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Methodius

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  1. The important thing is the ratio of the two numbers. If you read r for meaning 'propensity to lend', the difference in value of the formula with different values for r will give a rough indication of the resulting reduction in total money supply. As r tends towards 1, even small absolute changes in its value will produce order of magnitude changes in the amount of money in the system. When I talk of a debt implosion, this is what I am referring to.
  2. I believe we will have asset price deflation and consumable price inflation.
  3. Of course that is correct, I am not suggesting that debts can be avoided, simply that it is best to have the choice of when to pay them off.
  4. You are both correct. It will depend on the legal structure of the organization in question and the details of any mortgage securitization that may have occurred but, at best, you will have your savings forcibly offset against your debts and, at the worst, you will lose your savings and keep the debt. If you must borrow, the best course of action is to do so from the least risk averse lender - who will charge unrealistically low rates of interest - and to deposit with the most risk averse who may not pay you the best interest but will not lose your money either, for now at least.
  5. This is entirely correct, although I believe that the value of r is now so close to 1 as to make an orderly reduction impossible.
  6. I don't recall ever having deliberately insulted anyone on this forum, perhaps you will do me the kindness of explaining why you felt the need to refer to me thus?
  7. I much prefer Richard Strauss as it happens, Wagner is too, well, Nazi, for my liking. I must also admit a liking for some Russian literature, although I would choose Tolstoy or, from another generation, Solzenitzen over Dostoevsky.
  8. The best advice I can give is to keep your savings in cash in an instant access account with a different organization than your debt. When deciding where to put your money ask what proportion of the capital base is retail vs wholesale and if they can't tell you, or the number is less than 95%, go elsewhere. I believe that many of your small savings and loans institutions (building societies I think you call them) would be suitable.
  9. The world is in the opening act of a long and epic tragedy. As I predicted some time ago, the government of the United States has begun to buy the nation’s mortgage debt at far above its true value from the charlatans of Wall Street. In Europe too, banks are finally being overwhelmed by their own greed and mendacity; whilst at an earlier stage of the cycle, due not to any excess of prudence over their US rivals but due only to different accounting standards, the great financial institutions of the old world are falling victim to the same blight of usury and poisonous financial alchemy that has infected those of the new. Inevitably, European governments will be force marched down the same path through the vale of tears. For all of us, this will be our own, all too modern, Via Dolorosa. In the coming months, governments of all of the major world economies will follow the American example and attempt to recapitalise their banking systems in one way or another. The result of this will be the same as it will be for the United States. Their credit worthiness will be destroyed, leaving the last remaining haven for peoples’ savings no safer than a sack full of cash buried in the ground. Think about how much money there is in existence, contemplate how it is believed to be worth so much more than is actually needed for all of the people of the world to live and then consider what will happen when that fragile confidence trick is exposed? Let there be money our rulers said, fiat obscura will be the new response. But what of the near future? We will shortly be engulfed in the filthy, stinking water thrown up by the death throws of the leveraged fund leviathan as it is slain by its own parents. September has been cruellest month for hedge funds since their invention. The short selling ban has destroyed the very basis of those old fakers statistical and convertible arbitrage – what use is a hedge fund that can’t hedge itself you might ask? The failure of the wholesale lending markets have starved their remaining lenders – the so called prime brokers (would not sub-prime brokers be a more suitable and honest a name?) – of the capital to provide them with leverage and what they do have available is at a far higher price. And last, but not least, their clients are deserting them in fear of what the future will bring. The coming months will witness the burial of the dead from this most monstrous of industries. Even the largest funds, Citadel, Renaissance Technology, D.E. Shaw & Co, HBK, Brevan Howard, GLG and others will find themselves on their knees. Some may survive but, without the elixir of cheap leverage to drive them, their existence will be marginal at best. And of the longer term? I am steadfast in my belief that the system of money created from debt will implode just as it has exploded. A monetary great crunch to follow the slow motion big bang of the last thousand years. For reasons that may not be immediately obvious, the most important mathematical formula in the world at present is 1/(1-r) – the sum to infinity of a converging geometric series. Calculate the value of this formula for r = 0.98 and r = 0.90 for an approximate view of what will happen to the world’s money supply as a result of the de-leveraging to come over the following months and years, and its relevance will be painfully clear.
  10. Thankyou for your kind words. I post here, as I post elsewhere, give lectures, write articles for magazines and newspapers and author books, because I think it is my duty. I used to work in the debt markets on Walll Street and I lived the kind of life that you would expect such a person to live - that is to say, not a good one. Now I am trying to make amends by using the knowledge I gained during that time for better purposes.
  11. After I'd finished writing this, it occurred to me that some here may also find the contents useful.
  12. Thanks for your charitable work here. A bit more hope wouldn't go amiss though ;) Anyway, keep it up :)

  13. You might also be interested in two of my posts earlier this year - here and here.
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