Holding the fort

I say…..there is no other choice, but, to leave it to the experts.

This `sound and fury` is from the comment section – (I am happy that no one will take any notice of it~!)

  • I agree that the sole purpose of a CB is to fund the Government spending machine. We have increased federal debt from around $9T to $15T…..none, zero of that will earn a return that will allow the Government to every pay off that debt or even interest. It’s all predicated on the ponzi of being able to issue more debt…..this is not unlike the 1980′s and the NYC banks loaning the interest payment to Latin American countries in order to pay the bank back so the loan would be considered current….it’s a ponzi, a scam and in my eye out right corruption.
  • Fortunately, there are many comments by people with genuine knowledge….and I encourage you to read them. Link to article and comments

    Audio -

    14:49 min.

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    • CSARichardo

      The article contained this line

      “More importantly still, QE also helps to reduce the debt-to-GDP ratio because debt held by central banks is excluded from debt-to-GDP calculations. Once debt enters the central bank balance sheet it becomes the equivalent of money (reserves). ”

      This is a politicians best dream … but how to make it all happen ?  Obama must announce infrastructure spending and when the debt ceiling hits he will just override the Republicians by having the central bank execute for him.  I think he was able to accomplsh this last year but was probably smart enough to save that course of action for this year.

      • http://overthepeak.com/wordpress/ Mystic

        It better be a very good looking plan, because them Repubs play very hard balls~!

    • John_by_the_creek

      Dear Mr. Mystic:
       
      All I can say is – WOW!  Ms. Kaminska appears to “get it”!!!  Let’s hope some of the highly educated experts stumble upon this article!!
       
      Happy Easter to you and Mrs. Mystic (bless her soul).

      • http://overthepeak.com/wordpress/ Mystic

         Mrs Mystic’s what~!!??

        Yes, it is another of those lovely articles……like getting a good piece in a jig-saw.
        (and (as I think I may have said a couple of times)….the comment section is delicious brain-food~!)

        Easter~!?…….Easter~!?……
        Today (6th.) is Hanuman Jayanti (birth of monkey god) and Theravada (New year for Therevada Buddhists).
        (7th.) is Passover for the Jews, but I am really waiting on next week-end for Vaisakhi (Sikh new year) , the birthday of Guru Nanak and Hola Mohalla~!!!

        • John_by_the_creek

          Oh…sorry….
           
          Happy Easter to you, Mrs. Mystic (and her “you know what”),, Hanuman Jayanti, the Therevada Buddhists, the Jews, the Sikhs, Guru Nanak, the Hola Mohalla, the Hindus, the Muslims, and last (but not least), Richard Dawkins.

        • NascentMind

          hmm.. we may one day have to rethink that one. If and when we hit the Omega point.
          This money stuff is starting to fit the Finale Anthropic Principle.
          Intelligent information-processing must come into existence in the Universe, and, once it comes into existence, will never die out. Frank J Tipler.

        • Paul

          Do you wear a kirpan everyday?  All Sikhs should.  The majority of the Sikh’s that I know in New York are shy young Indian kids who have no idea what the fuck Grandpa is talking about?! They run the family bought Dunkin Donuts.  Not exactly warrior status, eh Mystic?  All religion is man-made bullish!  Happy Easter!

          • http://overthepeak.com/wordpress/ Mystic

             It is an ongoing shock to me that people can’t realize how much that `they are` where they are. 
            You can ask a christian why there are so many muslims in Saudi Arabia……and he will look at you as though it is you that is stupid………and go on thinking he has made all those choices on his little own.

            • Paul

              Humans are silly little creatures.  Play with them, but be nice, or not.  Their egos are fragile.  Happy Hola Mohalla or what ever the fuck?  I could care less.
              What a crazy world that we have created for ourselves to play in.  Do you think it is really worth saving?  I am more concerned with the fate of the Siberian Tiger, which is being slaughtered for Chinese medicine so old , crinkly Chinks can think they have a giant tiger cock with which to rape their young Apple Foxconn factory workers?  Justice?  Let this present  system burn to the ground and let the 10% survivors figure out the next system.  I could care less.

