CountryPlans Forum

Rising costs of money

I have speculated that as credit has decreased and the money supply stalls we will see the cost of money increase.  For those of you with credit cards this is not a new thing; as this past year credit cards rates have gone through the roof.  I am concerned about this trend and what I see playing out in my mind and want to make a post about it because it scares me.  I want others to be aware of the risks out on the horizon and how they might take steps to protect themselves. 

Skipping the history lesson on what happened last year, everything went boom for various reasons.  How that was reacted to is the key.  The federal reserve in concert with the us treasury stepped in to purchase assets and make loans in an "effort" to keep the economy stable.  Perhaps they did the right thing, perhaps they did the only thing they thought they could do; but the law of unintended consequences is a tough one.  The fed has purchased some 1.5trillion dollars of "Agency" debt.  Agency debt refers to mortgage MBS bonds mostly, the Fanny and Freddy bonds.  They purchased more MBS in 2009 than was issued; indicating not only that they were responsible for every house that got sold, but that they also allowed banks and bond companies to unload what they had into them as a consequence.  They did this by purposefully overpaying for these bonds.  As other countries are beginning to get close to soverign default, our fed has itself in quite a pickle.  They need to exit the market, and fast before they self destruct.  I know many people feel the fed destroyed the economy on purpose for thier own gain, and I believe that as well to some extent, I do not believe they intended to blow themselves up in the process.  But that's quite literally where they are headed. 

I have been hearing rumblings for a while about rates and bonds but this week has been very reveiling in what's been released. 

Bill Gross of PIMCO, the worlds largest bond fund has been quite vocal about the events of late, on Monday releasing a statement that they would be net sellers of US treasury debt and sellers of UK guilt debt.  As there is no longer any foreign debt purchase, and the bond market is rejecting the offering, while at he same time the government wishes to issue more debt than ever (2.5trillion new treasury debt for 2010 on top of 3trillion to rollover vs. 1.5 trillion last year).   Quite the vexing problem. 

One thing I am certain of about Bill Gross, if he is saying something he has an agenda behind it.  To me, the agenda is plain as day - he wont buy US debt at current rates. 

Sure enough, what does he have to say today?
http://www.businessinsider.com/pimco-fed-tightening-is-impossible-without-2010-1

"There's No Way The Market Can Absorb The Fed's Giant Balance Sheet Once It's Time To Tighten", he is very honestly stating that there is nowhere near enough global demand for the issues at current rates and that if the US (or the UK for that matter) need access to capital then they will be paying a higher price.  Sure enough, just a few paragraphs down.

QuoteVarious studies by the IMF, the Fed itself, and one in particular by Thomas Laubach, a former Fed economist, suggest that increases in budget deficits ultimately have interest rate consequences and that those countries with the highest current and projected deficits as a percentage of GDP will suffer the highest increases – perhaps as much as 25 basis points per 1% increase in projected deficits five years forward.

let's do some math... 
last year the deficit was 7.1 trillion, last years news says the plan is to move that to 9trillion, or perhaps 10trillion with healthcare.  A 10 is 40% higher than 7.1.  25 basis points for each percent comes out to 1012 basis points or roughly 10% increase in federal borrowing.  That places the fed funds at 10%, the 10year TNX at 14% and likely home mortgages in the 18-22% range. 

I cannot express the kind of deflationary disaster this is. 
example:
a 100k house loan with a 5%  interest rate has a payment of 682 a month
a 100k house loan with a 7%  interest rate has a payment of 811 a month
a 100k house loan with a 10% interest rate has a payment of 1023 a month
a 100k house loan with a 15% interest rate has a payment of 1410 a month

In other words, a 100k house at 5% costs about the same as a 50k house with a 15% rate.  As rates climb, home prices fall because the purchasing power of the people do not change.  As asset values decline, everything goes right with it, this is the slow spiral. 

Some may be thinking to themselves that mortgage rates cannot ever get that high, that such a thing is impossible.  I welcome you to go google historic mortgage rates, a quick search from 1983 when my dad bought the house he lives in now shows a good mortgage at 13%, I have heard horror stories of people in the 17-18 range from a few years before that.  The past decade has been the decade of cheap credit, and that is reversing and reverting back to the mean. 

And out from the wires just a few minutes ago.
*FED CALLS FOR `ROBUST PROCESSES' FOR CURBING INTEREST RATE RISK
*FED SAYS EXCESSIVE RISK MAY PROMPT REQUIREMENT TO RAISE CAPITAL
*FED TO REQUIRE CORRECTIVE ACTION FOR FIRMS WITH EXCESSIVE RISK
*REGULATORS RELEASE ADVISORY ON INTEREST RATE RISK IN WASHINGTON
*U.S. WARNS BANKS TO GUARD AGAINST RISK OF RISING INTEREST RATES

There is a bloomberg article on it as well, I guess they got them memo as well. 

THIS is what I refer to when I say that the market and NOT the fed sets rates. 
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What do do in a area of rising costs of money?  cash is king, but productive assets are better than cash if you can keep them.  If you are considering purchasing home or land or seeking other type of finance consider ways to do it without financing.  Move quick if you need to.  Absolutely reduce or eliminate any variable interest loans or debts you have, there is no telling what rates to consumers will do.  If you own a business, find a way to work with cashflow and do not rely on credit to float, that will be the difference between who makes it and who doesn't.  Well, it already has been but I see more of the same coming.  If you have assets to sell at a price large enough for someone to need financing, you need to ask yourself if they are going to be going up or down in the next 12-18 months and act accordingly. 

Lastly, I dont think this is any kind of doomsday stuff so please dont read it or take it as such.  It is however a large shift in how the economy operates; the sooner you can mentally accept and prepare for it the better you will be positioned to prosper within it. 

So if you are a government/bank that is printing money to cover your deficits whats the best way to prevent run away inflation? Maybe make money harder to get by raising intrest rates? If you expected the money you where printing to devalue what would you do? Use that newly printed money to buy stocks and other assets? I think it's possible this is what's really going on. We'll just have to wait and see what happens because they'll never tell us.

I think you might be onto something, Scott. We all like to call these guys idiots, but they know what they're doing and always have an agenda that benefits themselves. Look at what Enron was doing. People think how stupid they were, but that company made billions for years before it imploded, and that money went to stockholders, executives, etc. I worked at an investment bank and have first hand knowledge of how they operate. Some people are going to make crap loads of money off this fiasco, and all I know for sure is I won't be one of them.

Quote from: ScottA on January 07, 2010, 05:40:26 PM
So if you are a government/bank that is printing money to cover your deficits whats the best way to prevent run away inflation? Maybe make money harder to get by raising intrest rates? If you expected the money you where printing to devalue what would you do? Use that newly printed money to buy stocks and other assets? I think it's possible this is what's really going on. We'll just have to wait and see what happens because they'll never tell us.

They don't exactly print money directly.  They issue debt.  To issue debt you need a buyer, the buyers have dried up. 

Foreign creditors: http://www.treas.gov/tic/mfh.txt
Note that China has stopped buying in May 2009 and has remained flat.  They do not give us money any more.
Note that the grand total at the bottom has been flat since July.  Foreingers are no longer purchasing US debt.  It's over.

Domestic creditors:
PIMCO:  the worlds largest bond purchasers are no longer purchasing debt from US or UK either.  That was the message in this post.

For inflation to take hold (a currency to devalue) you need an expansion of the money supply, or an expansion of the credit supply because money spends the same as credit.  The credit supply has contracted, and the money supply has stalled.  Every dollar they "print" as it is being called is destroying 10 dollars in credit because of the destruction of credit behind it.  The credit market is much larger than the dollar market. 

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I dont think they are expecting the dollars to devalue, they are raising rates because of supply and demand.  They wish to sell more than there is demand, so the rates must raise to attract buyers.  As rates raise the price of the things you can buy with the currency goes down.  stock market goes up on rate cuts because the currency is cheaper and worth less, when rates raise the money gets stronger and therefore the price affixed to assets goes down. 

As for what they are trying to do, here is my personal theory:  -- I cannot prove this as just like you said, such things would never be released or discussed. 

Last year, the federal reserve overpaid for assets. 
The bond funds sold into that and unloaded these assets at an inflated price. 
Now the fed wants/needs to unload these assets and at the same time the bond market is saying no mas. 
The only way to sell them back is at a huge discount or increased rates. 
The fed will end QE/MBS purchases in Q1/Q2, and the bond world will scoop them up at pennies on the
dollar as the market for MBS craters. 
The fed will see the further destruction in credit and will act to enable QE2 (or the like) in Q3 or Q4 of this year. 
Then the same bond funds will unload those assets back into the fed at inflated prices. 

The net affect being the rich get richer, the taxpayer gets screwed. 
Interest rates for consumers goes up while asset prices goes down.  Somewhere along the way, I strongly think they will go after IRA's and 401ks and try to force them to be treasury purchasing instruments.  Further stripping of wealth from the middle class. 

That's my read on it.  I certainly could be wrong. 

