The Ultimate Destruction of the US Dollar and World Markets Will Not Happen

[tothemax6]

Dan Norcini posted up the following quote of Karl Marx today which brought me back to our discussions here and my rant above:-

"Owners of capital will stimulate the working class to buy more and more of expensive goods, houses and technology, pushing them to take more and more expensive credits, until their debt becomes unbearable. The unpaid debt will lead to bankruptcy of banks, which will have to be nationalized, and the State will have to take the road which will eventually lead to communism. (Das Kapital, 1867)

Yes, yes, 'exploiting the proletariat' etc etc. Marx should be out of favour by now, and maybe one day (hopefully), Keynes too.
Marx was simply molding the phenomenon of the credit-expansion fueled boom-bust cycle into his (highly warped) economic views.
We already have nationalized banking (state money, state central bank - which was Marx's 5th recommendation in the 'Communist Manifesto' for practical application of communism), and it allows for monster bubbles and inflation.

 

[bandicoot76]

I think its past the time of looking at all the charts and the so called (in my head) fancy stuff.

We have unprecedented riots across the globe by people who have been marginalised and exploited. And Buddhism for example is merely a symptom of deprevation and a lack of opportunity. Put a dollar in a pocket and give a lad meaningful and productive job and it would all in my view go away.

I get this gut feel that the markets are going to explode down soon and they wont give it a GFC number , it will be "The Armageddon".

Dan Norcini posted up the following quote of Karl Marx today which brought me back to our discussions here and my rant above:-

"Owners of capital will stimulate the working class to buy more and more of expensive goods, houses and technology, pushing them to take more and more expensive credits, until their debt becomes unbearable. The unpaid debt will lead to bankruptcy of banks, which will have to be nationalized, and the State will have to take the road which will eventually lead to communism. (Das Kapital, 1867)

See;- http://traderdannorcini.blogspot.com/

i think you and i are on similar pages, however you are still stuck in the bogus L Vs R paradigm that is dividing the people, turning them against each other and in doing so losing focus of the real villians of the peice, that being the hidden parasitic elite "authority" that includes the global banking cartels, government beauracracies etc... it is a case of the 'PARASITE ELITE' VERSUS 'THE PRODUCTIVE SECTOR' rather than 'THE WORKERS' VERSUS 'THE BOSSES' in my opinion.

 

[Uncle Festivus]

I'm not sure what this chart means or implies for the future? Must go and get a haircut... woops, I'm not a US bank

Once apon a time there was 'mark to market', now it's 'don't ask & we won't tell'......

 

[explod]

i think you and i are on similar pages, however you are still stuck in the bogus L Vs R paradigm that is dividing the people, turning them against each other and in doing so losing focus of the real villians of the peice, that being the hidden parasitic elite "authority" that includes the global banking cartels, government beauracracies etc... it is a case of the 'PARASITE ELITE' VERSUS 'THE PRODUCTIVE SECTOR' rather than 'THE WORKERS' VERSUS 'THE BOSSES' in my opinion.

Agree and well put.

Rothschildsrokerfellas et al.

 

[tothemax6]

I'm not sure what this chart means or implies for the future? Must go and get a haircut... woops, I'm not a US bank

Once apon a time there was 'mark to market', now it's 'don't ask & we won't tell'......

View attachment 42620

Yes, it amazes me that the Fed was this loose. Its not 'tightening' if the interest rate rises are not causing credit expansion to slow. Its almost like they wanted to create a bubble. This ridiculous rate of credit expansion is a perfect example of the failure of central banking.
As far as the future goes, well. After the tech bubble, the fed dropped cash rates to 1%. That's as loose as the fed got. This time round they forced cash rates to 0%, and printed so much money you'd think they were printing newspapers.

I don't see any light at the end of the tunnel for the US.

 

[Aussiejeff]

I don't see any light at the end of the tunnel for the US.

I do.

It's called a "bondfire".

 

[Uncle Festivus]

In regards to the US having already used up it's "ammo" already, I don't really agree. America isn't Greece(or any of the other Euro countries that have given up control of their currencies and monetary policy). Their financial ammunition is essentially limitless.

Any austerity measures they undertake before the recovery is fully taken care of will be solely a political choice, not one that is forced on them as you seem to be implying.

