There was an abundance of snow last week, too much as it turned out …
There was an abundance of snow all over, too much for some, just enough for others.
Untitled screen shot from FBI video of the shooting of LaVoy Finicum, (Oregonian). No snow and Finicum drives right around the Fed roadblock. No snow and the attempt to apprehend LaVoy & Co. at a roadblock is postponed indefinitely.
LaVoy might have known there is no place to run, all the roads lead to … what Kunstler calls; ‘the geography of nowhere’. It’s now the geography of everywhere.
Plainly obvious is the high level of calculation on the Federal side regarding to their ‘management’ of cowboy-style ‘rancher militants’. The FBI wants to end the Malheur National Wildlife Refuge siege without bloodshed, at the same time, gunning down one of the militants on TV sends a message to wannabe insurrectionists — as well as to the country at large — as to what sort of game is being played. Intimidation works, it keeps honest people honest. It keeps those who would never dream of taking part in an insurrection from taking part in an in … oh well, you know.
So far, our homegrown militants have satisfied themselves with making nasty noises and fetishistic gestures; at the symbolic level there are few if any consequences. Actual violence is risky; it takes on a life of its own and spirals quickly out of control. Meanwhile, ending one round of outrage becomes the starting point for the next as the underlying problems are never addressed, (Washington Post):
‘Rolling rally’ in Oregon marks killing of wildlife refuge occupier LaVoy Finicum
Heeding calls for daily protests after Tuesday’s shooting death of a man who had been occupying a nearby national wildlife refuge, a “rolling rally” of dozens of vehicles clogged the streets of this tiny rural town Saturday evening.
The cars and trucks, many of them the oversized, rugged models favored in this rough desert terrain, roared around town bearing U.S. flags, Confederate flags and passengers brimming with rage.
“I feel we are living in a very corrupt government. Right now people are getting pulled out of their car, getting guns pointed at their heads, and they killed an innocent man,” said Judi Rodgers, a local resident of Harney County, who came carrying a sign that read, “Welcome to Nazi Germany.”
Look at it this way … your way of life is falling apart at the seams and you search for answers/someone to blame. We are at the end of a long period of resource plunder, the marginal resource has already been consumed and spat out as waste. People are nevertheless 100% invested in a very high level of resource access. For any particular group to maintain high level access, others must lose it or be denied: pensioners, Venezuelans, Syrians, ranchers, Hapless Negroes, frackers, etc. Any way you look at it, denial of resources is a very ugly process.
Here is the problem: “The cars and trucks, many of them the oversized, rugged models favored in this rough desert terrain, roared around town … “ multiply these vehicles by the number of cities and towns and suburbs across the US and around the world, plus all the other fossil-fuel powered junk; millions of folks roaring around for no purpose other than to waste time and resources, to pretend to be doing something useful, to make vacuous symbolic gestures regarding their self-perceived ‘status’. For some folks … for most … ultimately for all of us … this is the last roar.
Seismic changes of the kind we are experiencing right now — from resource squander to high order conservation — do not come quietly. The shift from European Roman Catholic theocracy to secular nation-states required 100+ years of all-out warfare in the 16th and 17th centuries including the English Revolution, the Spanish war to expel the Moors and the 30 Years War which involved almost all Europeans and killed off about 20% of them.
… the sort of thing we can look forward to avoiding!
Economist Brad DeLong has another idea: he writes at Project Syndicate the (second) largest problem the West faces right is how to manage our incredible abundance (or surplus). At first glance it is hard to tell whether DeLong is being cute or if he has stumbled upon Debtonomics and the First Law by accident.
The debtonomy’s purpose is to direct surplus- related costs away from the holder onto third parties so that he (the holder) can enjoy his gains. Debtonomy evolved to manage The First Law, which states the costs associated with any surplus increase along with it until at some point they exceed its worth. Very much abundance = very much larger abundance-related costs.