              • Paul

                Aye~!

              • http://overthepeak.com/wordpress/ Mystic

                 Worth saving~?

                No.

                • Paul

                  There won’t be a choice.

                  • http://overthepeak.com/wordpress/ Mystic

                     No.  In the Big scheme of things, there will not be a choice.

    • John_by_the_creek

      Also…

      A fun watch:

      Mind Over Money
      http://video.pbs.org/video/1479100777/

      • http://overthepeak.com/wordpress/ Mystic

         Not available for Mystics in Franceland…….but I am sure it was fun.

    • PW

      From my limited view, two mechanisms for price discovery exist, ,,, supply vs demand and value of exchange medium ($). A shift in either of these lead to a price inflation or deflation.

      QE is aledgedly monetarily constrained, designed to increase liquidity within banks and ultimately Government without affecting the genral prices of goods. I see this as a fallacy because the loop is not closed every bond that is ultimately bought will result in money being spent by gov in to circulation not to mention the effect of debt forgiveness by the banks. The government bit follows Koo’s prescription for debt deflation and the debt forgiveness allows capital flows to be steered toward those that are seen to matter.

      The “liquidity trap” appears to be one result of the desire to manipulate the international exchange rate mechanism by dislocating the accounting of a currency from price discovery.

      This can work whilst accounting rules are rigged, allowing a CntlBk debt to not be used cumulatively to asses a nations solvency (or value of currency).

      I think confidense is the key, this time national players taking second place to other international supplier nations and their willingness to be on the loosing end could dictate the pace of a rebalance of the Exchange rate mechanism. The undoing of MMT as it were..

      Im typing this on a mobile so appologies if its a bit disjointed but hopefully its another perspective to add to the pile…

      • Bigcollapso

        The idea that money can be created without inflation is insane. There are only two cases where this can happen.
        1. The money does not get traded for wealth.
        2. The wealth throughput of the economy increases in proportion to the new money created.
        If you look at what is happening it is clear that neither of these is happening. The inflation is also getting very ugly here in the US and we are crashing some poor countries by inflation the reserve currency. I think that it is a plan.

        • PW

          Not sure Im with you on the definition of wealth but option 1 is effectively the intent of QE i.e. create without spending in to general circulation.

          The exportation of inflation is a given and the consequences of higher oil and imported good is also a given.

          The tricky bit for the Central Banks is how they manage expectations ( boiling the international frog ). If they get it right they will maintain the status quo and still have control, if they get it wrong confidence will change the medium of exchange and thus the control will move on to others.

          My gut says they will maintain the quo as they have lots of tools to influence things but I also believe my normalcy bias my be allowing me to be too complacent so I,ll be open to any out come in these volitile times.

          • Bigcollapso

            The lie that is QE is exactly what you are saying. But think about it. They already have been given a pass on the “value” of their “assets”. They need to cover their wealth consumption. Period.
            I think that we all understand what the Central Banks and the Government is trying to do, very slow destruction of the currency. I just don’t think that will help the situation in the slightest. I may travel in different circles than you, but my business friends are making big changes in their future plans due to what is happening with the government and the monetary system. Not good for the future of the economy.
            The one thing that I always come back to is trying to understand where you guys that don’t see a big collapse in the cards think that the wealth consumption cuts of the governments will come from? That is what I don’t get. I just can’t see it. Not at all. I see more of the same until the monetary system dies.
            So why don’t you tell me when, how much and how the wealth consumption will be cut by especially the USA?

      • http://overthepeak.com/wordpress/ Mystic

         How about doing a little extrapolation…….Imagine the US housing boom was still a gogo and the money was still a pumpin’.
        O.K. now compare that to what we have now~!?

        While you are at it, you could ask yourself if the US housing boom was still a gogo, would there be lots of horrid inflation~?
        (Taking into account all that we know about the conditions 2004 to 2008)

        Then, having all that in mind; compare it with today’s bank reserves stuck in the Fed with little demand to borrow them.

        How are we doing~?

