technological advancement and yes - expansion, only suppressed by our human desire to control it and suppress it, if need be, to "protect" assets. Look back in his-story and take a look at when the progress and evolution have occurred. It was when humans were "allowed" to "create" and not suppressed by scared humans at the top of the pyramid scam who figured out how to keep the people in "cheque".

Those at the top are scared and desperate folks and creativity is what has done it. You can only hold mankind back for so long and they always revolt.

Never mind living in good old Oilberta, can you imagine what will happen on this planet when the desperate suppression of petro energy is finally over? Has anyone even considered the Rockefeller's divesting funds away from oil and gas?

Very - very good times ahead. Whoop Whoop.

[errolanderson]

Calgary Herald business section full of commentary on 'Crude prices on the rebound'

good grief . . . those that feel markets owe them a return are like deer in the headlights right now . . . .

[macdon02]

Have more kids because pensions are dust. Gonna need someone to keep the land producing. The grain and meat farmer will survive because you can touch everything we work for. I know nothing just what I've read.

[cottonpicken]

Farm-i'm just coming up on 11 years down the rabbit hole,well over 10,000 hours in,which is what they say you need to master something,doubt i post a tenth of what i thnk.

I remember it well because my wife got pregnant and i realized,no more fun and games i needed to know if there was a future in farming.

So i did,and seen this stuff coming,well documented here,at least most,some of the archives have been erased,i use to be quite the prick,i underestimated the emotional impact and found out you should really act like you are talking to someone face to face,i thought it was all a big fun joke,still very sorry for the way i behaved.

I remember telling my now passed Grampa farming was going to get easy,land and grain would go up,he said the most prophetic thing to me i have ever heard,({while laughing}"farming was never easy")

How i could be so blind to the words of someone who had hundreds and hundreds of thousands of hours into the profession i'll never know-"confidence of youth"

I dont jump in on many of the "real" farming threads because i know i dont know and will probably never be as good as most.

Maybe the storm clouds i see wont really be that bad,i sure hope i'm wrong.

Take it all with a grain,even the vet told us yesterday not to give our dog bones pppffffff...

[cottonpicken]

Gold was always considered money because a guy could sell a camel in china then buy a bushel of wheat in germany,think a piece of paper from china could do the same.

Money is simply the means of exchange and store of value,could i pay you a million zimbawe dollars,confederates,pre ww2 deutchmarks,monopoly money,or the other over 600 examples of failed government paper promises for a goods or service.

There is nothing special or magical about it,its just what the world chose-that is a simple truth..

It takes a massive amount of time and energy to produce it like everything else worth while in this world does.

Its value doesnt matter 1 dollar a gram a 100 a gram,it gets converted into the good or service-please,please understand this point-whos own median of exchange is then realized

In todays world i dont see it as the panacea,the best idea i have heard is to tie the worlds currencies down to a basket of goods,like twenty or so,it was out of some dutch bankers head many years ago and i'll be damned if i can find it.

[sumdumguy]

I'll take my gold wafers to Regina, see who'll accept them for a new Audi, or Las Vegas next month, see if the Bellagio thinks it is money. Just saying. I think it is about as portable, transferrable and exchangeable as my old Chevy truck. Not everyone will accept it as payment.

[cottonpicken]

See what you think when the dollars in your bank account get cut in half over night,look at what happened to the us dollar in the thirties but we all know about that simple simple simple thing and therefore we know or do we?