DeLong doesn’t aim too high … he merely points out a vanishingly small percentage of the West’s workforce is engaged in food production, that the specter of famine has been banished; that the bulk of those engaged in food processing aim to make food more pleasurable and convenient; that the remaining percentage strives to remedy the consequences of over-eating. Interestingly enough, discussing agricultural labor productivity is as far as DeLong goes with his ‘abundance’ thesis. He veers off into the presumed consequences of increased labor productivity in general, assuming this sort of thing will carry forward unchanged into the distant future …
But job number two– developing economic theories to guide societies in an age of abundance – is no less complicated. Some of the problems that are likely to emerge are already becoming obvious. Today, many people derive their self-esteem from their jobs. As labor becomes a less important part of the economy, and working-age men, in particular, become a smaller proportion of the workforce, problems related to social inclusion are bound to become both more chronic and more acute.Such a trend could have consequences extending far beyond the personal or the emotional, creating a population that is, to borrow a phrase from the Nobel-laureate economists George Akerlof and Robert Shiller, easily ‘phished for phools’. In other words, they will be targeted by those who do not have their well-being as their primary goal – scammers like Bernie Madoff, corporate interests like McDonalds or tobacco companies, the guru of the month, or cash-strapped governments running exploitative lotteries.
Look at it this way … your way of life is falling apart at the seams and you search for answers/someone to blame. We are at the end of a long period of resource plunder … send in the dancing girls!
Otto Yamamoto, ‘Black Lives Matter Protest Distraction’
One has to wonder about economists. It would make sense for DeLong to discuss manufacturing ‘abundance’ (over-capacity) in China and elsewhere (which turns out to have little to do with labor productivity) or the mass of plastic waste, found everywhere in the world or carbon emissions, worthless junk or the toxic chemicals that are inundating us.
Because of stupendous material outflows, the resources needed on input side of industrial processes are becoming increasingly short. That this is so is both self-evident and undeniable (except to economists). Excluding some renewable inputs, we started long ago with everything and are feverishly, frantically squandering our way toward nothing.
“Everything” = resources before we begin extracting them, as for example, petroleum before 1858.
‘Nothing’ = a few years later, after we have extracted everything we can get our hands on.
Within the everything-to-nothing regime we are about half way to the bottom. ‘Abundance’ as such only makes sense out of context, where finished products appear by magic out of thin air, crafted by elves from climate gases. As a component of debtonomics’ self-fooling process, the worth (see below) of inputs is discounted, otherwise output cannot be affordably financed. At the same time, resources are considered to have no value at all, how can it be otherwise? If resources had value they would be hoarded, as they would be precious. One does not throw a Picasso into the furnace in order to keep warm even if snow is up to our armpits. But feeding the fires is what we do with our resources … without a care in the world! We burn them because we lie to ourselves, because we are able to do so effortlessly by conflating value and worth as if they are the same (no)thing.
From this starting point of self-deception, corruption by inches takes on a life of its own until it engulfs everything in sight. The Bernie Madoffs, the corporate interests, the (finance) gurus of the month and various governments … where has J. Bradford DeLong been? The modern economy is basically a form of organized crime. Industrial firms are morphed into hedge funds intent on increasing their own worth by way of debt-financed share buy-backs and mergers, by the issuance of dubious ‘securities’ and shifting of liabilities off their balance sheets. Markets as such have ceased to be, they have become cockpits of manipulation and insider trading. Regulators are bought and sold like Ottoman galley slaves. Politicians are sock puppets for finance interests. Wrong-doers walk the streets unpunished: if there is abundance of anything it is malfeasance and fraud and deceit. Even our cowboys are fake!
DeLong plugs behavioral economists like George Akerlof, Robert Shiller, Richard Thaler, and Matthew Rabin but they don’t really need it. He does not seem to grasp the scale of crimes, far beyond the deception of individual investors. Our 21st century looting is both transnational and opaque. The thefts are always presented as ‘making the economy grow,’ implying a ‘helping hand for the little guy’. The beneficiaries are invariably tycoons and finance-level criminals, (Marketwatch):
China’s Central Bank Makes Massive Cash Infusion
China’s central bank is putting the largest amount of cash into the financial system in nearly three years, using a weekly market operation to pre-empt a holiday-induced funding squeeze and offset rapid capital outflows.