        • PW

          If the housing was still agogo then there is no deflation of bank reserves in MMT land, no interest rate drops, no raises or artificial drops in treasuries…. but the ability to service the increase in debt and to cover the cost of oil would be very noticeable.

          These last two points have been the destroyers of demand and in todays case the difference is that Money creation has stuffed the channels with seemingly no where for it to go other than debt forgiveness and government spending.

          The rest of the CB jiggerdy pokery is to gerrymander the price discovery mechanism. T which we know is more effective over shorter time frames.

          • http://overthepeak.com/wordpress/ Mystic

             Was the Fed not setting the price of money in 2005~? (and 1965…..1935 etc.~!?)

            • PW

              Agreed, thats the central bank jiggerdy pokery that i was referring to.

              The main musing is that domestic inflation is unlikely to be the crux but currency confidence is a different matter, Feds running independant deficits wont help the confidence game.

              Will they get through this scott free? I doubt things will be the same in a few years time… other factions can and are using all these levers to increase their interests, its probably the spikes in volitility generated by ??? (an old man killing himself at the Washington memorial?) that will ring In the big changes.

            • PW

              I should just add that the difference between influencing and maintaining confidence at a national level is easier because the masses are on the whole are ignorent and the educated views are drownd out at the ballot box.

              Where the game changer “risk” becomes more realistic is at the national boundaries, here we have “expert advice” directly guiding policy at the international level and as the cloak of economic shenanigans is lifted we see nations like China relise where the real levers are.

              Id postulate that the ubiquotous centrally managed game where all nations tow the line will only truly become a reality when control of the material resources are absolute. I dont think we are there yet but yes the Fed have had quite a good go of it.

              • http://overthepeak.com/wordpress/ Mystic

                It looks to me like `boys like to play games` and the `game in town (the world) is exports.
                Government, treasury, central bank and industry and ganging together to try and win the game.
                It does not matter that this is a perfectly silly game……other boys looking on will think the ones that look to be wining the game (exporting) are the ones to bet on.  (again, perfectly stupid logic; but then boys will be boys~!). 

    • Bigcollapso

      Mystic, you do realize what it means when the Private Sector, that is the productive economy has no demand for money/debt right? Come on think about it. This is like your heart having no demand for blood. It’s game over. You can’t push a string.

      • http://overthepeak.com/wordpress/ Mystic

         Yes, `pushing on a string`, because that makes sense……we know what that means.
        But no to, `It’s game over`, because that is just silly Idiot Collapso talk. 

        • Bigcollapso

          I realize that my understanding of the situation puts you in pain and you have to attack me personally.
          But the situation that we face is very serious and you are peddling some very dangerous garbage.
          You can’t get your mind around the difference between money flow and wealth flow. You think the two have the same phase, and therefore when someone puts money into the system they are “helping”. They are not. Because the wealth is flowing in the opposite direction of the money, they are extracting wealth from the system. There are other problems with your understanding but I think that this is one of the most important.
          You also think that the money has power against nature, instead of is just being a political accounting system. This is the reason that we are very close to hyper-inflation and you can’t see it.
          The day will come that I will give up on OverThePeak, but for right now I just try to shine light in the situation as I prepare for the end of Fiat currencies.

          • NascentMind

            Make some posts and tell us how you see it. Come on, enjoy the banter.

          • Paul

            BC, I think Mystic is just having a bit of fun, so don’t take it personally.
            Again, do you have any forecast for your hyper-inflation crisis?  Because all that I see for the next few years is Deflation.  I think we’ll have a blah, Japan style deflationary economy for 20 years, long before we ever see some Zimbabwe style hyper-inflation.  I think that is the point that Mystic is trying to make you see.  If the central banks do not pump money into the system, then the entire economy goes into Depression.  The central banks are trying to balance all the de-leveraging that is occurring in the private sector.  I am a bit wary about the Fed’s over-reach into the private markets.  I am not worried about hyper-inflation.