I see what you're saying muldoon. Here's the thing though. If no one buys the debt the government folds up and that's not likely. Think of the government and the fed as 2 parts the same entity. The government issues the debt and the fed creates the money to buy it. It's the same as printing money. What I see is right now is that the govrnment and the big banks have merged. And with that they have the power to do what I mentioned in my earlier post.

QuoteWhat I see is right now is that the govrnment and the big banks have merged.

I agree with that, I also see your point that the fed and treasury are two parts of the same entity.  However, having the power to self destruct does not necessarily mean that they will do so.  I think they are greedy, and with that they wish to keep what they have stolen.  (power and money) I do not think they wish to destroy themselves in the process. 

There are many cases of countries crashing without the government folding up.  Just 15 years ago Russia crashed, but most of the same people stayed in power.  Just 5 years ago Argentina crashed, but the same people retain power their now.  In fact Argentina and Russia are now considered "emerging markets" again and cash never stopped flowing into them.   The 80s Mexico peso crises comes to mind as well, their government did not fold up and go home.  Iceland had a complete currency collapse last year with the krona loosing some 80% in a day.  However their government is still intact.  What did change was the rate they pay to get that cash on the international market, and the taxation and wealth collection policies the governments imposed on their collective people to pay those rates. 

If the government and the banks could just print money without stop, why would anyone work, why would taxes be needed?  Except for zimbabwe I dont see any politicians promising such a thing - and if you look at zimbobwe you can see why no one else wants to go there. 

So the PIMCO message is good for me (I think) because I own some shares?   ???

considerations, good luck, sorry I cannot comment on stocks anymore.  I do sincerely wish you luck with it. 

something I saw tonight, its from shadowstats, the hyperinflation guy who republishes information on monetary system using his own algorithms -- allegedly to shows how the data used to be calculated. for example, he still tracks M3.  I thought it was interesting.

here is a year over year chart showing a shrinking money supply. 

(http://shadowstats.com/imgs/sgs-m3.gif)

Quote from: muldoon on January 08, 2010, 01:11:33 PMThe net affect being the rich get richer, the taxpayer gets screwed. 
Interest rates for consumers goes up while asset prices goes down.  Somewhere along the way, I strongly think they will go after IRA's and 401ks and try to force them to be treasury purchasing instruments.  Further stripping of wealth from the middle class. 

That's my read on it.  I certainly could be wrong.

I'm gonna suggest everyone listen to Muldoon as I think he is on to something: http://www.businessweek.com/news/2010-01-08/americans-oppose-initiatives-limiting-401-k-choices-ici-says.html

dollar has risen 1.2% in the last 24 hours, something almost unheard of.  The euro has fallen roughly 1.3%.

silver, oil and gold getting hammered straight down.  thats not panic, thats forced selling.  it's liquidation waterfall.  also called margin calls. dollar shorts getting closed and covered on the forced liquidation of assets. 

greek officials went on strike today, looks like EU is going to have to bail them out.  likey or no.  if they dont, they entire EU tanks large, if they do, it tanks small.  If they do, then portugal, spain, italy, ireland all line up for the next one.  If they dont, some of those crash anyway further tanking. 

Dollar 81ish is on the horizon again. 
gbp, eur, nzd all making key lows, usd making yearly highs.  cash is king. 

wheres my dow 10k hat? 

these are huge moves in the dollar.  something somewhere is blowing up.  With the euro crashing, this points to European banks. 

My bet is Portugal, the CDS spreads on them went berserk last night out of nowhere. 
http://www.cmavision.com/market-data
Thursday, 4 February 2010 — 23:30
Largest Widening Spreads (Greatest Credit Deterioration)
Banco Comercial Portugues SA (SUB) -- 346.77 +102.16 +41.76
Banco Espirito Santo SA (SUB) -------- 358.63 +96.60 +36.87
Banco Comercial Portugues SA ------ 239.14 +63.99 +36.54
Banco Espirito Santo SA ------------ 253.42 +64.31 +34.00
Banca Popolare di Milano SCRL ------- 91.55 +19.91 +27.80

- for reference, that is exactly what happened to Lehman when they popped.  As soveriengs, this is exactly what happens when a country defaults.  The CDS spread is a meausre of the risk.  As risk goes up, the rate goes up they pay for debt.  As they get worse and worse credit, they must pay more and more until they pop.  It's ugly. 

--
(http://www.loopy.org/euro-cds-2-5-10.jpg)

Quote from: muldoon on February 04, 2010, 10:29:59 AM


wheres my dow 10k hat? 

(https://i896.photobucket.com/albums/ac168/wagginwagon/Funny%20Stuff/Dow10kHat.jpg)

fed just raised the discount rate from .50% to .75% in an emergency rate hike. 
that's a 50% increase folks. 
http://federalreserve.gov/newsevents/press/monetary/20100218a.htm

dollar surging again.  dollar just crossing 81 now...

Quote from: bayview on February 18, 2010, 09:55:54 PM


   I may be a bit of subject here . . .   A commercial realtor friend has mentioned that it doesn't matter much what the lending rate is if the banks are not willing to lend money.   Previous commercial properties could be financed with 15-20% down.  Now the banks are requiring 50%.  Also, good luck, trying to refinance a residential mortgage right now.  Doesn't matter if you have good credit and a "good" job.  .  .

/

I think that's one of the big real life issues Bayview. Charting and using profiles are fine but the bottom line in "real life" still boils down to how business is handled. I'm sticking with my melt down theory. We are in a new era and have to compensate on an individual level. The Government ain't gonna help.

Shilling: Euro Poised to Plunge 27 Percent

"I think the currency could go back to 1-to-1 versus the dollar,"

http://moneynews.com/StreetTalk/Gary-Shilling-Euro-Dollar/2010/02/23/id/350654 (http://moneynews.com/StreetTalk/Gary-Shilling-Euro-Dollar/2010/02/23/id/350654)

Anyone read Thomas Woods:  Meltdown?
James Wesley Rawles:  Patriots?

There are many others but those who listen to the likes of Woods, Roubini, Faber, Schiff have seen this coming for some time....in fact back when the DOW was climbing to 14k.

Sadly, I don't think there is much you and I can do besides stock up for a rainy day and hope for the best...

I read patriots, a hyperinflationary collapse followed by UN takeover of the US, fought off by survivalists in Idaho. rough novel, weak plot and characters, but lots of detail for those wanting to focus on the details of what a group of survivalists would want to think about. 

The affect of a rising dollar and declining euro coupled with declining credit is 180 degrees opposite of what patriots describes in their financial meltdown. 

The hyperinflation presented in the story is that the value of the dollar will go to zero and that prices would go to the moon ala Zimbobwe or Weimar Germany.   That the dollar became worthless. 

The effects of deflation is that there is less and less debt which manifests the same way as less and less money.  Prices fall, wages fall, unemployment rises, markets decline, because $$$s are in demand.  When you need money now, your 20k boat might just sell for 5k - because you need money.  Thats deflation.   That's the rising "cost" of money. 

While we may one day see the mighty dollar fall, I do not see it in the next few years.  As for par between the euro and the dollar, they were at par just 10 years ago or so.  That by itself does not constitute a crises. 

there is much going on lately and my thoughts are a bit disjointed.  I also do not wish to wade too deep into political quagmire so I'll keep this on point. 

We have firmly crossed my last target of 81 on the ino usdx, held and today surged again.  My next target for the DX is 84, to come over the next few weeks.  If locking a mortgage rate or seeking a refi - is in you immediate future, I would do so quickly. 

Quote from: muldoon on March 24, 2010, 04:00:33 PM
there is much going on lately and my thoughts are a bit disjointed.  I also do not wish to wade too deep into political quagmire so I'll keep this on point. 

We have firmly crossed my last target of 81 on the ino usdx, held and today surged again.  My next target for the DX is 84, to come over the next few weeks.  If locking a mortgage rate or seeking a refi - is in you immediate future, I would do so quickly. 

I tend to go along with that. Like everything in the last couple of years, it's hard to predict especially this week with the country in a tizzy.

It really does look like interest rates will jump soon though. What will happen then is beyond me because the economy sure isn't going to pop any time soon.

Thanks for the input, guys.

Faber, Roubini, Celente and others all better educated and wiser then I on these matters continue to hold that Hyper Inflation is likely.

many say deflation first then inflation then hyper inflation.

The crisis is starting to heat up again and that's also anticipated by those watching Option ARMS, MUNI's and Commercial Real Estate.

I believe we are in for a very rough ride and I wouldn't want to live in or near any big cities.

http://www.zerohedge.com/article/latest-gold-fraud-bombshell-canadas-only-bullion-bank-gold-vault-practically-empty

If this comes to pass (people asking for their gold and silver) the dollar crashes.

This is from Canada, so it might not impact the US dollar, although I'm sure American banks have been doing the same thing.

Banks don't have all of the money that is held in deposit with them and as long as everybody doesn't attempt to withdraw everything at the same time the bank is fine. Many local banks in 1929 and the first years after the crash were fine, until rumors spread and everybody "ran" the bank. Panicking mobs are the problem.

