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Toto deVeer

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Everything posted by Toto deVeer

  1. Some great graphics from William Banzai: William Banzai7 Not sure that it's fair to label this 'Obamanomics'. Seems to be rife everywhere. Especially the UK. PS:: You know, I've argued for some time, that a bank is the easiest business in the world to set up. To set up a factory, or natural resources extraction (you know, the true productive and wealth creating enterprises), you need skills and 2 to 7 years physical infrastructure lead time. But a bank? I think that Firerush says it all. Just take a guy with money, no banking experience, and Voila! You're in business. That's why I've argued that we should have just let the banks fail, because new, stronger banks could emerge over night.
  2. Survival under times of stress requires either societal cohesion, or a totalitarian regime. The higher the population, the more likely the 2nd option will be needed. Not pretty.
  3. From the Guardian: I've seen other estimates showing the population topping out at 115 million. Now we all understand the demographics at play, ageing population, etc. But can someone please explain to me why the UK managed to quite successfully maintain a steady population in the 60's, 70's and 80's, and why it is necessary to let it explode now? I mean those demographics are going to be there eventually. To me, we face them with 50 million people, or we face them with 115 million people, Personally, I'd rather face them with 50 million. Surely the standard of living would be much higher with fewer people? Why is no one screaming out about this one. Not only will it create misery of life, but it will completely destroy British culture.....
  4. This is interesting. There may be an ulterior motive. Do you still need banks if everything goes to the government? Is this a precursor to large scale bank defaults?
  5. No. I think that defaults will occur in the private sector, particularly on the balance sheets of the banks. It's happening at this moment. If mark to market was enforced, there would be an almighty destruction of dollars. If you take a snapshot of the past and a snapshot of the future, the 'obligations' that the US will incur in the future are far greater those of the past. These future 'obligations' will be easier to pay if deflation is allowed to proceed. Additionally, the interest rates under a deflationary scenario (staying low for an extended period) will make the existing debt easier to service. Because their purchasing power will be worth more in the future than today. I don't think that I said treasuries would default, only dollar denominated debt. But it may come to putting cash under the mattress before this is over.
  6. There. Fixed it for you. I can join you with a watering can. Is that enough to get Merv's attention, do ya think? We could give him a hair cut and a good bath...
  7. This was the foundation of the US system before the Federal Reserve Act. Only corporations paid income tax, and individuals only paid tax on capital gains. The other source was a tax on imports. Labour was not considered a gain, but an exchange, therefore no taxation. I am told that this is written into the US Constitution. There is a big political movement to return to this system. There will be major political upheaval over this in the next years. The US has been heading this way politically since the 1960's, but vested interests have interfered with change. All good stuff.
  8. The feature that supports debt-based fiat currency is taxation. This creates a demand for a given currency. It is no surprise that, under Woodrow Wilson, the Federal Reserve Act and a Federal Income Tax were put in place within days of each other. The dollar is the currency of trade exchange globally. This creates a demand for dollars beyond the demand created by taxation only. Most of the sovereign and private debt world-wide is in dollars. No other currency holds this position. The Euro has tried, but it is faltering. It is precisely the default of dollar debt that will increase the value of the dollar. The available pool of dollars will be decreasing, rapidly. This is why the Fed had to enter into currency swaps during 2008 and 2009. Otherwise the international demand for dollars would have driven the DX to over 100. The default of dollar debt will lead to a strengthening of the dollar, this is ultimately how claims will be extinguished. This will also lead to deflation. There is an interesting story by Buckminster Fuller. In the early 30's, he was approached by a man to design and build the world's most advanced car. Fuller told this chap that it would take $26,000 and they wrote and agreed a half page contract that allowed Fuller complete freedom and complete control. The guy handed over his money, as cash. By the time Fuller returned to his home in Connecticut, Roosevelt had closed the banks, and was confiscating gold. Fuller was standing there with $26,000 in his pockets. He was able to hire out the largest warehouse and hire the best engineers for peanuts, as nobody had any cash. He also designed and built the dymaxian car.
  9. ? Not my experience. The biggest PM crash in history was largely due to interest rate policy. Nope. We are verging on an 'end-of-the-Euro' crisis. That's what is driving gold. The dollar and the pound will not be a part of this. In the early '80's, there was about a week to accomplish this; the collapse in gold, by percentage comparison, made the '29 and the '87 stock market crashes look positively boring.
