Finance, Fuel Prices, Economics, Markets

Its So Simple

The following is a comment by a reader of a financial web site.  It is so to the point I filched it and reposted here:

“The system cannot be saved.

“Simple as that.  Regulation WILL NOT SAVE IT.

“You cannot REGULATE AWAY mathematics.

“We have an exponential growth system which requires that credit continue to grow endlessly.  Taking us back to where PEOPLE are the sole originators of credit is going to collapse credit outstanding and deflatively destroy the entire money supply.

“There is TOO MUCH DEBT out there and every last dollar of it REQUIRES interest service!  That means that there must at some point be MORE debt elsewhere that finds its way into the hands of the payors in order to pay the interest service.

“A monetary-system-as-debt IS a forced exponential growth animal.  There’s no way around this; I can demonstrate it in a minute as it is simple mathematics.

“Credit growth took off on its own when they figured out how to originate without using PEOPLE, iow, CDOs, MBSs, CDSs, and all the other synthetic instruments.  Erecting “regulations” to stop this will collapse credit creation back to 40 years ago.  Doing this would cause the EXISTING debts’ interest service costs to consume the entire money supply.

“All of this because of ACCOUNTING ENTRIES!  We have let the fuckin bankers BECOME the barbarous relic strangling our society!

“If you review the anti-gold standard commentary more than 100 years ago, you see the same issues…an inability to find specie to service monetary needs imposed by DEBT.”

There is really little more to be said. This system is self-destructing beyond recovery.

January 25, 2010 Posted by | Uncategorized | Leave a comment

The Stock Markets Will Crash

The stock markets are getting ready to crash again. And this time around there will be nothing left with which to bail it out except for worthless digital dollars passed out by the Fed to the still insolvent banksters, the megabanks whose bankrupt condition congress allowed to paper over with fantasy asset values. This is a road well traveled and well mapped; it needs no further elaboration.

As I predicted, after the Massachusetts elections, the administration and congress appears to be doing an about face, turning on their masters and biting them. We will see mock inquisitions and show trials before congress, yet before the ink is dry on the Presidents proposals, analysts responses that the proposals are little more than window dressing are pouring out. It really matters not whether the they are serious about reigning in the robber barrons, or the masters of the universe as they are often derided. The damage will be done in the form of the psychology of the market.

The health of the markets is the same as the banks, for the health of the market is phonied up in the same way as bank balance sheets. The economy is not recovering, it is getting worse month by month. Government also cooks its own books. Corporate revenues continue to fall all the while reporting rosy profits. How can this be? They are cannibalizing themselves to create appearances of sound health, that’s how. Here’s the proof:

15 stocks in the S&p have a P/E of over 100

23 have a P/E over 60

67 a P/E over 30

150 a P/E over 20

125 a Negative P/E

The last 125 are no doubt correctly priced, but the first 255, more than half the S&P are grossly overpriced. During all prior recessions P/E’s averaged around 8:1. What is holding this market up are the banks and the Fed and not even they can levitate the markets indefinitely. Sooner or later something happens to topple the house of cards. You may recall there was no big event that sent the markets crashing in August ’07 when the mortgage ponzi scheme finally imploded. The powers that be stopped the crash in the midst of free fall by means of the same sort of fraud and chicanery that caused the collapse in the first place, notably endemic corruption. That halt was only temporary, it will resume in the form of the much predicted second leg down reminiscent of the 1930’s.

The events that will put the final crash in motion have already begun. The epicenter of the shock was Massachusetts last Tuesday. These are shock waves that will ripple around the world.

January 23, 2010 Posted by | Blowing Steam | , , , | Leave a comment

The Future as I See It

I’ve been developing this vision of the future for several years now, having drawn on the ideas of many futurists. I don’t see all doom and gloom as many do, but rather a silver lining in the black cloud.

Anyone who was an adult in the 60’s and 70’s will recall how totally unpredictable the chain of events was during those years. There were widespread predictions of doomsday and Armageddon to such a degree that a president even gave a speech about the great malaise that had overtaken the nation (thanks to people like him ) The nation and the world faced numerous and very serious challenges, but ultimately sanity prevailed.