Yes, it will be forced on them by bond buyers and the so called debt ceiling, (among other things like unfunded liabilities), which really is just another name for the yearly debt 'limit up'. So when they increase it another trillion or so where will that come from? What will they do with it? There just isn't any political will whatsoever to take the tough actions required to avert a debt default sometime in the future, so called 'recovery' or not, worlds 'default currency' or not?

Now a bit about the GDP & how the government 'manipulates' it. This bit is in John Mauldins latest piece and explains it well.

http://www.johnmauldin.com/frontlinethoughts/the-endgame-headwinds

[FONT=Arial, Helvetica, sans-serif]GDP = C + I + G + net exports, or GDP is equal to Consumption (Consumer and Business) + Investment + Government Spending + Net Exports (Exports – Imports). This is true for all times and countries.

___________
[/FONT][FONT=Arial, Helvetica, sans-serif]
[FONT=Arial, Helvetica, sans-serif]The chart needs a little set-up. It shows the contribution of the private sector and the public sector to GDP. Remember, the C in the equation was private and business consumption. The G is government. And G makes up a rather large portion of overall GDP.
The top line (in dark blue) is real GDP per capita. The next line (yellow) shows what GDP would have been without borrowing. So a very real portion of GDP the last few years has come from government debt. Now, the green line below that is private-sector GDP. This is sad, because it shows that the private sector, per capita, is roughly where it was in 1998. The growth of the “economy” has been government.
[/FONT][/FONT]

[FONT=Arial, Helvetica, sans-serif]

[/FONT]

 

[Aussiejeff]

Yes, it will be forced on them by bond buyers and the so called debt ceiling, (among other things like unfunded liabilities), which really is just another name for the yearly debt 'limit up'. So when they increase it another trillion or so where will that come from? What will they do with it? There just isn't any political will whatsoever to take the tough actions required to avert a debt default sometime in the future, so called 'recovery' or not, worlds 'default currency' or not?

Now a bit about the GDP & how the government 'manipulates' it. This bit is in John Mauldins latest piece and explains it well.

http://www.johnmauldin.com/frontlinethoughts/the-endgame-headwinds

[FONT=Arial, Helvetica, sans-serif]

[/FONT]View attachment 42661

The bottom dashed lines that display the yawning gap between Fed receipts and outlays in the last few years looks like a bayou alligator about to snap it's jaws shut!

Then, I looked left and LO! The same situation was apparent in the final years of WW2 (44-45). Hmmm. Is this an omen?

A little research shows punishing US & UK austerity programs ran from 1947-50 to reign in the runaway wartime expenditure - the "austerity" period on the graph is where the Fed actually ran a rare surplus (the only other period appears to be circa 1997-2002).

Hmmm...

 

[professor_frink]

Warren Buffett has weighed in on this discussion between myself and UF a little too. Full article can be found here:

http://www.cnbc.com/id/42836791

Warren Buffett says if Congress fails to raise the U.S. debt limit, it would be its "most asinine act" ever.

But he told shareholders today there's "no chance" lawmakers will fail to do so, despite "waste of time" debates on Capitol Hill.

While Buffett doesn't want the nation to keep increasing its debt relative to GDP, he says there's shouldn't be a legislated debt limit to begin with, because circumstances change.

Buffett says the U.S. will not "have a debt crisis of any kind as long as we keep issuing our notes in our own currency." Inflation resulting from a "printing press" approach, however, is a serious threat.

 

[tothemax6]

Yes now Buffet is on the 'Its OK, we have a printing press' bandwagon.
No, its not OK Buffet, its OK for you. Unlike you, most peoples primary asset is cash and primary source of income is a cash wage. Inflation is good for you because your assets prices and dividends will increase.
A##hole.

 

[bandicoot76]

Yes now Buffet is on the 'Its OK, we have a printing press' bandwagon.
No, its not OK Buffet, its OK for you. Unlike you, most peoples primary asset is cash and primary source of income is a cash wage. Inflation is good for you because your assets prices and dividends will increase.
A##hole.

haha, thats what i like to see... a bit of passion! next thing you'll be using capslock to try to emphasize the point your trying to make! :

 

[konkon]

I wonder if institutions etc will end up buying more and more protection in the form of precious metals and other commodities in the coming months and even next year?

The stock market in the US has risen a fair bit in the past year (and past few years), but in dollar terms, relative to other currencies etc, what would be the US stock market's net gain (or loss)? If you're off to Vegas with the profits, great. But if corporations need to trade with other nations (and this is what they do) with stronger currencies etc, then you have a problem.