  10. The sad thing is that those who are piling into gold are going to find out that the 'greater fool' theory applies to precious metals too. I have distinct memories of what happened to gold in the early '80's and I know some people who lost almost everything when it happened. Soros is right, nothing is safe at the moment.
  11. Mish, ever the deflationist, believes that for Lira's thesis to come true, there would have to be a 'Shazaam' moment, when everyone turns from Treasuries. But I think that even a 'Shazaam' moment will be short-lived, and not of any lasting impact. In my view there is really only one thing that could lead to dollar hyperinflation. A major war, say in the Pacific. That would be a hyperinflationary firestorm for the US. It could happen, but it's not on the horizon yet. I believe that eventually this will happen (I agree with Faber on this), but it is many years into the future. The dollar, in the early 1900's, already occupied about 60% of global settlement activity. The US experienced a massive bond crisis in the 1920's, when France and others stopped buying Treasuries (I am not sure but I believe that as a percentage of GDP it was comparable to today's situation). Yet this represented a small blip in the scheme of things.
  12. The dollar has already experienced hyperinflation against commodities and currencies over the last 10 years. An unprecedented decline in value. This was cleverly masked by the Fed, by creating a housing bubble based upon free and unlimited dollars. The turn to deflation, initiated by the extinguishing of debt, started in 2007, and led to a hyperbolic gain in value of the dollar. In Q1 of 2009, a world coordinated printing frenzy has delayed this activity, but only temporarily. Wages in America are going to continue to decline. This is a trend that has been under way for 3 decades, and is not going to stop now. The question is, will those lower wages buy more or less than they did before? My view is that they will buy more, say 5 years from today. Excess liquidity can and does push up commodity prices, temporarily. But the long term value of commodities will return to the demand/supply position. If people can't buy corn to eat, they will eat something else, or starve. Even Gold has multiple markets, investment, jewelry, industry. At the moment the investment/speculation aspect is dominant for Gold, but this is not affecting the average Joe in the US. If Gold goes to $5000, but you can still buy a burger for $2, does it really matter? When the great unwind occurs in earnest, there will be a greatly reduced demand for commodities. Just can't see hyperinflation in the US. Currently government is getting the chop. The last bastion is the banks, who are sitting squarely in the cross hairs. Meredith Whitney has recently said that the banks are going to be hit next. There are predictions of layoffs in the City approaching 80,000 within the next 2 years. When the banks are hit, the speculation stops, and the great unwind begins in earnest.
  13. I guess that I agree with Michael Hudson that "Debt that can't be paid back, won't be paid back". And Stoneleigh over at AutomaticEarth also expresses it succinctly, "The excess claims against real assets will have to be extinguished". With such a high uneployment rate, and a global labour market, I just can't see wage inflation on the horizon. This was a completely different situation in the 1970's. Russia, China, and to a large extent Japan were not participating in the global economy. Now there are 4 billion more workers who are available, compared to that time. For these reasons I disagree with Lira's hypothesis. The worst case there may be a step change in the value of all currencies against commodities, but I can't see the follow through that could cause hyperinflation. Lira is from Chile and those countries whose debt is denominated in other currencies will be at the greatest risk of any (internal) hyperinflationary event. I think that this may be a major reason why the IMF is pushing SDR's...it reduces the risk of hyperinflation for small countries borrowing against only Dollars or Euros. Don't see this hyperinflationary event as a logical outcome for the dollar now...
  14. One of the clearest signs of hyperinflation is the astounding property tax that is paid. In many metropolitan areas the property tax for an average (3 bdr) house is in excess of $15,000 per year. There is no way this can be sustained, and it is a major factor behind declining sales activity. House prices are falling off a cliff, but property tax is not following. Taxes, assets, debt etc must all deflate before this is over. I saw one article where a property had fallen more than 50% in value, but taxes were over $60,000 per year! Even the developers are not interested. This was in Washington or Oregon I believe.
  15. Hyperinflation of the dollar? Gonzolo Lira thinks so... The article continues... Gonzolo Lira at Zerohedge... Having read this article, I don't agree. First, there is no foundation for wage inflation follow through. Second, I believe that hyperinflation has already occurred for the dollar, against gold and other currencies since 2002. Thirdly, in the worst case the reaction to a loss of confidence in the dollar will actually accelerate the debt unwind. This will cause the dollar to soar, as dollars are destroyed. And it could happen on a gargantuan scale, never before seen. It would only take a 1 to 2 % rise in fed funds rates to trigger such an event. We've already had hyperinflation, it's just that its been carefully hidden from the average joe by some very clever bankers...