The People’s Bank of China offered 340 billion yuan ($51.89 billion) of short-term loans, known as reverse repurchase agreements, to commercial banks in a routine money market operation Thursday.
The central bank provided 440 billion yuan via similar tools Tuesday, the first leg of its twice-a-week liquidity-management exercises.
Given the maturity of 190 billion yuan of previously issued loans, the PBOC’s net cash injection this week totals 590 billion yuan, the biggest of its kind since early February 2013, when it reached 662 billion yuan.
This is a crime but it is invisible. Liquidity provision is nothing more than central bank financing the theft of stolen funds. Nobody asks how theft occurs or who is behind it: certainly not the ordinary Chinese manufacturing worker. Finance managers and government administrators don’t even recognize the crime (except where blame can be fixed on ‘malcontents’). Instead, funds outflow is offered as nothing more than an unfortunate consequence of well intended government policy, bad luck … an (over) abundance of snow!
Liquidity provision shifts (pillages) buying power away from customers toward Big Business and finance. Bosses grab the money and leave the country, using it to buy expensive flats and houses … anywhere besides China, where the ordinary workers are left holding the bag.
At the same time, the provision is self-defeating because the decreasing availability of credit undermines the customer bid for products. Prices fall leading to supplier insolvency which ricochets through finance reducing credit-worthiness overall. The outcome is increased outflow of foreign exchange from the country and currency depreciation in a vicious cycle.
The central bank infusions are intended to defend the currency, yet by itself the defense signals to speculators and arbitrageurs the currency is over-priced. The specs turn around and short the currency in overseas markets where central bank cannot reach, (Wall Street Journal):
Currency War: U.S. Hedge Funds Mount New Attacks on China’s YuanSome of the biggest names in the hedge-fund industry are piling up bets against China’s currency, setting up a showdown between Wall Street and the leaders of the world’s second-largest economy.
Kyle Bass’s Hayman Capital Management has sold off the bulk of its investments in stocks, commodities and bonds so it can focus on shorting Asian currencies, including the yuan and the Hong Kong dollar.
Billionaire trader Stanley Druckenmiller and hedge-fund manager David Tepper have staked out positions of their own against the currency, also known as the renminbi, according to people familiar with the matter. David Einhorn’s Greenlight Capital Inc. holds options on the yuan depreciating.
Expectations for a weaker yuan have led to an exodus of capital by Chinese residents and foreign investors. Though it still boasts the largest holding of foreign reserves at $3.3 trillion, China has experienced huge outflows in recent months. Hedge funds are gambling that China will let its currency weaken further in a bid to halt a flood of money leaving the country and jump-start economic growth …
… and help the little guy!
When a country’s currency is depreciated it is as if a robber goes from house to house stealing a percentage of the goods and money inside. If the depreciation is ten percent, that is the amount of the robbery- times every house in the country! Hedge fund barons avoid the time-consuming mess and hard labor of sledgehammering their way into thousands of houses, they simply switch on their Bloomberg terminals and push a few buttons (this is called risk-taking). Meanwhile, the victims have no idea what has hit them, they don’t even comprehend they have been robbed!
There are more finance crimes, always more; “I feel we are living in a very corrupt government,” says Judi Rodgers, the understatement of the millennium. Our entire economy is based upon pillaging under a veneer of high minded, well intentioned propaganda. We never give anything back, we never have! we never even bothered to learn- or consider how. The militants in Oregon and elsewhere are not interested in improving public lands for the ‘good of the country’, neither are frackers or miners or other despoliators. The hedge fund barons and Wall Street bankers Kyle Bass or Stanley Druckenmiller — or the Chinese central banker Zhou Xiaochuan for that matter — they don’t aim to increase the prosperity of the working man or anyone else, anywhere else; no one but themselves. They grab what they can of the loot and demand more; lest the devil take the hindmost which he invariably does. This is what it comes to: five hundred years of labor-efficient pillaging and the customers cannot afford to retire the barons’ debts. So much for abundance, our businesses are busted.