            • Bigcollapso

              It is very important to understand that we are likely to have inflation, deflation, hyperinflation, and possibly hyper deflation all at the same time. Oh yes, I do understand that the banks must either liquidate debt or create loans to prevent deflationary collapse. This is the simplest to understand failure mode of the debt-based exponential system.
              We currently have lots of inflation and lots of deflation at the same time. For instance, in the last 5 years the price of the sandwich cheese that I buy is up 350%. The price of used business jets is down over 50%. House prices in Lansing MI have fallen at least 50%. I talked to a house inspector recently and said the average house that he inspects is now about $7,000.
              In order to understand why we will have all of them at the same time, you have to understand that money has no power over the physical world, it is just a political accounting system. Some people are looking at Inflation and Deflation as if the money is gaining or losing power against the economy.
              That is not a correct way of looking at what we are facing.
              As we slowly move into the Post Industrial Era, the value of everything will change. Especially the value of things as expressed in fiat tokens. Some, things like financial buildings in New York will tank. Other things like food staples and energy will climb.
              So the concepts of “Inflation” and “Deflation” being two mutually exclusive things is an old idea that the Central Bankers played as they created economic cycles by first letting the economy expand, and then harvesting wealth by increasing interest rates. These days are over.
              The bankers will realize this slowly, that the money that they are creating is not becoming wealth, and then the real fun begins. They will want to cut the amount of new money to “save” the value of it. But as you guys all know the exponential function must be fed or collapse ensures.
              What they really must do is liquidate debt, but is is not in their nature. They still can’t get their minds around the idea that no one can convert the money to wealth for them to harvest. It will be ugly when they figure it out.

              • Paul

                I don’t disagree with you that the Fed’s over-reach will fuck up the private markets.  They cannot make the housing sector rise just by buying MBS off the insolvent banking system.  But, that is our alternative? A free for all grab of U.S, based assets?  Please, explain yourself.  You are doing ok so far, in most of your comments.  Hyper-inflation in America in the near term?  No fucking way.
                A gradual over-reach of the free market economy by the Fed?  Makes me nervous.

              • snedmeister1

                Hello BC….

                I rarely comment to you without you posting to me first, and that is probably because I get the impression you have decided what the end is in all of this ( mad max ), with the first bit of info that you came across which resonated with a mathematical lesson you attended some time ago….???

                I am curious of two things when reading this post though….

                Have you read any of my suggestions for you lately..???
                Have you considered all of the info presented to you, before reaching these conclusions of yours…??

                Now don’t take this next part as patronising, but maybe you should ensure you do the two above, before you writecomments that imply you know exactly the cause of any given scenario playing out before us…???
                ( At least to the best of your ability…  We are aware no-one understands it all, but lets not ignore important bits, eh…?? )

                If you show you have considered all arguments intelligently, instead of picking one that you like the sound of and ignoring the rest, it then becomes more inviting to discuss with you…. 
                ( Even if you are wrong or right, do understand or not, have abetter grasp than me or not… I wouldn’t hold it against you )

                Again, I am not trying to put you down….. So I say this next bit with the hope it prompts you to consider this comment to you….

                Many years ago, young Sned had a cousin, that owned a parrot….
                The cousin taught the parrot to say “Who’s a pretty boy”…..

                As amusing as it was, the parrot didn’t really understand when the phrase was relevant or not….
                This became glaringly obvious, when either a Girl was in the room, or when no-one was in the room…!!

                Obviously, when Sned was in the room, the parrot was correct, but it did not really understand why, as it didn’t notice when one scenario was different to the next….
                Whether the Parrot was right or wrong, was dependant on the given scenario…..Do you see…??? 

                You are applying 100% Endogenous factors, to an economy that may have Exogenous sectors
                ( although, even without this I still doubt collapse would be the as bad as you state, for a few reasons ), but you fail to see where it doesn’t apply, instead choosing to write comments implying others don’t understand..!!!

                Many of our price problems stem from high oil demand, debt being taken for consumption, combined with stagnant wages, and not from debt based money per say….
                In other words, maybe I am suggesting, there is a girl in the room….????

                Maybe you should look harder..????