  16. My take is that gold jumps to a new baseline whenever the Europeans get worried about their currencies/sovereign position. The Europeans seem to have a more switched on attitude when it comes to the value of gold ownership than the Americans, even though the Americans owned more gold per capita than any nation in history in the early 1900's. India/China are also underpinning the price, but it is Euro-stress, in my opinion, that's driving it at the moment...
  17. Using the word in its non-religious context: secular as in: occurring or appearing once in an age or century lasting for a long time Although house prices might be tied to the Church too....who knows?
  18. Looks like you are right. A more careful read of their terms seems not to restrict me, the addressee, an any way. They only seem to restrict those who are not the addressee. So here you go: "Thank you for your note about the long run real house price graph - it is not often we have such technical comments! You are absolutely correct that having an exponential trend would eventually result in a near vertical slope. While this may seem strange, many financial series do in fact exhibit such properties. For instance, if one tried to fit the whole series of the Dow-Jones index with dividends reinvested onto a single chart the line would become more and more vertical. It is for this reasons that often the scale is transformed by taking logs of the series, so as not to have a graph which looks explosive. Similarly, when doing time-series regression analysis, one normally takes the log (or the delta log) of a series. The nominal series of house prices clearly exhibits an exponential trend, but it is less clear whether one would expect real house prices to exhibit a linear trend or an exponential one. In the sample we have, the exponential trend fits the data better and this is why we use it. The chart is simply intended to illustrate the movement in prices over the long run, rather than to be used as a tool for forecasting so we are not suggesting that the compounded growth of 2.9% should be used to make very long projections for real house prices. Nevertheless, we do re-estimate the trend as the sample increases. Thank you again for your comments"
  19. I cannot send their reply, but here is what I sent them.... "- -----Original Message----- Sent: 20 April 2009 16:46 To: Fionnuala Earley Subject: Your long term chart is mathematically impossible... Just a quick comment. The chart (Long Term Real House Price Trend) of page 3 of your March 2009 review cannot be correct mathematically. It appears that you are trying to match a compounded rate to the most recent value of the index. However, this produces a curve that is concave upward, with a constant compound rate. Due to this concavity, any mathematician would tell you that when you extend the curve into the future the limiting condition of this relationship (which is of an exponential form for a constant annual interest rate) leads to the limiting condition where the house price trend will approach a vertical slope (the tangent to the trend line is vertical) at some point in the future, so that an infinitesimal time change will lead to an almost infinite price increase. This cannot be correct mathematically. Therefore you might consider reviewing your trend line representation and provide something that would be of a more suitable form."
  20. Trapped in a vice. Either: -print to save the banks and wreck the real economy or -let assets reach a true value, and destroy the banks. Walking a tightrope...and this will ultimately determine the rate of the house price decline...
  21. It really depends upon the path of the decline. Because the banks are at such risk, my view is that the government will try to keep this path line flat as long as they can. Eventually it will intersect the bottom trend, but it would take decades. However this could completely destroy the real economy. The other option is to just let go and let prices reset. The recovery could then begin and the real economy could recover. While this option won't be allowed to happen by the government, it may be imposed by external events.
  22. The middle line is nonsense because it is based upon a compounded rate of return. This cannot be extended into the future as it will go vertical. Therefore the actual line must be something else. In fact as time passes the compounded HPI rate will become lower and lower. This is the problem with the curve and why it is nonsense to report it this way. In reality it would be better not to produce a trend line at all when the peaks and valleys are so large. It is simply misleading, in my view.
  23. Fair question. There was another thread, started by someone of the 'bullish stance' (yes there are a few around) who stated that if prices didn't fall over the winter, then there would be no house price fall. Actually this is a secular trend, not just a seasonal thing. I produced this because it is the most compact way to illustrate all the key forces/trends at play. The actual path of the decline is difficult to predict, but it will occur. Surprisingly, there still are quite a few people on the forum with an apparently bullish stance.
  24. I emailed the Chief Economist, and illustrated mathematically that the assumption of a compounded rate of HPI would, into the future, approach the vertical asymptotically. I have their reply by email, and yes they agreed with my analysis, but essentially stated that this is always the way it is reported, so they would not change it. This idea of compounding and exponential growth is a nonsense invented only by bankers as a means to suck the borrower dry. No asset increases in value exponentially over the longer time frame (only debt does, because the bankers have crafted it that way). I have the reply by email but they have asked me to keep this email as confidential correspondence.
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