This article is along the same lines. Although charging people storage fees when nothing is begin stored should be prosecuted, all this article will do is cause people holding gold bonds to request delivery and if enough of them make the request then we've got yet another financial crises that will cost us a few billion dollars to clear up.

Greece has effectively hit the wall.  They were cut to junk today by moodys.  Consider their death spiral fiancing of late:

Yesterday, their 2 year bond tracked at 10%, today 12% and two hours after that 15%, then the downgrade and they went 17%. 

Portugal was also cut, and their banks were then cut because they held such a high amount of Greece debt.  Italy took a hit as well.

The EU bailout talks continue to fall, seems if Portugal is broke too then they cannot bail out greece.  How can any of them borrow money at 6% to give it to Greece at 5%?  See the dilemma? 

Pound is under 1.32 now, wow. 

As for the dollar, up 1.10 to 82.34.  Tomorrow brings D-day for the euro debt crisis in my opinion.  They are effectively at Lehman failure crises level over there, and have escalated to this level very rapidly.  At it's worst, Lehamn was 700 basis points on CDS, at its worst AIG was around 900 bps, now we have a European sovereign at the same level. 

I expect some European fireworks over the next 24-36 hours. 

Quote from: muldoon on April 27, 2010, 04:19:38 PM
Greece has effectively hit the wall.  They were cut to junk today by moodys.  Consider their death spiral fiancing of late:

Yesterday, their 2 year bond tracked at 10%, today 12% and two hours after that 15%, then the downgrade and they went 17%. 

Portugal was also cut, and their banks were then cut because they held such a high amount of Greece debt.  Italy took a hit as well.

The EU bailout talks continue to fall, seems if Portugal is broke too then they cannot bail out greece.  How can any of them borrow money at 6% to give it to Greece at 5%?  See the dilemma? 

Pound is under 1.32 now, wow. 

As for the dollar, up 1.10 to 82.34.  Tomorrow brings D-day for the euro debt crisis in my opinion.  They are effectively at Lehman failure crises level over there, and have escalated to this level very rapidly.  At it's worst, Lehamn was 700 basis points on CDS, at its worst AIG was around 900 bps, now we have a European sovereign at the same level. 

I expect some European fireworks over the next 24-36 hours. 

I'll be interested to see if it slips Muldoon. Actually, everything is getting interesting from the local to the international level..

We'll see the same here soon enough.

Quote from: peternap
I'll be interested to see if it slips Muldoon. Actually, everything is getting interesting from the local to the international level..

The Greece two year was completely destroyed later in the afternoon.  rumor has it 60% but I never saw it, the worst I found was GR0124011454 the bond that exp may 19 2010 best bid was 97.45 for a yields of 53%
for reference:
Portugal 2 year is priced at 5.2%
Germany 2 year is at 0.76%
US 2 year at 1.01%
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The DAX futures were halted earlier
Check this out,
http://tools.boerse-go.de/index-tool/

Hangseng doen 4.5%
Nikeie down 300+ points

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tidbit out on Italy bonds:

QuoteAll of Europe is scrambling to issue new debt and refinance in advance of what more and more are seeing as a credit crisis soon to envelop not only the European periphery but its core as well. We all know what is happening in Greece and Portugal. It appears Italy may be next: the country sold €9.5 billion in 6 Month Bills at 0.814%, up dramatically from 0.568% just a month ago, on March 26. What is scariest is that the Bid To Cover on the auction tumbled from 1.56 at the previous auction to a just barely above passing 1.02. At this rate Italy will be unable to find bidders for its next Bill auction. And if it can't sell Bills, it can't roll the easiest part of its curve. Also, unlike Germany, Italy does not have the "flight to safety" appeal. Keep in mind that Italy, just like Greece, dipped freely in the Goldman debt/GDP swap "adjustment" mechanism. We are confident that as contagion fears grip Portugal, Italy is sure to be next. And confirming that the market is seeing Italy as an even greater risk than Spain, the country sold 1.7 billion euros of six-month securities to yield 0.736%, up from 0.482 percent on March 23. On the other hand, Spain has to sell €150 billion in euros in 2010: it has so far only sold 26% of this amount. We wish them best as they scramble to fill the quota.

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Now what does all that mean?  It means as your credit risk goes up, and the amount of money or credit available goes down, money gets more expensive.  It means that these countries must pay more for money.  The entire thread is named the rising cost of money to capture the mechanics of this situation.  The mechanics of deflation. 

As these countries must pay more to service debt than exists, they go into death spiral finance.  Todays 8% is tomorrows 12% is the next days 17% until no one will touch it and they pop.  This was the mechanism by which all of the financial banks collapsed last year.  They became credit and counterparty risk, and (as always) it couldn't hit at a worse time.  They needed funds just when their collective ability to repay loans was at its worst.  So, they were given higher and higher interest rates to combat the "risk".  But the more they borrowed at higher and higher rates the more it became apparent they would not pay back a dime and no one would loan them money at any cost.  game set match.  fin.

We saw this play out in Iceland last year, we saw it in Latvia as well. 

Whats going to happen tomorrow, whats happening now in Asia?  Well, those bonds are worth less.  First off, most prospectus's flat out bar holding anything rated junk so any funds holding them will be FORCED to sell them.  Second, the downgrade means those funds will be worth less, as they are worth less it means that banks must RAISE capital to cover the exposure.  The way to raise capital is to force liquidate other assets. 

Finally, I would also touch on the destructive force of these kinds of rates.  Here in the us, our 10year hovers around 4%.  This is generally used as prime and most mortgages are tracked back to it +1 or 2%.  If the 10, or ^TNX, were to go to say 7% in the next few months, that means mortgages goes to 9%.  If it goes to 10, mortgages goes to 12%.  Mortgages going from 6% to 12% has HUGE impact on the value of a home.  Suddenly, you would see a 50% hit across every piece of real estate in the country.  Thats what Greece, Portugal, Spain, Italy, UK, is looking at.  The banks therein are woefully insolvent again on a massive level.  So are the citizens who just took the devastating loss. 

Quote from: scotta
We'll see the same here soon enough.

fair enough, but I think it will take some time to work its way out.  The part I still struggle with, if your the last one standing can you still lose?  Or by definition does being the last standing imply winner?   At what point does the reset wash away? 

Quotefair enough, but I think it will take some time to work its way out.  The part I still struggle with, if your the last one standing can you still lose?  Or by definition does being the last standing imply winner?   At what point does the reset wash away?

Good point but I don't think the last one standing will be a country but the banks themselves. The IMF has already created an alternate currency (special drawing rights). At the end of the day it will be the banks who will dictate terms to the various governemnts of the world.

I have a question though. Why have the fees for currency exchange gone up so much in the past year? It's like they are trying to discurage people from moving money.

One thing you must not discount is the printing of FIAT money.

The easy way out of this in the minds of the Keynesians is simply to create more money (our dollar is backed by Debt today -- so more debt = more dollars).  If you print enough (300% more recently) in a short enough period you will cause inflation (not a natural occurrence) and devalue the dollar thereby making the debt go poof.

My target of 84 on the DX was hit, well not hit it was smashed as the the dollar topped 85 this morning.
(http://i42.tinypic.com/x4qbrs.jpg)

europe is rioting.  I am exiting my dollar long position to sit on sidelines for a while.  Were at the top of the channel of a more than year look.  Either ECB does their version of TARP and DX falls back for more channeling, or it does a massive breakout and the EU breaks up in months.  I dont believe in lucky guesses here. 

Quote from: muldoon on May 06, 2010, 11:30:27 AM
My target of 84 on the DX was hit, well not hit it was smashed as the the dollar topped 85 this morning.
(http://i42.tinypic.com/x4qbrs.jpg)

europe is rioting.  I am exiting my dollar long position to sit on sidelines for a while.  Were at the top of the channel of a more than year look.  Either ECB does their version of TARP and DX falls back for more channeling, or it does a massive breakout and the EU breaks up in months.  I dont believe in lucky guesses here. 


RIDE EM COWBOY!

CNBC is trying to do damage control for some reason ???

Ride 'em cowboy, indeed. The last couple hours were...... interesting in the market.

Now that trading is over for the day, I'll discuss it a little more  c*

I cashed out of all my positions in everything last week. Stocks and bonds.

Sitting on all cash again, and had to scatter it out in 5 accounts again... and I'm still over the FDIC limit :-\.

I have to admit it was interesting today. I'm trying to figure what's going west and what will hype back up.

I would love to be in Greece tonight.

It looks like much of the near 1000 point daily spread can be laid at the feet of the automated trading programs. But that doesn't mean there is no fire hidden in the smoke.

I will be interested in the analysis of our financial "experts". (Hey, I trust them at least as much as the hired gurus on TV d*)

Here is an interesting read

The Global Crisis of Legitimacy (http://www.investorsinsight.com/blogs/john_mauldins_outside_the_box/archive/2010/05/06/the-global-crisis-of-legitimacy.aspx), May 4th, By George Friedman

Quote from: John Raabe on May 06, 2010, 04:52:18 PM
It looks like much of the near 1000 point daily spread can be laid at the feet of the automated trading programs. But that doesn't mean there is no fire hidden in the smoke.