The end of the world as we know it didn’t happen, there was no nuclear war and USA didn’t fall apart. Overpopulation didn’t result in worldwide calamity. Here we are now 40 years later with a similar series of events and crises. But now a financial disaster faces the whole world which stems from the profound changes that took place 40 years ago. History is evolutionary.

All of our present circumstances basically resulted from the US emerging dominance after WWII and the arrogance of power that went along with it. What could have been more insane than the nuclear arms race? That arrogance of power is fueling the backlash that will ultimately cut it down to size. The glory days of American wealth and power are drawing to a close, lasting a mere 50 years. We will end up much like the collapse of the British empire which was also accompanied by severe financial problems. This is all to the good, a much needed adjustment.

Will the USA collapse? No, I don’t think so, there remains of this nation far too much wealth – both in terms of money and the dynamism of its people – for that to happen. We are corrupted, but not utterly corrupt. There yet remains much goodness in our people. The rest of the world has a love/hate relationship with us; we are not perceived as a totally evil empire but rather a misguided one.

I do not believe that there is any grand conspiracy by the elites. I can’t give them that much credit for being that smart, or organized. Rather, they just exploit conditions to their advantage as opportunities arise. Nowhere in history of nations do we find such such conspiracies. No, I think the behavior of the elites are simply misguided by amorality and greed, and like all such, they will destroy themselves. Caesar will end up with Brutus’s knife in his back. They always do.

The US will survive all this in a much humbled condition just as Britain did, and the good news is that I don’t think this will end up in a series of world wars as happened back then. Bad things will happen, to be sure. Maybe even a nuke will be set off somewhere in the world, but the futility of war is sinking into the minds of much of the world. Today it has advanced to Mutually Assured Destruction for all.

2010 is likely to be the pivotal year in which the 60 year status quo finally ends. The scenario I foresee is a repeat of the Great Depression without the world war that followed. The system of debt-money and the endless growth thesis that is required to maintain it has failed. It will be replaced by a new paradigm, a new economy in which technological advancement is no longer dominant and driven by constant, unending growth which is no longer possible due to resource scarcity and excessive populations. The global economy will not end but take a huge hit, scaling back by 50-75%. Import/export economies will no longer be viable; instead import nations will be forced back into self-sustaining economics; Americans will become poorer, the rest of the world richer.

Corporate, finance and investment structures will also undergo radical changes. Global corporations will die out quickly; nationalism will prevail. There will be trade wars and much fighting over resources; that’s never going to cease. Employment will evolve into a huge issue; I don’t see a bright future for free enterprise. We will end up looking more like Europe. It is a maxim that the larger populations grow, the more personal liberties shrink. That is inevitable, so get used to it. This doesn’t necessarily mean a lower quality of life. Your desire to do whatever you wish will be restrained.

We will be forced to live with less energy. We’ll be lucky to have one car in the driveway, yet alone two. I agree with Kunstler that there will be vast changes in the socio-economic layout of the nation. There will be huge migrations of people along with much social upheaval. The consumer economy is finished forever to be replaced by a self-sustaining economy or perish. Fifteen to twenty years from now the USA will more closely resemble the US of 1950 than of Y2K. And we will likely be happier and more mentally well balanced because of it.

Our so-called leaders are not Machiavellian conspirators. They are mostly ignorant, stupid, greedy people who are drunk on their own perceptions of illusory power. And most of them are laying the seeds of their own destruction. And while they think they are, they are not smart enough to organize a one world government. That’s a joke: these people can’t even agree on the time of day, yet alone organize a world government. The UN is proof of this impossibility.

Fiat currency will not come to an end, but the debt basis of that money probably will, replaced by some other arrangement, possibly by gold or other commodity backing. How this will play out is unknowable. The relative value of precious metals will increase dramatically but ultimately may end up in the hands of government exclusively as a monetary basis.

January 21, 2010 Posted by | Uncategorized | Leave a comment

The Direction

January 16, 2010 Posted by | Uncategorized | Leave a comment