US Corporations (and even Australian companies like BHP that trade with USDs) will have to hedge against these market dynamics and there could be more protection-buying (buying inverse related commodities etc) in the future.

If the US didn't have such a debt crisis (that pretty much can't be solved with current methods) then the commodity play would eventually be dead in the water. But commodities and other currencies will continue to appreciate over the next year or so given the unyielding position the US finds itself in.

 

[konkon]

Good to see the US going after speculators and the like (futures traders etc) by increasing the margins on futures trading contracts. Just goes to show how powerful the US really is when it wants to be. A commodity take-down in the making? An interesting year ahead.

I still think the USD's devaluation over the long term will mean commodities will appreciate in the future. BUT one shouldn't stand in the way of a giant. Imagine if the US got desperate and wanted to really move the markets one way or the other? Hard to know what to own and what to sell if we went through this again.

 

[konkon]

What a week! First that @#%#$#!@##$ in Pakistan and then those speculators that have caused a lot of problems around the world. The US (military, Obama etc etc) has done an amazing thing by fighting back on all fronts. This is the sort of thing that amazed me about Ronald Reagan. Republican, Democrat or whatever else, this is the right way forward. Partisan politics in congress is not.

Speculators might well be priced-out of their own futures trading environments/platforms (they've done a fair bit of pricing-out themselves). To hit silver speculators twice in a week with an increase in future contracts is, in my opinion, a deliberate and calculated move to go after speculators in general. Those birds of a feather will flock together, whether it be high or low. And they will not win Obama a next term or help get the US out of the #@#$%$ they're in.

The move this week on the markets is more than just a glitch or a correction. This is the US 'telling' all those that are betting against the United States economy and USD (and I do this occasionally myself) that the US doesn't like having its back against the wall for too long.

The US will not give up its dominance of world markets and its status as the reserve world currency. I don't really include many on Wall Street as they aren't as concerned about a strong USD, for example. By the US, I mean high level government officials (Obama etc), the military, CIA, NSA, FBI etc etc. Wall Street will be made to play along. So will the Federal Reserve and there is mounting pressure on it to reform itself.

I can't help thinking that Obama etc and those in charge of the futures exchange and other key players planned this move to go after speculators. This was not a 'normal' correction this week. I thought we might have this later on, from July onwards (and maybe even next year). But the US administration must be feeling like their backs are against the wall and it was time to go after those that were feeding-off a struggling USD and economy.

I do take my hat off to Obama this week. This is an exceptional effort by the military etc, Obama and others on two major fronts. Many were betting that the US administration would just sit there and not do anything about futures trading practices. But, for now, they went after them head-on and have won this round.

I wonder if the ECB was in on this speculator take-down, by suggesting that the ECB will not raise rates any time soon? Perhaps not, but it wouldn't surprise me.

 

[professor_frink]

Re: SILVER
"Personally I think the Silver story is just as much about rampant speculation these days as USD weakness" from professor_frink

professor_frink, your comments don't make sense. Are you aware of what is going on in the US, Europe etc?

Still think they don't make sense?

 

[konkon]

Still think they don't make sense?

This is a commodity take-down and if the authorities didn't step in to make silver contracts more expensive you would have silver continuing to go higher, with some corrective periods.

Many investors are not convinced that the USD won't go into hyperinflation in the future sometime. I don't believe it will, but there are plenty that do. So the silver trade is not just about speculation. It was about protection buying against a falling USD. This trade will come back later on, but perhaps, not for a while.

 

[konkon]

I do believe the end of QE2 and the lack of a QE3 will be disastrous for stocks, overall. The decision to, or not to, implement a QE3 (or something just like it) is perhaps the most important one of the year (and one I'm really anticipating).

I feel like the decision this week to 'price-out' many futures traders is:

1. a coordinated effort by Obama (indirectly) and his very powerful associates to try and get a grip on (or try and get their heads around) things, before other perhaps more extreme measures are implemented.

2. a warning to others involved in speculating on inversely related commodities, currencies etc (to the USD) that more counteractive measures will be incorporated if needed.

3. the United States pretty much showing who still controls markets (debatable, like everything I've posted, but I believe this).

4. testing the waters with other agencies, like the Federal Reserve, to see who is with us! The Obama Administration might be checking to see what changes it needs to do (maybe after the next election, if it gets in). *

5. the first of many (surprise) moves or 'attacks' on those that don't see eye-to-eye with long-term US economic interests. I bet there will be more surprises and not just for US investors.

