“Deflation first — it clears the way for the complete loss of faith and hyperinflation that will follow. The next big wave down in the financial markets is the battering ram. The U.S. national debt is about faith, so is quantitative easing, and so is the very idea of magical coins that could ever be “worth” a trillion dollars. When this is faith breaks, in concert with loss of faith in perpetual growth and unlimited cheap energy, then things will move very, very quickly.
There is nothing any of us can do at this point, except navigate the rapids as well as possible, and to stay out of the way of a dying empire, which is still very dangerous in its death throes. We are actually very privileged to be alive and witnessing this next transition, to what we do not know just yet. But what an honor to live at this time, not in ignorance but with an existential resolve to come out of it alive and much the wiser.”
Via Deflation Land
“Is the coming financial collapse going to be inflationary or deflationary? Are we headed for rampant inflation or crippling deflation? This is a subject that is hotly debated by economists all over the country. Some insist that the wild money printing that the Federal Reserve is doing combined with out of control government spending will eventually result in hyperinflation. Others point to all of the deflationary factors in our economy and argue that we will experience tremendous deflation when the bubble economy that we are currently living in bursts. So what is the truth? Well, for the reasons listed below, I believe that we will see both. The next major financial panic will cause a substantial deflationary wave first, and after that we will see unprecedented inflation as the central bankers and our politicians respond to the financial crisis. This will happen so quickly that many will get “financial whiplash” as they try to figure out what to do with their money. We are moving toward a time of extreme financial instability, and different strategies will be called for at different times.”
” Columbia Professor Michael Woodford, the world’s most closely followed monetary theorist, says it is time to come clean and state openly that bond purchases are forever, and the sooner people understand this the better.
“All this talk of exit strategies is deeply negative,” he told a London Business School seminar on the merits of Helicopter money, or “overt monetary financing”.
He said the Bank of Japan made the mistake of reversing all its money creation from 2001 to 2006 once it thought the economy was safely out of the woods. But Japan crashed back into deeper deflation as soon the Lehman crisis hit.
“If we are going to scare the horses, let’s scare them properly. Let’s go further and eliminate government debt on the bloated balance sheet of central banks,” he said. This could done with a flick of the fingers. The debt would vanish. “
Via The Telegraph
““We all know it’s going to end badly, but in the meantime we can make some money” – Jim Cramer 3/5/2013: Read that quote folks and burn it into your memory. He didn’t say that because he was being smart, he said it in response to Stanley Drukenmiller telling the morning crew on CNBC how bizarre things have gotten. Cramer had no intelligent bullish response and coughed up that line. Funny, it’s one of the few honest things he’s ever been forced to say.
Why Does It Still Go Up?
I was sitting with my 83 year old mom on Tuesday evening and the 6 pm evening news was just “agog” about the market putting in an all-time new high. My mom is old enough to remember some rough times. She was a depression era baby. She listened to the shouts of joy and turned to me and said “Why is the market going up? A lot of my friends at Bingo say their Grandkids are having a hard time.”
In the past week, quite a few people have asked that very same question. Considering that the economic reports are dismal at best and horrid at worst… how and why does the market move up? Well, pull up a chair because there’s a lot to chat about, and it all has big time consequences for each of you.”
“The alarmist media always seeks to sell papers or broadcast ratings built on the unswerving fear that following the financial meltdown the banking establishment profits from the debt liquidation panic. The lack of stability in fiscal confidence certainly abounds, but the schemes to paper over the mountain of liability obligations, develop at even a more rapid pace.
The implied result of a real currency war is that nations are acting or defending their own national interests. The truth is that fiat currencies, designed to depreciate, benefits the moneychangers as the loss of purchasing power penalizes taxpayers and consumers.The financial press spins the “so called” harmonious unity of the industrial nations, in a lame attempt to ease concerns that the money markets can be trusted. An example is the G20 summit to focus on ‘currency war’ threat to economy. “
Via Activist Post
“The summer of 2012 is shaping up to be very similar to the summer of 2008. Things look incredibly bleak for the global economy right now. Economic activity and lending are slowing down all over the planet, and fear is starting to paralyze the entire global financial system. Things did not look this bad back in the summer of 2011 and things certainly did not look this bad back in the summer of 2010. It is almost as if a “perfect storm” is brewing. Today, the global financial system is a finely balanced pyramid of risk, debt and leverage. Such a system requires a high degree of confidence and stability. But when confidence disappears and fear and panic take over, the house of cards can literally start collapsing at any time. Right now we are watching a slow-motion train wreck unfold and nobody seems to know how to stop it. Unless some kind of a miracle happens, things are going to look much different when we reach the start of 2013 than they do today.”
“To understand where the money appears, we need to walk through the cycle again. The most important thing to be aware of is the timeline of events.
Adam deposits $1,000. Now, the bank owes Adam $1,000. And the bank, by law, can give out $900 of Adam’s money to Anne. And that is it right there. That is how fractional reserve banking manufactures money in the form of debt. That is, it creates money as debt.“
Via Activist Post
“Money vs. Wealth
Money is an artificial thing. It doesn’t exist in reality. You can’t go out and find “money” anywhere in the physical, non-artificial world. That is to say, money doesn’t grow on trees. It comes out of the mind and is a purely artificial concept. Its only legitimate purpose is to facilitate trade and commerce, or in the words of Aristotle, “Money was intended to be used in exchange.”
Wealth on the other hand differs in that you can find “wealth” in the natural world. Wealth is something that you can touch. It has existence on its own with no reliance on the existence of humanity or any “ideas”.
Wealth has utility in and of itself, and is not reliant on any external acceptance of it for it to have utility.”
Via Activist Post
“Breaking the whole thing down into a simple ordered list, fractional reserve banking follows this pattern:
1. The government issues bonds to the bank.
2. The bank loans out 90% of the money.
3. The borrower spends the money.
4. The seller deposits the money into the bank.
5. Go to point 2 where the bank then lends out the money again.
Step 1 kick-starts the system the same way that you would kick-start a motorcycle. The government can always inject more money into the system, but every time it does, it starts this fractional reserve banking process over again with that money.
Step 2 is where the “magic” of fractional reserve banking happens. The legal requirement to keep only a small portion of a deposit gives the bank the “right” to print money out of nothing. This is explained in detail in Part 3.
Step 5 is nothing more than running through steps 2-4 again for the entire cycle to start over. This is the second “magic” of fractional reserve banking because it creates a an iterative feedback loop for money to multiply itself. Aristotle called the process of money multiplying itself “the most unnatural”. “
Via Activist Post
“We have spent a considerable amount of time in the last week or two explaining just why depositor withdrawals (or bank runs) are the death knell for the Euro experiment. We first described the ‘run on banks and governments’ on the basis of the potential for overnight loss of ‘fungibility’ back in December but the escalation last week in Greece (and the contagion to Spain’s Bankia) signals things are shifting to 11 on the amplifier of Euro-Fail. This evening brings new information from The Guardian that ‘Police are urging Greeks to keep their money in bank accounts rather than putting it at risk of theft, amid further uncertainty about whether the austerity-struck country will remain in the eurozone.’ “
Via Zero Hedge