I will be interested in the analysis of our financial "experts". (Hey, I trust them at least as much as the hired gurus on TV d*)

Here is an interesting read

The Global Crisis of Legitimacy (http://www.investorsinsight.com/blogs/john_mauldins_outside_the_box/archive/2010/05/06/the-global-crisis-of-legitimacy.aspx), May 4th, By George Friedman

As usual John, much of the stock drop was due to safety triggers but there is a lot of finger pointing and not much blame taking as far as the automated snafu.

The simple fact is that the market has no fundamentals and hasn't for a very long time. This just proves it. Tomorrow will be interesting too. I'm not sure there will even be a lot of bargain hunting.

Right now, it's a fishing hole full of snakes and I'm going to sit on the bank and watch the show. ;D

Interesting also is gold breaking $1200 again.

Predictions are that it will break $1400 this year.

As folks move out of the Euro into the dollar (have been for a while) the DI goes up...what goes up...

http://www.bloomberg.com/apps/news?pid=20601010&sid=aMbfBKW.uKn4
China May 'Crash' in Next 9 to 12 Months, Faber Says

http://www.spiegel.de/international/europe/0,1518,692666,00.html
The Mother of All Bubbles

http://www.zerohedge.com/article/cmbs-delinquencies-hit-fresh-record-now-51-billion-268-increase-prior-year
CMBS Delinquencies Hit Fresh Record, Now At $51 Billion, 268% Increase From Prior Year

http://online.barrons.com/article/SB127294729055586423.html?mod=BOL_hpp_dc
Still No Credit Where It's Due

Some light reading for you ;)

what a day,

I have long exited any real investment positions.  My "money" now sits in land and improvements.  All I have now is a little "beer money" pot on the sidelines.  Even with that I pulled more cash in 3 days than I have in 12 months of real work.  crazy days.  bring some more of these. 

jarhead - I read your links, if you believe that china is about to crash, and that euro is about to crash, and that CMDS are about to crash; I just dont understand how you can be anti US dollar.  If anything, if you belive what you posted you should see the demand. 

Quote
I will be interested in the analysis of our financial "experts"

The rumor late afternoon was that europe completely locked up lending.  No more loans, no more bonds.  The credit markets shit the bed on a no bid scenario, and the market cratered.  This was NOT a fat finger "mistake".  I dont care what any news source says, thats a lie.  Credit markets seized, markets went no bid and nose dived. 

After the fact, the ppt stepped in, put a floor in at 10k, and here we are.  Where we go tomorrow I dont know.  I still have puts.

Quote from: muldoon on May 06, 2010, 11:16:23 PM

Quote
I will be interested in the analysis of our financial "experts"

The rumor late afternoon was that europe completely locked up lending.  No more loans, no more bonds.  The credit markets shit the bed on a no bid scenario, and the market cratered.  This was NOT a fat finger "mistake".  I dont care what any news source says, thats a lie.  Credit markets seized, markets went no bid and nose dived. 

After the fact, the ppt stepped in, put a floor in at 10k, and here we are.  Where we go tomorrow I dont know.  I still have puts.

My guess is that anyone with a slightly dangerous position is gonna be running to sell. So in the morning at least, I expect another smaller sell off.
Then I think everything is going dormant for the weekend.

I'm not as convinced as you Muldoon, that the US Dollar is the thing to have...but I'm also not as versed in currency as you are.
The market is going back to mama though.

I can make money on the roller coaster but not until I get a feel for the new hysteria.
The irritating thing about this mess is I'm going to have a whopping tax bill next year. >:(

Quote from: muldoon on May 06, 2010, 11:10:22 PM
what a day,

I have long exited any real investment positions.  My "money" now sits in land and improvements.  All I have now is a little "beer money" pot on the sidelines.  Even with that I pulled more cash in 3 days than I have in 12 months of real work.  crazy days.  bring some more of these. 

jarhead - I read your links, if you believe that china is about to crash, and that euro is about to crash, and that CMDS are about to crash; I just dont understand how you can be anti US dollar.  If anything, if you belive what you posted you should see the demand. 

I should lead with this:  I'm no trader and no economist -- I'm just an incessant reader that has read a ton and found what at least to me appears to be folks that have a good idea of what to expect.  Those folks are typically from the Mises Institute or at least Austrian economic theorists.  Pretty much they've been right from before the dow hit its peak at $14000+ to today.  In general they seem to believe that FIAT money doesn't work and never has.  Oh sure, it sorta works for a while but inflation always kills it no matter what the rest of the world does.

Thus, the FRN can't survive.  However it may take another 100 years for it to deflate to a point that it's tossed out -- who really knows?  After all, they printed some $1.3 TRILLION last year (ok they didn't actually print it all but it amounts to the same thing in our world today) and the banks (using Fractional Reserve Banking principles) then loan out (not necessarily to you and me as seen in some of the latest figures) an additional $11.7 TRILLION thus further diluting the dollar.  Inflation will come, there is no way around it.

Will the dollar survive?  Who really knows?  I personally don't think it will and I think the end game is the IMF and the World Bank.  Which, of course, will just print more FIAT money.

http://gulfnews.com/business/opinion/us-faces-inflation-or-default-1.622397
US faces inflation or default

http://www.gallup.com/poll/127616/Inflation-Worries-Permeate-US.aspx
Inflation Worries Permeate U.S.

My last target of 88 on the DX crossed hard today, next target 94 or 95 on a wedge.  (Those who are continuing to bet against the dollar are losing badly).  With a DX print of mid nineties over the next 3-6 weeks would likely also equal par or close on the euro, and a huge equities crash (spx under 900?) with perhaps oil at <50.  Who knows, it's my guess. 

I'm a betting man and I have made my "beer money" bets accordingly.  btw, Monday is probably green, it gets dicey after that I think. 

Just posting an update to this thread as todays activities makes this an "inflection point" in my opinion.  If my posts on here are too far from the desired direction of this forum, please advise.  thanks. 

Quote from: muldoon on June 05, 2010, 12:20:55 AM
My last target of 88 on the DX crossed hard today, next target 94 or 95 on a wedge.  (Those who are continuing to bet against the dollar are losing badly).  With a DX print of mid nineties over the next 3-6 weeks would likely also equal par or close on the euro, and a huge equities crash (spx under 900?) with perhaps oil at <50.  Who knows, it's my guess. 

I'm a betting man and I have made my "beer money" bets accordingly.  btw, Monday is probably green, it gets dicey after that I think. 

Just posting an update to this thread as todays activities makes this an "inflection point" in my opinion.  If my posts on here are too far from the desired direction of this forum, please advise.  thanks. 

Can I get a glossary for this post?  ???

Quote from: JavaMan on June 05, 2010, 12:25:27 AM
Can I get a glossary for this post?  ???

Sure, I'll give it a go.

I'll start off by saying I am not a certified or registered investment advisor.  I am just some guy on the internet who is spouting an opinion.  And with that, you should take this opinion as worth exactly what you paid for it.  ie, nothing.  That being said, I have followed the markets a touch, and I think I have a read on what it may or may not do.  Again, this is my opinion only.

Quote
My last target of 88 on the DX crossed hard today, next target 94 or 95 on a wedge.  (Those who are continuing to bet against the dollar are losing badly). 

The US dollar is weighed against a basket of currencies internationally.  That means that as other currencies get less desirable our currencies value increases.  Our dollar is genaerally track via the us dx.  You can watch it here

http://quotes.ino.com/chart/?s=NYBOT_dx

From there, you can change to 1 month, 1 year or max timelines to get perspective.  Essentially, during the crash of mid08, it spiked because everyone needed money (dollars) and supply and demand dictated that the value of something in demand increased.  In Feb 09, the fed began programs to inject funding to the banks "stimulous/tarp/etc" and the dollar fell.  In December that reversed when those programs ended.  Since then, other countries have began to undergo debt crises.  Mostly Europe, Greece, Portugal, Spain, Ireland, Italy, UK, etc.  As those countries and the euro have delcined, the US dollar has increased in value.  I see no reason for that to reverse, and with news today from Hungary on the verge of default I see it increasing.  I have tracked my targets on the DX for months here for all to see, and I now believe it is headed for mid nineties for a variety of technical and fundamental reasons. 

QuoteWith a DX print of mid nineties over the next 3-6 weeks would likely also equal par or close on the euro, and a huge equities crash (spx under 900?) with perhaps oil at <50.  Who knows, it's my guess.

This is the crux of the entire thread.  If the US dollar increases in value, what does that mean?  It means the dollar goes further, it means that prices of many asset classes goes down.  It means that when people NEED dollars they are willing to sell things cheaper than when they do not.  That applies to houeses, to cars, to stocks, to oil, to anything.  The value actually does go up.  And when the value of the dollar goes up prices of assets go down.  For various reasons I pontificate targets on the primary measuring sticks on things like oil and the stock market, perhaps I am wrong, perhaps my models are wrong, but that is the general mindset behind this statement. 