Busted, insolvent, ruined: our tycoons, our businesses, our workers our banks, our cowboys. So it goes, to the logical conclusion, will the last cowboy out the door please turn off the lights.
DEBTONOMICS NOTE:
The ‘worth’ of something is the financial, monetary measurement of a good (or service) relative to another good or service. Worth = price or rate of exchange.
‘Value’ is the intrinsic character of a good (or person, organization, idea or service) outside of its price, a determination over time of its usefulness to the furtherance of civil society.
Worth is a quantitative measure, value has no arbitrary measure but is rather a matter of quality.
Top photo = Steve Ludlum © Copyright 2015.
If we have incredible abundance, the financial industry is no longer necessary. With true abundance, what’s there to manage? I guess my problem is that I take abundance and subtract out debt for starters. I am guessing Prof. DeLong doesn’t do that. When the costs of managing “abundance” are greater than “abundance,” there is no abundance at all. Dig?
I better or I should take up drinking professionally …
🙂
Ken – You don’t understand, it is the banking/financial industry that has singlehandedly created this abundance of everything.
Back 20 years or so ago we were beginning to see the constraints, the Limits to growth, so banking/finance pulled all the stops so everyone could get rich in which case there are no constraints only high prices.
There is nothing that can’t be fixed by throwing enough money at it even high prices ;-}
I understand very little, true. I do find it amusing when a politician advocates a reduction in debt. After all, indebtedness is not a bug, it’s a feature. That no economist strictly says so leads me to believe I inhabit a bizarro world. This website keeps me sane, temporarily 😉
@KB: Same. Whenever I hear neo-cons (peeps in glass houses shouldn’t throw stones!) and libertarians talking about how he have to pay back the debt and about “unfunded obligations”, I can tell they have no clue this system couldn’t even exist without debt to carry the resource-abundance of the future into the present so that it can pretend to pay for itself! And much more so today, when a mountain-range of debt is being used to paper over the fact that we’ve passed the point by far of diminishing returns on growth for the sake of growth, and now all that’s left is gimmickry before it all falls apart.
Debt is the huge, uncontained monster stomping around the house, destroying everything.
Steve,
Thank you for your latest article. There is a certain intellectual satisfaction and pleasure that comes of seeing things clearly and understanding the idiocy or moral bankruptcy of BAU and the “world-as-it-is” (or “worldliness” in Christian terms), but I confess this is now being far, far outweighed by tremendous sadness. I found your following observation, while brilliant in its perceptivness of the overall patern, piercing:
“Our entire economy is based upon pillaging under a veneer of high minded, well intentioned propaganda. We never give anything back, we never have! we never even bothered to learn- or consider how. The militants in Oregon and elsewhere are not interested in improving public lands for the ‘good of the country’, neither are frackers or miners or other despoliators. The hedge fund barons and Wall Street bankers Kyle Bass or Stanley Druckenmiller — or the Chinese central banker Zhou Xiaochuan for that matter — they don’t aim to increase the prosperity of the working man or anyone else, anywhere else; no one but themselves. They grab what they can of the loot and demand more; lest the devil take the hindmost which he invariably does.”
That’s pretty poetic, actually. And I see from your last sentence that you are now echoing Kurt Vonnegut.
I am not in, and don’t, despair, nor do I live in hope, but really, it is shocking to someone (like me) raised on Western notions of “free will” and morality how very, very little we are capable of change.
Well, a system such as the one we have set up where we all have to be fossil-fuel junkies, makes prisoners of us all.