                The still optimistic and patient ( but not as patient as he once was ), Sned….

                P.S. The story didn’t end well… The Parrot escaped to be with the birds outside…He probably didn’t last long, as the phrase “Who’s a pretty boy” becomes irrelevant in such scenarios….

                • Bigcollapso

                   I do take into account everything that I have read here, and have learned some things. Some of the information also causes me some doubt as to if I understand the situation completely.
                  But I also see a lot of growth in the understanding of the situation, and the growth is toward what I think reality is, not the reverse.
                  I do not necessarily see a Mad Max type scenario, but replacing the exponential missing wealth monetary systems with something much more stable will be very difficult because everyone wants to preserve their “wealth”. That is why the bankers keep creating more debt in the face of mounting unserviceable debt, they know that liquidating it would put the economy of greased skids, but the debt that they have created is their “wealth” They will not let go of it easily, no matter how they created it, and no matter what it does to the economy.

                  • snedmeister1

                    That doubt, is a good thing to hold onto at the moment…. ( If experts can’t agree, it can not be all so simple, can it…??? )
                    Use the doubt to double check everything….

                    Talk about replacing the system with something more stable, by all means…
                    The conversation should be held, definitely….

                    I would like to thank you for a better, more approachable response, and would just ask two more questions….

                    Which part of the Exogenous money supply models in MMT/R causes you to doubt it…???
                    And do you feel you could rethink the “Why Bankers keep creating more debt” thoughts…???
                    After all, they can only perform this, but fulfilling the demand from the people…ie you me, and the rest of the population….

                    We need to remember, I think, that bankers can not supply something nobody wants…. Maybe???

                    I think I will add one last question, as we seem to be on a roll here….

                    If you don’t see Mad Max, or a total collapse, do you think you lay off the extreme “Game over”, “Collapso” and such
                    comments…??
                    After all, comments and discussions are far more productive when carried out in a calm, grounded fashion….

                    Cheers, Sned.
                     

        • Paul

          “Idiot Callopso” is a form of censorship.  It’s funny, but it’s not OK within this dialog, Nick.  Asshole Axel1Million is more appropriate, but even I think Axel Asshole should have a voice, no matter what a fucking stupid moron that lame shit douche-bag represents.  He is stupid, as his comments always show.  Fuck you, Axel!  But, he should at least get a fair shake by the moderator.
          BC is blindly focused, but he is not an Idiot, Nick.  He has a sharp brain.  We need to harness his engineering brain.  Axel is a just dumb cunt who is not worth educating.  There’s a big difference.
          Now, BC, please but some numbers to your projections!  I am sick and tired of your bullshit anti0fiat currency nonsense.  Talk energy, with math skills!

          • http://overthepeak.com/wordpress/ Mystic

             It looks like we have a bright kid in class and can find no way of shaking anything of worth out of him. 
            In my day, he would be thrashed with a swishy stick; but…..it is not my day any more and I can’t get me stick down the interwebs to him~!

            But, there is a good chance that Idiot Collapso is actually an Idiot.
            He just learned the energy stuff at college…..and when he graduated he just stopped learning.

            I have never had any reason to think of Axel as anything but a bright bunny (I have seen your interactions with him, but only in passing…..I didn’t read them.  (I have a Mystic radar for nonsense avoidance~!)).

            • Paul

              Ok, fair enough with BC.  As for Axel, we will have to agree to disagree on the “bright bunny” or “ignorant moron” debate.

    • Paul

      So, our choices are either austerity, which will cause a Depression, or continual quantitative easing, which will yield a blah economy for (many) years?  Is there no way to speed up the process?  Would it help if we made the shareholders of the Zombie banks take a severe haircut and then, either bring them back to life or just kill them off?  We don’t want a Depression, but the thought of a 20 year blah economy, like Japan’s, is not appealing either.
      You mentioned Sweden in one of your comments.  That got me thinking.  We have not really spent much time discussing the Swedish solution to their banking collapse. 
      Maybe it’s time we brought that situation into the OTP jig saw puzzle?  Also, I would like to hear more about your views on the Swedish Model of socialism.  Perhaps yet another piece for the Meta jig saw puzzle?