I also don't think Obama needs Wall Streets support like other Presidents might have, this time round. He needs the support of the middle class. Obama might have the Fed on notice, and I think Bernanke is feeling this a little. I think Bernanke will gravitate towards the Obama Administration more than Wall Street this time round. But it won't be official, of course, like most of the points raised by me above.

Does Bernanke's 'transitory inflation' comments last week mean that he knew about the effort to reign-in speculation in commodities? Did the ECB's decision yesterday to not raise European interest rates in the foreseeable future (which took many by surprise), mean that the ECB is part of this coordinated effort to reign-in speculation in futures markets? We won't be told officially, but I think there is a very good chance that this (all of the above) is the case.

* (The attacks on the Libyan government also tested the waters a little too; to see which countries were with the allied US and European nations).

 

[LifeChoices]

I do believe the end of QE2 and the lack of a QE3 will be disastrous for stocks, overall. The decision to, or not to, implement a QE3 (or something just like it) is perhaps the most important one of the year (and one I'm really anticipating).

I feel like the decision this week to 'price-out' many futures traders is:

1. a coordinated effort by Obama (indirectly) and his very powerful associates to try and get a grip on (or try and get their heads around) things, before other perhaps more extreme measures are implemented.

2. a warning to others involved in speculating on inversely related commodities, currencies etc (to the USD) that more counteractive measures will be incorporated if needed.

3. the United States pretty much showing who still controls markets (debatable, like everything I've posted, but I believe this).

4. testing the waters with other agencies, like the Federal Reserve, to see who is with us! The Obama Administration might be checking to see what changes it needs to do (maybe after the next election, if it gets in). *

5. the first of many (surprise) moves or 'attacks' on those that don't see eye-to-eye with long-term US economic interests. I bet there will be more surprises and not just for US investors.

I also don't think Obama needs Wall Streets support like other Presidents might have, this time round. He needs the support of the middle class. Obama might have the Fed on notice, and I think Bernanke is feeling this a little. I think Bernanke will gravitate towards the Obama Administration more than Wall Street this time round. But it won't be official, of course, like most of the points raised by me above.

Does Bernanke's 'transitory inflation' comments last week mean that he knew about the effort to reign-in speculation in commodities? Did the ECB's decision yesterday to not raise European interest rates in the foreseeable future (which took many by surprise), mean that the ECB is part of this coordinated effort to reign-in speculation in futures markets? We won't be told officially, but I think there is a very good chance that this (all of the above) is the case.

* (The attacks on the Libyan government also tested the waters a little too; to see which countries were with the allied US and European nations).

I can't believe you are continuing to banging on about this stuff. Why bother - what's your motive? - are you trying to educate the dumb masses?

If not why not just bunker down in some hole somewhere and shut up and let the rest of us morons cope with impending doom.

 

[explod]

I can't still believe you are banging on about this stuff. Why bother - what's your motive- are you trying to educate the dumb masses?

If not why not just bunker down in some hole somewhere and shut up and let the rest of us morons cope with impending doom.

Some of us morons find konkon's post very informative indeed. All views make the picture.

 

[tothemax6]

Ugh, I simply must be drawn back into this thread to try and understand the age old question "What the hell, man?".

'This is a commodity take-down'? What in gods name is that? 'Good to see the US going after speculators'? Why on earth is that a good thing?

Bernanke has been wrong about everything he has ever said. His 'transitory inflation' statement simply springs forth from the same fountain of Keynesian-flavoured jibberish.
Speculation does not cause inflation, but inflation may cause speculation. In a bubble, the speculators still need to obtain the money and credit required to make their ever-larger purchases. If the money and credit supply remains constant, any funds funneled into a particular asset must be drawn out of another - hence no net inflation. As Friedman said 'Inflation is, and always has been, a monetary phenomenon'. Inflation is produced by credit expansion, which is fueled by an expanding monetary base.

Speculation, or 'trading', is the means by which prices are set in a market. When a speculator buy's wheat futures because he thinks a shortage is coming on, he is doing no different to a farmer who plants more wheat, or a baker who stockpiles more flour in anticipation of the higher prices. Indeed, if speculators are correct - which they need to be to be profitable, they force the price up more quickly - increasing the rate at which farmers produce wheat. That is how a market works. Speculation is good.