Thanks Steve,
I know these posts take considerable effort on your part and the clarity of your thinking is very impressive to me. If we would think of our collective existence as a biological rather than economic reality a lot of the foolery would fade away. We have a collective metabolism and currently it is uncontrolled. If we wish to live together as a collective entity then there are hard choices to be made. We have to have mutually agreed upon and strongly enforced limits on population. We will need to balance our energy budget. The role of money and corporate power must be analyzed and rationalized to the benefit of the public good.
The first nucleated cells (eukaryotes) appeared 2.5 billion years ago. The first multicellular organisms showed up 500 million years ago. It took individual cells 2 billion years of trial and error to figure out how to become multicellular clones. There were uncountable failures along the way.
It is improbable to the point of impossibility that our global civilization will endure as the dominant expression of humanity’s collective will. Nature is clear – improvement requires competition, reproduction and, most importantly, death. A global civilization will die leaving no successors.
Your posts are the highlight of my month. Thank you. I’m not sure anything can be done at this point – or perhaps at any point. But I firmly believe seeing the state of our collective being clearly is better than being deceived by liars and thieves.
“But I firmly believe seeing the state of our collective being clearly is better than being deceived by liars and thieves.”
https://www.youtube.com/watch?v=ThToz3UmIL4
Great post
https://www.youtube.com/watch?v=OA4FTIz2Zrw
Jim Rogers says that the jig is up; http://www.zerohedge.com/news/2016-02-08/market-knows-its-over-jim-rogers-warns-were-all-going-suffer I am suddenly of the belief that James Howard Kunstler had it right all along, we are in for 15 to 20 years of never ending recession. For those of us who wanted to believe that there was some sort of sudden event coming, it is actually much harder to prepare for 20 years of the ‘Long Emergency.’ This will take a certain amount of mental toughness.
In 15 to 20 years – that’s when Campbell’s oil production curves are at its steepest decline. In that chart he has tar sands and heavy growing until 2030. It doesn’t look like that’s going to happen.
I agree with you. B.W. Hill has been saying for sometime that shale oil and tar sands will be totally over by 2020.
Is there someone who can answer a stupid question of mine? Why does the yield on the government debt go down as government debt increases almost exponentially? The greater the debt of a country, the less the yield on it’s bonds.
That’s an interesting question and let’s see if Steve chimes in.
Seems like it should be opposite, right? The only explanation I have is that global capital flows tend to concentrate in currencies which make up a big percentage of global reserves. Here I am thinking of the dollar, pound, euro, and yen, primarily.
This gives any such currency an advantage…the countries can issue more and more debt at lower and lower yields, in a sort of self justifying perpetual motion. Because their bonds are trusted, the demand is seemingly infinite which sends the yields plunging to zero.
It’s strange really. No governments are responsible anymore, all of them tend to go into more and more debt. But only the advanced, developed countries get away with it.
More debt in developed country = lower yields and currency remains strong
More debt in developing country = higher yields and currency is weak
Sovereign yields can be low (they can also rise through the roof). This is evidence of deflation: there are fractionally more lenders willing to lend to the government than the government is able to borrow at any given time. Call it a flight to safety/reason.
The central banks swapping credit for assets will drive down sovereign yields. Central banks ‘buy’ the asset and hold it, they pay par (more or less) then credit the ‘seller’ with excess reserves. They offer a premium for the asset then pay interest on the excess reserves. The idea is to reprice assets and support the banks (and the banks’ investors).
Because the ‘economy of things’ is in the toilet, there are few if any other investment opportunities other than loans to governments. Lending to the government is less risky because governments can (usually) borrow at will. They can also create money and use it to retire maturing debt (although governments have not done this for decades.)
Tuesday humor:
2016 Democratic National Convention at the Wells Fargo Center (Philadelphia, PA)
2016 Republican National Convention at the Quicken Loans Arena (Cleveland, OH)
I think it’s funny, anyway.
The New York Times is on it!
http://www.nytimes.com/2016/02/10/business/dealbook/as-oil-prices-plummet-mounting-debt-catches-up-with-us-producers.html
I did not see the phrase “triangle of doom.”