      How Sweden solved its banking crisis:
      http://www.nytimes.com/2008/09/23/business/worldbusiness/23krona.html

      The Swedish Model:
      http://online.wsj.com/article/SB10001424052748704698004576104023432243468.html

      Some Swedish models, for young Sned.  ;) 

      • http://overthepeak.com/wordpress/ Mystic

         When it comes down to it…..besides blonde girls, there is not much we can get from Sweden, that we cannot get from Japan.  They are a better size, they started this Social Welfare Stuff before anyone else and we know they are bright, hard-working peeps.

        The `bash the bond-holders` is an interesting point.
        There may be some thinking that goes like this – We burn the bond-holders (could be pensions~!) and we get a reputation for burning bond-holders……..and the buyers just go to other countries that protect bond-holders = big money outflow and problem re-financing the banks again…..(this is a Mystic guess~!)

        • Paul

          Bash the bond holders and shred the class A stockholders.  Did they not have some influence in which direction the companies went?  Fuck them!  Let them lick their wounds like the rest of us.
          Capitalism is a cruel mistress!

          • http://overthepeak.com/wordpress/ Mystic

            Capitalism was a go for a few hundred years, but it is not what it used to be….nor will it ever be again.
            Capitalism with Government backing is what we have and it is how it must be now.
            Hang on……..I’ll dig something out for you………
            Here you go – http://blog.marksweep.com/post/20469283331/the-beer-game-or-why-apple-cant-build-ipads-in-the
            China has accidentally fallen on the `modern way` (or they stole it from Japan~?)~!
            This way of doing things would beat the shit out of `old` capitalism.

            • Paul

              That a was good article, thanks.  It reminded me of another article that I read that stated that companies cannot move from China into lower wage countries like Vietnam, because the manufacturing infrastructure and the necessary supply chain does not exist.

        • Paul

          The 1% are bond holders and share holders.  They should also feel the pain.  In Sweden, they knew the hammer was going to fall, and they reformed themselves quickly.  Otherwise, what option is left?  The guillotine?
          I like my guillotine solution, what can else can I say~?  Hermit cave has already been negated by the Mystic~!

        • Paul

          If we’re reduced to eating bond-holders fricassee over a simple wood-fired grill, I don’t think the bond-holder moeny outflow is going to be an issue;  just my guess~! ;)

          • http://overthepeak.com/wordpress/ Mystic

             Lots of 99% money in as bondholders (pension, insurance etc.)

            • Paul

              Oh well, too fucking bad for them….too~!
              You lie down with dogs, you wake up with fleas.

        • Paul

          Well, then the pension holders picked slick morons to invest their dollars and they should suffer the consequences as well.

          • http://overthepeak.com/wordpress/ Mystic

             No.  That is not playing fair.
            Pension funds are pension funds…..run by people, for people.

            • Windcutter

              Yeah, sure.

              But who are the people in “for people”.

            • Paul

              Pensions run By very well-paid people (investment managers) who collect enormous commissions, For very well-paid people (govt workers) who are scamming the system.  There’s some true 1% mentality at work in the pension scams.  The vast majority of us pay for the schemes and We will not have anywhere near the money they will receive in retirement.  This scam is operating in almost every state and county around the country.

              http://articles.latimes.com/2012/jan/28/local/la-me-pensions-20120128

      • snedmeister1

        Mr Paul…

        How on earth, did you get photos of misses Sned’s twin sister…???

        I had to do a double take, but quickly realised, it was the sister not misses Sned….
        You have to look closely, but under inspection, you notice I have the better looking of the two ( near identical ) twins…:)

        • Paul

          Good for you, Sned~!  That’s my boy!

    • Randall

      At 3:45 min to 4:25 min into this interview Bill Gross, who runs the world’s largest bond fund valued at over $1
      trillion, feels that the Fed is caught in a conundrum of providing cheap
      liquidity.

      • Paul

        That did not post well.  Try again>