Quote
I'm a betting man and I have made my "beer money" bets accordingly.  btw, Monday is probably green, it gets dicey after that I think.

Today was an extreme.  things do not move in a straight line on the markets.  But to be honest were in a really bad spot.  almost any symbol I can think of is trading under the 200 day moving average, and most are heavily down from month and months and months of gains.  Extremes in trading often indicate short term trading points.  So I am halfway expecting the early part of next week to be very up days in the market.  However, the tide is moving, and the dip buyers or not, or the interventions or not, it may take time but the direction is down.  The funny thing about money is that it moves like water.  It flows from one thing to another.  If one thing is down, another is up.  When the stock market tanks, the dollar goes up and vise versa.  Also like water, money seeks level.  It can be distorted momentarily by intervention, but it always finds true level.   

Quote
Just posting an update to this thread as todays activities makes this an "inflection point" in my opinion.  If my posts on here are too far from the desired direction of this forum, please advise.  thanks.

Mr. Raabe has been very gracious in letting me ramble on about my musings for several years now, I am just noting that if I am causing any unwanted distraction or disturbance to his forum I will happily shut up.  Until I hear different I will continue to ramble on with my thoughts on the markets as they affect us. 

If you want to read more, you can search for my name and get more posts on these topics than you likely will want to read.  There are actually plenty of market savvy folks here with many different perspectives, (very different than mine but equally worth listening to)  so if you have questions, start a new post and see where it goes. 

Although my grasp of all this financial stuff is very weak, I find it fascinating (like watching a train wreck). I have my own beliefs about where this is all headed in the long run, but like many folks, I don't know where to have my money as we head there. Most of our assets are real estate, one property (our house in FL) losing value like crazy, the other (raw land) is still appreciating, albeit slowly. The land is valuable to me, since I can live there and grow my own food, as well as having wood for heat. So if things really go south, I have a place to survive, unless the zombie hoards get to me. The rest of our vast (major sarcasm) wealth is in a 401K, only a little of which is still tied to the stock market. Since we are nearing retirement age, we're trying to keep what little we have relatively safe. Next year, we're going to draw out some of that money to build our place in the country, so that at least one of our properties is paid for. The house here in FL still has quite a bit of equity, despite losing about 50% of it's one-time 'value', so I think we can sell and at least not owe anyone.

Sorry for the somewhat off-topic ramble there, but it is tied together a little. In short, we have a few hundred thousand in various assets, which is both a lot of money, and not very much money, depending upon what you do with it. At our age, we certainly can't afford to make a major financial blunder, so it is with great interest that I read and try to understand everything I can. I'm torn between two opposing theories: 1) Most of what's going on is being cleverly manipulated from behind the scenes by a group much more powerful than merely the United States of America, or 2) The financial wizards and politicos are in way over their heads, and have no earthly clue how to restore a semblance of stability. Either way, i figure us little guys are probably screwed unless the PTB in scenario #1 decide to leave us peasants alone after achieving whatever it is that they are planning, or the clowns in scenario #2 somehow get lucky and things go back to 'normal' despite their help. At any rate- keep throwing those financial insights out there!

Well, muldoon, that was a good stab at explaining what you meant, but wasn't what I meant by a glossary  :)

Some of what I was looking for was indeed covered in your explanation. However, it was only by inference that the meaning of a word or phrase was deduced.

What I was originally looking for was something like this:

DX - meaning: Dollar exchange (dollar value vs other currencies) (To a ham radio operator this means a "distant station", usually overseas d*)
Wedge - meaning: ???
DX print - meaning: ???
Monday  is probably green - meaning: an "up" day for the market (and I'm assuming here from what you stated)
"Inflection Point" - meaning: ???

Just like building has its own technical jargon (cripple, king stud, etc...), and we programming types have ours (Java, no, not the liquid kind   c*), threads, thread safety, etc...  Those that trade, even as a "hobby" get to a point where they have a tech-speak that, well, you may as well be speaking Russian for as much as I can understand.

As you can tell, I can figure out some of it, but then again, there are a few things that I just can't quite grasp  ???

From all that I've read of yours on this subject, I find it fascinating, and I do believe that you have an opinion worth considering - even tho it's "free advice" and worth every penny I've paid for it.  I think it's wise to get information from many sources, tho.

So keep posting info like this.  Just help some of us understand your language a bit more fully  :)

Thanks

I'll second this:

"So keep posting info like this.  Just help some of us understand your language a bit more fully   :)

Thanks"

Bruce

Wedge - meaning: ???  -- a wedge is either an ascending or descinding line, as opposed to a gap which would look like a jump or straight fall.  a wedge can mean a grind up or down, but its directional and steady. 

DX print - meaning: ??? -- a print is the price as it is recorded.  the prices can be called a few things, there is bid and ask.  the bid is what someone is willing to pay, the ask is what some is willing to sell at.  the bid/ask fluctuates up and own with direct buying or selling pressure.  as more buyers show up, the bid increases.  a print is the recorded price the transaction is done at.  It can also be called the tape, or the tick.  It is a singular data point in the stream.  By saying a DX print of 95, I means that at some point I personally think it will get that high on the next extreme swing but that it may not close at that. 

Monday  is probably green - a green day is a up day, or a green tick is where the sale was completed at the ask and not the bid. 

"Inflection Point" - meaning: ??? -- the market swings like a pendulum, and usually goes too far in both directions.  so it sways back and forth.  When there is extreme in either direction you can identify "turns" or inflection points.  For a more scientific answer, in differential calculus, an inflection point is a point on a curve at which the sign of the curvature (i.e., the concavity) changes.

Send me all your money then you won't need to worry about all this complicated stuff. Life will be so much simpler.  :)

Wasn't that the solution that Bernie Madoff proposed?

Anyway Scott - the check is in the mail. I look forward to the simple life.

Quote from: MushCreek on June 05, 2010, 06:43:21 AM

I'm torn between two opposing theories: 1) Most of what's going on is being cleverly manipulated from behind the scenes by a group much more powerful than merely the United States of America, or 2) The financial wizards and politicos are in way over their heads, and have no earthly clue how to restore a semblance of stability. Either way, i figure us little guys are probably screwed unless the PTB in scenario #1 decide to leave us peasants alone after achieving whatever it is that they are planning, or the clowns in scenario #2 somehow get lucky and things go back to 'normal' despite their help. At any rate- keep throwing those financial insights out there!

Why not 3), both of the above?  Since this is a building forum, consider the phrase, "Think like water." which is referenced when trying to figure out weatherproofing.  For our financial situation, consider the golden rule, "They who have the gold, make the rules."  These two phrases are quite similar generalizations in my opinion.  It doesn't really matter who you think is in control, be it the politicians themselves, or some nefarious, secretive organization, the money is what speaks the loudest.  In trying to figure anything out, following the money trail will often explain why something works out the way it does.  Most politicians don't have a clue, and they're really only focused on fundraising and re-election, so they follow the "suggestions" of their financial backers.  Ever notice how which ever party is out of power currently blames every single ill on the other party, yet when they're in office, nothing changes?  If you follow the financial contributions, you'll often see the same donors contributing to both parties.  In the end, the elected official is bought and paid for regardless, and anyone who refuses to play by the rules isn't going to get to play at all. 

As far as "normal" goes, I don't think we were living in a situation even remotely "normal."  We as a country have been floating along in a fundamentally unsustainable manner for a long time.  I'm talking decades, with both Republicans and Democrats in office, and the more I learn, the less difference I see in those two parties.  Regardless of which party ends up in office, we as a nation (and individuals) can't all expect to live like Bernie Madoff forever.  Think about someone you know who may have been living on credit cards or home equity loans.  Sooner or later, there isn't another low interest card to transfer the balance to, or the bank won't loan 120% of the house's value.  As a nation, there are advantages that an individual doesn't have, but the mistake is in thinking that ponzi economics will work in perpetuity.

At different times, the DX has meant different things to me.  In the past, I have effectively "shorted" the dollar in ways that were tied closely to the DX when the dollar was falling relative to the other currencies.  An example would be the UDN ETF, or just buying another currency directly.  By selling those instuments, I effectively went "long" the dollar again.  Right now, the dollar is rising against the other currencies in the basket, but really it only means the dollar is the "least worst" right now.  Notice how heavily the Euro is weighted in the index?

Euro - Weight of 0.576
Japanese Yen - Weight of 0.136
British Pound - Weight of 0.119
Canadian Dollar - Weight of 0.091
Swedish Krona - Weight of 0.042
Swiss Franc - Weight of 0.036

The perceived safety of being in US dollars vs. the other currencies is propping up the dollar in relation to the other currencies in the index.  In the end, they're all leaky, sinking ships, and the dollar is just the one that is currently sinking the slowest.  If anyone thinks the US dollar is "strong", I suggest a visit to www.usdebtclock.org , and then doing a little simple arithmetic.  Would you "invest" in that "asset"?

Like others, I am not an investment professional, but I am a bit of a news junkie, and I'm always seeking understanding.  As this crisis has evolved, my thinking has evolved, and more questions have led to more reading...which leads to even more questions!  Count me in for another vote that this is exactly the kind of thing that fits in this section of the the forum.