Regarding customers being broke. I wonder how much of that is also willingness to spend – and fear of not having enough savings. This article really resonated with me.
http://www.zerohedge.com/news/2016-02-09/economics-professor-negative-interest-rates-aimed-driving-small-banks-out-business-a
People are not stupid. Some probably are starting to wake up to the fact that the situation is precarious, and that saving more could be the prudent thing to do, if you have any surplus.
If people stop spending what would happen? And given the advanced state of “marketing” and propaganda with displays in every room of every building, how well is that system working? Not to mention having a screen in your pocket so you can look at it at any time.
So it seems that the paradox of thrift could be a major component in the end game..
Thoughts?
It’s dollar preference in action!
Dollars become proxies for fuel: that $20 stuck in the desk drawer becomes your last best chance to drive your sick kid to the hospital.
From peak prosperity: “This time there’s something different in the story line: the absence of abundant and high-net energy oil. Many of you might be thinking “Hey, the price of oil is low!” which is true, but only momentarily.”
Momentarily? Chris is a metals guy. At least there are ads for gold and silver on his site.
Steve? Does it all come down to purchasing power? When will the gubermint hand the money to the people and not to the wealthy?
Government cannot hand out purchasing power only claims against it.
Adding claims simply dilutes existing claims. To ‘liquify’ the end users by giving them more claims would require credit equivalent to current Fed balance sheet: four more trillion dollars. Otherwise, there would be no effect. Such funds distributed among customers would be spent into the hands of the wealthy and their lenders.
The difference between ordinary customers and wealthy is structural not just one group having more- or fewer claims.
So if the government were to give me back the equivalent of my tax payment for 2015 that would make me liquid. I would pay my bills and buy stuff. (liquify me, funny turn of phrase:)
If they gave us all back our tax contributions we would all feel really liquid and really good for awhile. We would rush out and pay our bills and buy stuff, thus giving our money to the wealthy.
Very soon we would be in trouble again and the government would have to do it again. They would be clearly broke. After all, our tax payments are the ultimate collateral aren’t they? Pretty soon it wouldn’t feel so good and people would catch on. People who have real stuff (wealthy) wouldn’t take the currency of the realm.
How to achieve structural change? It is so unthinkable people can’t think about it.
The US borrowing- then refunding $600 to a select group of taxpayers was an attempt to add real money to the economy. The total cost (about a trillion dollars) was about the same as the amount as TARP (about eight-hundred billion). TARP was money borrowed from the banks — then handed right back to the exact same banks! In any event, the efforts were silly (crazy).
What is coming clear is there really is no collateral at all to our industrialized Ponzi scheme, not even bank deposits (M1) which are presumed to be underlying collateral for everything else: foreign currency, shares, bonds, mortgages; up to and including derivatives … all of which amounts to a gigantic, inverse pyramid of claims.
I’ve said this before; we’ve burned a trillion barrels of crude, what do we have to show for it? Some potholed freeways and rusty, dented automobiles … along with toxic gases circling overhead like avenging gods waiting to strike us down. What we have to show for it = this is our collateral.
We have books, music, philosophy, science – and each other. Because of or in spite of – who can say?
BNP Paribas says to oil cos, “No more credit for you!” http://www.zerohedge.com/news/2016-02-11/bnp-pulls-plug-us-energy-sector-will-exit-rbl-lending
This thing is unravelling fast.
“I’ve said this before; we’ve burned a trillion barrels of crude, what do we have to show for it? Some potholed freeways and rusty, dented automobiles … along with toxic gases circling overhead like avenging gods waiting to strike us down. What we have to show for it = this is our collateral.”
What we’ve got to show for it REALLY is $200 trillion dollars of debt (excluding off balance sheet derivatives). Minus what we’ve always had in terms of personal relationships and survival mechanisms , the planet looks like the aftermath of “Girls Gone Wild” and the “Animal House.”
Pingback: The Last Cowboy | Doomstead Diner
A tale of three Decembers (2013-15) from the Bakken ;
2013: 26.85M barrels extracted, 6,840 wells, 127 barrels per day per well
2014: 36.08M barrels extracted, 8,950 wells, 130 barrels per day per well
2015: 33.97M barrels extracted, 10,373 wells, 106 barrels per day per well
So, 2013-14, 34.38% rise in output, 2,110 additional wells
2014-15, 5.85% fall in output, 1,423 additional wells
file:///C:/Users/Classroom%201%20S5/Documents/Downloads/historicalbakkenoilstats(19).pdf
Good thing it’s profitable at $20/barrel!
The drillers have little choice but to pump oil until the money runs out. There are already declines with much bigger declines to come:
http://peakoilbarrel.com/bakken-december-data-big-decline/
Keep in mind, even with declines in driller ‘product’ the prices will still remain low. Price is where credit fantasies intersect with reality, our economy of things. Shortages won’t make anyone richer.
There are certainly extraction declines in other oilfields besides Bakken, even as drillers do everything they can to increase extraction rates:
http://www.ft.com/cms/s/0/1269ec82-c69e-11e5-808f-8231cd71622e.html#axzz40YaS98Un
Overseas trade goods are energy (coal) in ‘finished’ form. Customers are not buying trade goods from anyone:
http://wolfstreet.com/2016/02/15/im-in-awe-at-just-how-fast-global-trade-is-unraveling/
No surprise, bosses are lost in the desert of their own minds:
https://sites.google.com/site/kocherlakota009/home/policy/thoughts-on-policy/2-18-16
Steve; how slow do you think the world economy can get and still function as a world industrial economy? My belief is that the economy in the U.S. will begin to fail when shortages begin to appear. The process of oil producer bankruptcy has begun. Maybe we will see oil shortages begin to appear slowly, which will cause the further loss of jobs and there will unfold the slow unraveling of the economy over an extended length of time. I believe that the failure of the U.S. dollar will occur when shortages of oil begin to appear. It will likely lead to hyper inflation and chaos. Venezuela is there already.
Another option is that the price of oil will drop to a level that will cause a sudden loss of confidence in the dollar. Currently it would appear the price of oil would have to get awfully low for the dollar to fail. Maybe, in the order of 10 to 15 dollars a barrel.
The various twists and turns to come are almost impossible to predict.
In general, holding onto money makes it valuable (gives it value) to the degree it becomes a collectible. At that point there is little in the way of commerce as it (commerce) is worth less than money that would be spent to engage in it. Also, trading value for worth is foolish, very few will do it.
If the dollar becomes valuable there is little chance of hyperinflation which is a form of currency arbitrage. Again, trading value for worth(lessness): nobody will do that even at the point of a gun.
However, hyperinflation can take place if there is some form of alternative currency that is traded by the banks (at a fixed rate to the local currency) with a parallel trade ‘on the street’. Modern hyperinflation is a banking phenomenon, a form of currency arbitrage. Because commercial banks lose money on each successive lending transaction (new money worth less than the old) they demand the central bank make up the difference by producing greater amounts of currency. If you look carefully, you can see in places where currency hyperinflation has occurred, there has been some form of money that people want to ‘buy’ with their local currencies: goldmarks/sterling/gold for papiermark (in Weimar in 1923), dollars for Argentine pesos (198s), Soviet Army money vs Hungarian forints after WW2, rands for Zimbabwe dollars (during the 1990s), etc. The buying of the desired currency + the banks as middlemen = a skyrocketing price for wanted currency: the process feeds on itself.
Now, the US could produce a ‘desired currency’ by issuing ration cards for gasoline. This MIGHT be a form of money that is more ‘valuable’ than actual dollars. Citizens MIGHT trade any amount of dollars to buy them so the currency arbitrage would set up. This is something to keep an eye out for.