I am a corporate finance executive, and have worked in various industries.  I have made a career out of making others rich.

For 95% of Americans, the path to financial freedom and the best choices are the simple choices:  live within your means.  A home is not an investment.  Don't covet thy neighbor.  There is nothing wrong with shopping at garage sales.  Your kids won't die if they wear JCP instead of Abercrombie.  Credit cards for durable goods only.   Fixed costs (mortgage) based on single income only.  Don't confuse cashflow with wealth.

I studied economics.  Most people don't recognize that it is not even a real science.  It's as much guessing as anything. The politicians are in the popularity game and most only care about the power.  There are no Democrats or Republicans. 

As I get older and closer to retirement, this site reminds me of the power of simple living. 

Years ago Donald Trump was a billion dollars in debt, and was asked by a panhandler for some money.  He supposedly told him "you are worth a billion more than me."   Ironic that some of the folks on this board living in modest, simple homes are actually richer than the guy in Malibu mortgaged to the hilt.

Live simple, stay liquid, and don't get too worked up about things you can't control.

Great thoughts.   Thanks, NNM

Very wise advice Native_NM   :D :D :D

I'm going to quote you to my two sons.

WOW Native_NM tell me it aint so.   ;)

If only more people would think and act like that advise.

Quote from: muldoon on June 06, 2010, 10:43:32 AM
Wedge - meaning: ???  -- a wedge is either an ascending or descinding line, as opposed to a gap which would look like a jump or straight fall.  a wedge can mean a grind up or down, but its directional and steady. 

DX print - meaning: ??? -- a print is the price as it is recorded.  the prices can be called a few things, there is bid and ask.  the bid is what someone is willing to pay, the ask is what some is willing to sell at.  the bid/ask fluctuates up and own with direct buying or selling pressure.  as more buyers show up, the bid increases.  a print is the recorded price the transaction is done at.  It can also be called the tape, or the tick.  It is a singular data point in the stream.  By saying a DX print of 95, I means that at some point I personally think it will get that high on the next extreme swing but that it may not close at that. 

Monday  is probably green - a green day is a up day, or a green tick is where the sale was completed at the ask and not the bid. 

"Inflection Point" - meaning: ??? -- the market swings like a pendulum, and usually goes too far in both directions.  so it sways back and forth.  When there is extreme in either direction you can identify "turns" or inflection points.  For a more scientific answer, in differential calculus, an inflection point is a point on a curve at which the sign of the curvature (i.e., the concavity) changes.

Ahhh, thank you!

I knew about the bid and ask, but  didn't know that an actual sale price was the "print" ... makes sense now!  So when you say 94 or 95 on a wedge, you are saying that it will keep rising from where it is to then (at least), without a significant downturn between the two points, right?

Not so sure about that inflection point, tho - if I understand the original post (that caused all this on my part  d*) the dollar rose to 88 on that day.  You stated that the days activities were an inflection point (by the defenition above, a turnaround point) which to my mind would mean that it would start back down, rather than keep going to the mid-to-high 90's (on a wedge).  Altho, by the DifCalc definition, it could still be rising, just at a different rate. (the rate of rise - or "concavity", or sin changing) - correct?

BTW - thanks for the discussion.  I am learning a bunch!

I just had to chuckle ....

Here I was, quoting NNM to Beautiful, my wife, in an email (wise words indeed) and it hit me ... I call this place "the builder board" ...


Does that make us all Builderboarders?    ;D  Are we all part of some sinister plot to undermine something? if so, what? ???

Then it hit me that my avatar was Gomez, who invariably was making a killing on some stock that he was invested in!

Looks like we were both wrong Muldoon.

I figured green too. The last hour was a copy of Friday.

Quote from: JavaMan on June 07, 2010, 02:59:41 PM
I knew about the bid and ask, but  didn't know that an actual sale price was the "print" ... makes sense now!  So when you say 94 or 95 on a wedge, you are saying that it will keep rising from where it is to then (at least), without a significant downturn between the two points, right?

I thought today would be a reversal from Friday with a down day on the dollar and an up day in the market based on the extreme buying selling from Friday.  According to ino, usd opened at 88.6 and closed at 88.4 something.  My basic premise is that the trend is up for the dollar however it zigs and zags.  Today it zigged and zagged. 

Quote
Not so sure about that inflection point, tho - if I understand the original post (that caused all this on my part  d*) the dollar rose to 88 on that day.  You stated that the days activities were an inflection point (by the defenition above, a turnaround point) which to my mind would mean that it would start back down, rather than keep going to the mid-to-high 90's (on a wedge).  Altho, by the DifCalc definition, it could still be rising, just at a different rate. (the rate of rise - or "concavity", or sin changing) - correct?  BTW - thanks for the discussion.  I am learning a bunch!

Looking at the chart when I wrote that I expected a serious downturn this week, but before we got there I thought it would surge back up a bit before doing that.  Obviously, you can't go by my thoughts :)    To be clear I am not in the prediction business.  Never claimed to be. 

Quote from: JavaMan on June 07, 2010, 03:07:53 PM
I just had to chuckle ....

Here I was, quoting NNM to Beautiful, my wife, in an email (wise words indeed) and it hit me ... I call this place "the builder board" ...


Does that make us all Builderboarders?    ;D  Are we all part of some sinister plot to undermine something? if so, what? ???

Then it hit me that my avatar was Gomez, who invariably was making a killing on some stock that he was invested in!

The Builderboarders..... as we plot and steer the direction of world events... [scared]

Anyone with a few minutes should read this:

http://www.constitution.org/tax/us-ic/schiff/moltz.pdf

native_nm, thank you your your post above.  Your most recent post however makes me want to comment.

It is a piece I have read before, written by Irwin Schiff. 

http://en.wikipedia.org/wiki/Irwin_Schiff

Quote
Irwin A. Schiff (born 1928) is a prominent figure in the tax protester movement. Schiff is known for writing and promoting literature that claims the United States income tax is applied incorrectly. He has lost several civil cases against the federal government and has a record of multiple convictions for various federal tax crimes. Schiff is serving a 13-plus year sentence for tax crimes (with his location listed as the Terre Haute Federal Correctional Institution). His projected release date is 7 October 2016.[1] Irwin Schiff is also the father of stockbroker and US senate candidate Peter Schiff.

In this piece, he essentially makes the case that a king has extracted our wealth.  That by using dollars we have declined because the greedy have stolen the value of those dollars.  I would just like to point out that the greedy are within our own populace.  We have no king, we are self governed.  Our greatest conglomeration of people has been the baby boomers.   Those are the people who have gained the very most from such policies.  With 401ks packed to the gills based on profits from outsourcing, from overseas, from Mexico. 

I think about my street, and the house a few doors down in foreclosure.  He was a preacher from Guatemala, bought an A-arm mortgage, with god knows what documentation, and heaven only knows what reset interest rate that killed him eventually.  He was a nice enough guy, very polite wife and children.  But he bought a house he could not afford.  Was he evil?  probably not.  Was Ms. Pharoan the lady who browkered the mortgage deal evil, I doubt it.  She was the same nice lady that did our 30year fixed convential loan back in 2002.  She is still in the neighborhood, she serves on the PTA with my wife at the elementary school.  I have had her brownies and they are excellent.  Sure she profited from such an arrangement, but so did everyone else.  So did the county, the insurance company, the mortgage company that is likely bankrupt now, and on down the line. 

Everyone wants to blame the king.  The "elite" of the world.  It's some conspiracy that destroyed us. 

Well, maybe not.  Maybe our own collective greed clouded our vision of what was an was not a risky venture.  I see this daily.  I see it hourly.  Until we collectively can look in the mirror and see that where we are as a nation is collectively our own fault, it cannot be reversed. 

I do not believe a tax protester has the answers.  I do not believe a man in prison, who placed many others in prison for falsely leading them down a path of self righteous greed has the answers.  I believe the answers lie at our own feet.  And it begins with righting the wrongs of our past, and with enforcing our laws as they are written.  I think we need to start with out big banks, our regulators, our politicians, and then down to every level where fraud and lies were present on a daily basis.  The problem with such an approach is that if we did it, it would lead to a total economic collapse.  That for decades, the positive growth we all have come to accept has been on the back of fraud and lies.  With that, the entire nation has "prospered".  We all have the technology advances that led to, the advances in medicine, technology, science and way of life.  Is it reversible?  I don't know.  I dont even know if it is inevitable at this point. 

NM, I mean no disrespect, but just as you posted your opinion, I am doing the same. 

Money is still cheap for some; it's just not us.  No matter how much deflation (of the money supply as measured by M1-M3) we have through debt destruction or slowing velocity, I can't see the Fed closing the discount window that allows the GS's, JPM's, and MS's to borrow at just above zero %, and we'll still have derivatives.  Here's a great article on derivatives which includes an example we can relate to. 
http://www.kitco.com/ind/Lewis/jun092010.html
This section is especially relevant:
The Bet on Dan

The example above is exactly how the derivatives market works. If you paid close attention, you'd notice that a loan of $200 is now worth either $400 or $500, depending on who is the winner of the wager. The two counterparties, Jim and Bob, have made a wager worth multiples of the actual real life event in their own form of the derivatives market, and now they have more at stake than what the loan is actually worth. 

Now, both are highly intelligent people. Jim knows he could pay Dan $200 to pay Bob a week late than agreed and make out like a bandit with a $200 profit.  Bob knows he could give Dan the $200 to pay him back, and he could make a $300 profit from Dan's wager. 

Now, with these bets in place, they'll each try to buy Dan off, just as banks and other institutions buy the power of government and central banks, effectively changing the game in their own favor and making a gold mine in the process.


This is now what passes for economic activity.  IMHO, to avoid having derivative positions ever see the light of day, unlimited funds will continue to be provided at low cost to the firms that trade in derivatives.  Since they're all bank holding companies now anyways, they're entitled to all sorts of other perks too!  As long as there is access to virtually free money for the favored institutions, this will continue to distort pricing and activity and render fundamentals for virtually everything moot.  The same folks also understand technical analysis and can take large enough positions to move things in their favor, making trying to play against them a losing game.  One way or another, money will continue to "cost" more for us, as more and more (of our) money is needed to fund the leveraged gambling of the big players listed above.

The analogy might not be the best, but the underlying principle is essentially accurate from an economic therory standpoint.  The King of course is a metaphor for big government.  I'm not a tax protestor, and believe a progressive system is the only fair tax system.  The system we currently have, however, is broken. 

The balance of your post is essentially consistent with my viewpoint. 

QuoteMaybe our own collective greed clouded our vision of what was an was not a risky venture.  I see this daily.  I see it hourly.  Until we collectively can look in the mirror and see that where we are as a nation is collectively our own fault, it cannot be reversed. 

A few free chips to get the suckers into the game is a common tactic. Let them win a couple of hands then clean them out. Standard poker scam. It works because many people are greedy. Does that make it less crooked?

When you first take narcotics I'm sure it feels good too, but eventually it catches up and you find yourself in a gutter -- or some such thing.

My point is that while something might have seemed good to some or even most it might have been very bad, even evil.  Though I think naive is more likely.

The CRA pushed sub primes.  This was/is a government program pushed by progressives.  Sub primes started the ball rolling in the latest mess but are really only a portion of the bigger issue:  progressive thinking.

Progressive taxation = nonsense.  It isn't 'fair' in any shape, way or form and that sort of thinking comes straight out of the 'progressive' play book (even if you don't know it).  Fairness is perhaps somewhat subjective but I think if you really want to talk 'fair' then fair is when each pays an equal portion of their income regardless of what that income is.  Don't get me wrong, I'm not a flat taxer or fair taxer, in fact I'm a 'no individual' taxer but that's another story (and don't give me that old byline "but businesses will make you pay" because they do anyway, doesn't matter so my position is no individual taxation at all which has many many benefits that I won't go into in this thread for time constraint reasons).

Socialism fails, always will, always has, period.  Progressivism = socialism.  Once you get past that then you can actually get to the root of the problem.  If you can't get passed the "but grandma couldn't survive without social security" or "but poor people without credit need to buy houses too" phase then there is no point in trying to explain how the crash of our economic system is rooted in the progressive mindset of "we must take from you in order to help them" and will always result in this kind of corruption, greed and ultimately collapse.

But hey, buy the buck, sell all your gold and vote for progressives if you think that will work.  Me personally?  I hope everyone with an 'I' after their name gets voted out (both D's and R's) and the new crop stalls, kills programs, and cuts back but then I probably was slipped a mickey by someone and am with Lucy in the sky with diamonds.

Quote from: OlJarhead on June 12, 2010, 10:39:57 AM

Socialism fails, always will, always has, period.

That will come as a surprise to Canada.  And Australia.  And Denmark.  And Ireland.  And...

In fact, according to a study by the Heritage Foundation (http://www.heritage.org/Index/) (not exactly a "progressive" crowd!), of the ten countries deemed highest in economic freedom, eight of them have socialized medicine.

Just saying socialism always fails doen't make it so.  It helps if there is some basis in reality.  And there is not.

jarhead, I agreed with much in your post.  almost all of it to some extent but when I hit this sentence you lost me.

"But hey, buy the buck, sell all your gold and vote for progressives if you think that will work.  "

buying the buck or selling gold has nothing to do with politics.  this is a mathematical equation here, not politics.  You still seem to under the impression that there is a magical printing press and that everyone is or soon will be pushing around a wheelbarrow full of money.  I dont think that is in the cards.  I think the value of dollars goes up because they get harder and harder to come by.  Many of the jobs are not coming back, wages are not coming back, tax receipts are not coming back, bonds are not coming back, liar mortgage loans are not coming back, ez-credit cards at 1% interest are not coming back. 

with that you see spending contraction at all layers, from consumer to producer to city, county, state and federal levels.  there is no money, thats the only thing one has to accept to "buy the buck". 

as for politics,

"Socialism fails, always will, always has, period. "

Given a long enough timeline, everything fails.  communism fails, socialism fails, capitalism fails, regulatory agencies fail, intelligence agencies fail, mms failed.  But what was the real driver here? 

corruption.  on paper capitalism works, on paper communism works, on paper socialism works.  they are are just different ways of granting opportunity and spreading wealth.  All of them have proven to fail from corruption a greed after a period of time.  Greece created the idea of a democratic government, they have been in default more years in the last 200 years than not.  What failed was a lack of enforcement of laws.  the haves and the have nots. 

Personally, I prefer the systems that rewards those whom pull themselves up and don't like the systems that are intent on bringing successful people down for the benefit of others.  That being said, voting every incumbent out of office no matter which "alleged" affiliate to D or R sounds like a fantastic plan to me.  They are all criminals and should be dealt with as such. 

Quote from: Pox Eclipse on June 12, 2010, 02:37:34 PM

Quote from: OlJarhead on June 12, 2010, 10:39:57 AM

Socialism fails, always will, always has, period.

That will come as a surprise to Canada.  And Australia.  And Denmark.  And Ireland.  And...

In fact, according to a study by the Heritage Foundation (http://www.heritage.org/Index/) (not exactly a "progressive" crowd!), of the ten countries deemed highest in economic freedom, eight of them have socialized medicine.

Just saying socialism always fails doen't make it so.  It helps if there is some basis in reality.  And there is not.

it's all a matter of how you read the tea leaves I guess -- for example, Canada is going the other way these days and seriously working to de-socialize medicine...why?  Because they are going broke trying to pay for the socialized medicine they've had -- it failed....

We're not a free country any longer (in many ways have not been for a hundred years or more) so comparing what we are today to say, Canada is sorta like comparing Socialism to Fascism.  Birds of a feather really.

While the world goes broke trying to pay for entitlements we can debate all of this till we're blue in the face, but going broke it is.

Quote from: muldoon on June 12, 2010, 03:16:40 PM
jarhead, I agreed with much in your post.  almost all of it to some extent but when I hit this sentence you lost me.

"But hey, buy the buck, sell all your gold and vote for progressives if you think that will work.  "

buying the buck or selling gold has nothing to do with politics.  this is a mathematical equation here, not politics.  You still seem to under the impression that there is a magical printing press and that everyone is or soon will be pushing around a wheelbarrow full of money.  I dont think that is in the cards.  I think the value of dollars goes up because they get harder and harder to come by.  Many of the jobs are not coming back, wages are not coming back, tax receipts are not coming back, bonds are not coming back, liar mortgage loans are not coming back, ez-credit cards at 1% interest are not coming back. 

with that you see spending contraction at all layers, from consumer to producer to city, county, state and federal levels.  there is no money, thats the only thing one has to accept to "buy the buck". 

as for politics,

"Socialism fails, always will, always has, period. "

Given a long enough timeline, everything fails.  communism fails, socialism fails, capitalism fails, regulatory agencies fail, intelligence agencies fail, mms failed.  But what was the real driver here? 

corruption.  on paper capitalism works, on paper communism works, on paper socialism works.  they are are just different ways of granting opportunity and spreading wealth.  All of them have proven to fail from corruption a greed after a period of time.  Greece created the idea of a democratic government, they have been in default more years in the last 200 years than not.  What failed was a lack of enforcement of laws.  the haves and the have nots. 

Personally, I prefer the systems that rewards those whom pull themselves up and don't like the systems that are intent on bringing successful people down for the benefit of others.  That being said, voting every incumbent out of office no matter which "alleged" affiliate to D or R sounds like a fantastic plan to me.  They are all criminals and should be dealt with as such. 

As the euro drops the dollar rises, as the euro gets stronger the dollar weakens...it's a mirage because both are actually weak and getting worse.

That is not to say that you cannot make money betting on one or the other but as FIAT currencies can't survive forever, and as they appear to be very near the end I tend to look to those few who seem to have called it all along (more then any others anyway) like Roubini, Faber, Cellente etc....the dollar can't survive the massive printing (and yes 'printing' is no more then a term these days since paper money represents only a small portion of the total with electronic money being the lions share) and the FED discount window and our debt continue to make it easy to create more and more and more dollars...sooner or later we have to pay the piper.