When the oil price drops it means the dollar that is used to pay for fuel is worth more. The dollar/fuel trade is all that matters (IMHO) regarding the worth of money itself … more than interest cost! When the dollar is worth enough, the oil business will fall apart completely because the dollar will then be worth more to the holder than any amount of gas.
“…the US could produce a ‘desired currency’ by issuing ration cards…”
Interesting! I have been looking at how the US could possibly generate hyperinflation and I just don’t see it.
However some kind of rechargeable ebt/gas ration card could come close. Only problem is that would be .GOV and it is the FED that creates money not Gov so I don’t see it happening that way.
Nope, its deflation from here on out I think.
Yes but …
Finance creates our money (even currency is privately issued debt laundered by the central bank). Private money creation is a monopoly finance will not surrender willingly.
At the same time, government CAN create its own money (called elsewhere ‘positive money’), fiat that is simply issued as were Demand Notes during the US Civil War. In this sense, the government ration ‘card’ would be issued money; any inflation would be the result of a four-way arbitrage between the good (petroleum products), dollars, the card and the banks. Any of the variables would make hyperinflation unlikely, with a piddling demand for petroleum products being the most critical.
The Treasury should create fiat dollars and use them to retire debts as they come due; there is more to this to come …
The gold bugs don’t see it that way, obviously…
Peter Schiff: “Once markets figure out that the Fed is all hat and no cattle when it comes to fighting inflation, the bottom should drop out of the dollar, consumer price increases could accelerate even faster, and the biggest bubble of them all, the one in U.S. Treasuries may finally be pricked. That is when the Fed’s nightmare scenario finally becomes everyone’s reality.”
http://www.zerohedge.com/news/2016-02-22/peter-schiff-warns-feds-nightmare-scenario-becoming-reality
But obviously the state, gov, and corp all have to be raising wages in order to achieve significant inflation. Corp seems to not be in on it. Then you have the unemployed, growing in number every year. To have any chance of achieving inflation is seems that the social security checks have to keep flowing.
Gas station closures. That’s my metric of collapse. No need to buy a new car ever as the 740 should outlast this shit.
1996-2012 below.
Total U.S. 190,246 187,892 182,596 180,567 175,941 172,169 170,018 167,571 167,346 168,987 167,476 164,292 161,078 162,350 159,006 157,393 156,065
Patience, ladies and gentlemen, patience!
http://www.upi.com/Business_News/Energy-Industry/2016/02/25/Continental-Resources-calls-for-patience/3431456396786
(Oil will be $60/barrel in no time.). The former Mrs. Hamm had exquisite timing.
Big thinkers at Bloomberg:
“The Peak Oil Myth and the Rise of the Electric Car”
http://www.bloomberg.com/news/videos/2016-02-24/the-peak-oil-myth-and-the-rise-of-the-electric-car
Everyone reading this blog will puke watching that video. I can’t even begin enumerating the problems with it.
http://creditbubblebulletin.blogspot.com/ This web site is a very good one to follow for understanding what is happening with credit. They are saying that the credit system is maxing out on all kinds of levels. When they print new money they are simply adding to a credit system that is beginning to freeze up. They make credit cheap because the want to make money and keep the system going but it is beginning to freeze up. Imagine if all the debt that the big banks hold becomes worthless. It seems that the debt only becomes worthless when the corporate and sovereign entities are totally bankrupt. Greece’s 10 year notes are at 10 percent; they are totally broke. Steve has said that the oil companies and consumers are totally broke. Auto buyers are starting to default on their loans. Oil companies are beginning to hit the point where they can no longer borrow money and must default. The defaults in the system seem to be like a last step. The bosses at the top issuing all this largess are still doing what they do. The debt system is peaking out.
I saw your Twitter about African Americans voting for Hillary in South Carolina. Why not? If she can help turn the richest country in Africa into a pile of rubble, she can do anything. Call her the Collapse President.
Oh, brother! And Hillary’s going to put Wall Street in its place!
http://www.nytimes.com/reuters/2016/02/29/business/29reuters-usa-oil-shale.html?_r=1