Hopefully you sell yours before the piper walks in.

That's all I'm sayin'

I don't like to argue politics, and I'm really here to learn about building a small house, but...

A progressive tax system is actually out of the conservative play book.  Conservatives know that unchecked capitalism would swing the pendulum so far to the right it would end up on the left, resulting in less freedom.

As a high income professional, I expect to pay a little more.  I am fortunate, and would not mind paying more if I knew it was not squandered.   What we have now is a system that does not tax proportionaly.  I think everybody needs to pay something - even the lowest income workers.  So many pay nothing in federal income tax, yet still get to vote.  Years ago we had "taxation without representation."  Now we have almost half the country that has "representation without taxation."  If I paid no income taxes, it would be easy for me to vote for a new expensive program that some "rich guy" is paying for.  Everyone needs to pay something.   The fallacy that the rich (or big companies) pay nothing and should pay more is actually out of the progressive playbook: 90% of all tax receipts are paid by the top 5%.  We need to flatten the curve.  It can still be progressive.

My wife and I live pretty frugal (not cheap, just frugal) and consider ourselves fortunate.  We are fiscally conservative.  I could probably afford to hire somebody to build me the cabin I wanted if I pushed a few things around.  That is counter to the way I was raised and I live.  Self-sufficiency is as important a trait to teach your kids as math or science.  The biggest problem facing America today is an entitlement mentality, in my opinion.  It was self-reliance and freedom that made America great.  I hope it is not too late to reverse the trends of the last 40 years.

Quote from: Native_NM on June 13, 2010, 09:48:12 PM
Now we have almost half the country that has "representation without taxation."  If I paid no income taxes, it would be easy for me to vote for a new expensive program that some "rich guy" is paying for. 

This is an excellent point.  The mice in this country who are contributing the least (or nothing at all) are getting all the free cheese.

Too bad there is not a way to earn "points" towards voting.  We have an overwhelming amount of non-contributors who are voting themselves benefits.  Hmmmm... what was that quote about democracy and voting into the treasury payout?

I wonder what Greece thinks of how well socialism is working out? 

Every adult citizen should get one vote.

Then as you pay more and more in taxes you should get extra votes.   Or something along those lines.    ???

All men are created equal; but some are more equal than others.

Quote from: Pox Eclipse on June 17, 2010, 06:30:27 PM
All men are created equal; but some are more equal than others.

All animals are created equal, it's just that some animals are more equal then others.....

Ya, I've heard that and it's a very good argument as to why socialism doesn't work.  Animal Farm is the book.

http://jsmineset.com/2010/06/21/the-u-s-dollar-falls-by-fall/

Haven't had a chance to read it yet...got get sleep but saw this just now.

Looks like the European central bank has hit the proverbial wall.

As they continue to try to sell debt to cover their insolvency, the amount of available capital has continued to fall while their need for capital has continued to increase.  Even though they were using "sterilized" auctions it has reached the point where they were unable to sell the debt they needed.  In the last operation they attracted only 31.9billion euro when they needed 55billion.  They also had to raise the yield on those notes in the middle of the auction to get them.  A week ago 67 banks bid (and they paid 0.31%), this week only 45 banks (and they tailed to 0.54% with the highest rate hitting 1% - which is the legal max).  They were unable to draw it.  

http://ftalphaville.ft.com/blog/2010/06/29/273606/ecb-fixed-term-deposit-fail/

As for the trend of available money vs. needed funds for ECB, here is a good visualization: (edited to make chart smaller)
(http://loopy.org/ecb-small-june29.png)

They have a bigger problem looming than inability to raise cash on Tuesday.  They have a debt rollover coming on Thursday.  They dont have the cash.  Historically this has led to one of thwo things when big players go pop.  Either outright default, or forced liquidation.  Liquidation means the selling of assets.  (Not unlike Greece selling islands now).  They also sell any assets they have, like stocks, like bonds, like gold, anything.  Those who follow gold saw it got crushed yesterday.  Take a look at the US stock markets today to see this in action as well.  

---

The european countries are burning again, and it looks as though the bond markets may be raising the battle cry for the final pillage in coming days and weeks.  (you can see money leaving the european continent and landing in the one place deemed "safest" - US treasury notes).   The US treasury 10 year touch 2.99% yesterday.  

--

At some point the US will have to face the same funding market, and will likely have the same pressures selling debt and needing to raise taxes, cut spending, and likely force seizures of assets they can.  It falls under the "invetible" target I think.  But in the meantime, we can learn from what others are facing and position our lives to accept a similiar fate.  

I still dont see any wheelbarrows full of money in our future.  I see money and credit being scarce and thus more "valuable".  fiat or not.  paper or not.  worthless or not.  its what people pay their bills with so people need it.  and when people need something in scarce supply, it goes up in value.  

So far, I agree and pretty much have agreed with your analysis so far Muldoon.

Here's where I'm sitting on the fence. Obama is admitting now, that he has to deal with the deficit. The very public secret plan, is to crank up the printing presses,

How will we avoid inflation? ???

Don, I dont know for sure what's going to happen but I agree that is the million dollar question.

I don't agree 100% that the secret plan is to fire up the printing presses.  the aggregate of money or wealth in a nation is what can be produced or borrowed.  They cannot replace the consumer side of the equation.  The more they try to replace the consumer piece the more they in fact kill it.  You cannot push a wet noodle,  which is effectively where we are in terms of "trying" to restart the credit engine.  46 of the 50 states have a full on budgeting collapse on their hands, the federal goverment is not even sending the states the money they owe them, tax rolls are way down, and everyone is tapped out.  we cannot borrow ourselves any richer.  we cannot spend to avoid bankruptcy.  "printing" is borrowing.  the federal reserve is a bank, it is not federal in the sense that it is a federal entity.  federal express is not a federal package delivery service - it's just a name.  it is more accurately a collection of member banks.  they do not print money anymore or any less really than visa prints money, or gm financing, or any other bank.  Once the ability to borrow is exceeded, so is the ability to "print". 

unless you think the bankers who created this mess are going to just begin giving money for free to to everyone?  why did they steal all of this money just to watch it become worthless?  they have not done that anywhere else in history.  the countries that eventually shunned the banks and went to self currency - german weimar, zimbobwe, us confederate forces post civil war, - yes, they inflated and hyperinflated away, but were not divorcing ourselves from the banks.  Do you see that on the horizon?   Just thinking outloud here. 

Looks like the note has come due. Now they'll need to cut spending to pay the intrest on the 13 trillion they borrowed. I'm starting to think we won't see inflation so much as deflation unless the banks start spending the money they stole, which they may do. I expect energy, food and imports to go up and services and local products to go down or stay stable. Look for social security to get cut in the next few years and for some major tax increases. Many tax increases are already on the table being discussed. The simple solution would be to bring the army home but no one is discussing that for some wierd reason.

Quote from: muldoon on June 29, 2010, 01:22:06 PM
Don, I dont know for sure what's going to happen but I agree that is the million dollar question.

I don't agree 100% that the secret plan is to fire up the printing presses.  the aggregate of money or wealth in a nation is what can be produced or borrowed.  They cannot replace the consumer side of the equation.  The more they try to replace the consumer piece the more they in fact kill it.  You cannot push a wet noodle,  which is effectively where we are in terms of "trying" to restart the credit engine.  46 of the 50 states have a full on budgeting collapse on their hands, the federal goverment is not even sending the states the money they owe them, tax rolls are way down, and everyone is tapped out.  we cannot borrow ourselves any richer.  we cannot spend to avoid bankruptcy.  "printing" is borrowing.  the federal reserve is a bank, it is not federal in the sense that it is a federal entity.  federal express is not a federal package delivery service - it's just a name.  it is more accurately a collection of member banks.  they do not print money anymore or any less really than visa prints money, or gm financing, or any other bank.  Once the ability to borrow is exceeded, so is the ability to "print". 

unless you think the bankers who created this mess are going to just begin giving money for free to to everyone?  why did they steal all of this money just to watch it become worthless?  they have not done that anywhere else in history.  the countries that eventually shunned the banks and went to self currency - german weimar, zimbobwe, us confederate forces post civil war, - yes, they inflated and hyperinflated away, but were not divorcing ourselves from the banks.  Do you see that on the horizon?   Just thinking outloud here. 

I'll be honest...I don't have a clue at this point.
I've been predicting a melt down for a long time and I think we're in the early stages of it. Past that point, I don't know. There's so much more than pure economics involved, it's mind boggling.

I'm seeing the black markets kick up now and more people are doing off the record work to survive. Housing hasn't picked up and won't without financing which is dead as we know it. Prices are going up though and it's just the death throws of companies trying to survive.

I like to look at historical loops but there really isn't anything in history to duplicate the cashless society we have right now. We have so many low spots that can cause the water to swing one way or the other, I'm stumped.

Whatever happens though, I think we're in for a very different world.