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. Right now, we have a bubble in debt at every level, but I don't know if that is the one that will burst this time around, there could be another I am not watching.)
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Agreed. (too soon to rep you again)
Of all the possible scenarios that could lead to the EOTWAWKI-- EMP, war, economic recession, invasion by Martians, depletion of oil, massive failure of crops etc etc, the most likely is that national debt will rise to the point that no one will buy US bonds anymore & the Fed runs out of green ink. The welfare checks will stop coming in the mail and chaos will ensue.
What "real value"? In malomars?
In quatloos? Frangibars? Euros? In dollar bills (worthless paper)?
The law?
"Dollars, or units; each to be of the value of a Spanish milled as the same is now current, and to contain three hundred and seventy-one grains and four-sixteenths parts of a grain of pure, or four hundred and sixteen grains of standard, silver."
"Eagles each to be of the value of ten dollars or units, and to contain two hundred and forty-seven grains and four eighths of a grain of pure, or two hundred and seventy grains of standard gold."
--- Sec. 9, Coinage Act of 1792, January 1792
A double eagle gold coin, approx. one troy ounce, has the value of twenty dollars.
A 20 trillion dollar debt computes to 1 trillion ounces stamped into coin.
(FDR tried a swindle after first declaring a state of emergency, confiscating gold and then shifted to $32 per ounce, but that would be unjust weights and measures. Wink, wink, nod, nod.)
A gold dealer in Manhattan's Diamond District on 47th Street discovered that an evidently certified gold bar was in fact more than 75 percent Tungsten.
Real value in currencies and precious metals is in convertibility. Venezuela's currency has no value because you can't convert it into anything. The dollar is valuable because it's the most convertible currency in the world, not because it is the scarcest. Further, the US dollar is the most BORROWED currency in the world. Even if the US goes kaput, if I still owe $400,000 to pay off my house....somewhere I'm going to need to trade someone for some worthless money so I can send it to a bank. Now realize that there are several multiples of debt outstanding as there are to actual money, electric or otherwise.
The US dollar likely survives beyond the US nation. Actually, I shouldn't even call it the US dollar. I should call it the Fed dollar. It's just that the Fed is going to need a new bodyguard and may have competition pop up left and right.
Right now every other nation preps for disaster by having dollars on hand as a safeguard against their local currencies. Because every nation has dollars on hand, they can also borrow in dollars and trade with each other in dollars. You can buy oil, with dollars. You can buy imports, with dollars. You can buy gold, with dollars.
It is also readily identifiable, verifiable, easy to carry and easy to make an exact amount with. Americans haven't faced a currency crisis in living memory, but it bears recalling from time to time.
Gold is valuable, because it is convertible into any other currency. It isn't widely held in the US because we already use the most convertible currency. Metals were valuable because at one time they were the easiest thing that was rare enough to be portable and valuable, identifiable, verifiable etc.
Gold does have one other element that could be valueless, or quite valuable. You can't trace gold...at least, not very well. They're trying though.
Society will always need a method of trading non expertise things. Without trading, it comes down to who has a bigger club.
Now a lot of prepping is based on specific item scarcity. If normal commerce is interrupted, then that surplus during scarcity will be rewarded for a smooth transition during an event and easy replenishment afterwards. If you chose correctly and if your own stockpile can be maintained safely both during the event and subsequently during increasing scarcity. The problem is if you cannot replenish it like the self-sufficiency would advocate, then really it's just something that's less scarce for you. It almost makes you a target.
The problem being that self-sufficiency of food alone almost eliminates mobility, which means a greater defense build-up. Which means more people.
Which becomes why it is hard to agree. So most people will go head in the stand. Others will maximize mobility, stealth and land survival skills and others simply spreading their their chips over two or more roulette numbers instead of 1 and hoping one of them doesn't get hit with a future event.
When SHTF, Safety in a time of not safety, is valuable. Then it works its way back up the hierarchy of needs. (Meislow sp?).
If I were to get to my bug-out spot, I will need an airplane. I could offer them dollars. I could offer the Euro. I could offer them RMB. I could offer them gold. If the US is kaput economically but all else is fine, the currency that can buy whatever is wanted will be the one of value. If a disaster has hit and flights out are scarce, but full recovery at some point seems likely, then dollars will do just fine. In a socialist secret police type avenue, gold would likely be the way to go. However in a literal zombie outbreak, or acute and grievous attack on a proportion of the citizenry (i.e. all caucasian christians must be rounded up and put in camps), shared safety may be all that's needed to be offered.
Of all the possible scenarios that could lead to the EOTWAWKI-- EMP, war, economic recession, invasion by Martians, depletion of oil, massive failure of crops etc etc, the most likely is that national debt will rise to the point that no one will buy US bonds anymore & the Fed runs out of green ink. The welfare checks will stop coming in the mail and chaos will ensue.
Wilson created, with misgivings, the Fed. Doing this gave the US a very potent advantage over the world. The American currency would be the new gold, and the gold would be housed in the US. The new Federal Reserve Notes would reign supreme around the globe.
What was understood by Wilson, was the grave danger the new Fed could pose to the country. Still, it could be controlled. All the country needed to do was make sure that it didn't run up alarming deficits. Certainly a distinguished Congress and oversight could accomplish this. Besides, there was the second catch of needing gold to produce Fed notes...so there were lots of safeguards. It's like keeping a tiger in your throne room. All others will realize its strength and power.
However, we've forgotten this. The Fed has been our friend lately as it finances huge deficits, but it really doesn't have to be. I think the current chief has made it fairly clear that he has no intention of being our friend.
Of course, the US can still dismantle the bank's charter, or replace the head....but that doesn't erase debt. And all of the world now has USD based debts on a terrific array of assets. Start pulling dollars in...faster than inflation and things are going to start to break.
This last Fed move scared me more than anything in awhile. While our modern financial texts would tell us that paying down low interest debt is a silly move, if the Fed is going to start making Federal dollars much more dear. That is, it's going to stop being the US Fed and start acting like the Fed Fed, then I start wondering if this is the Fed's endgame. Christmas shopping is done. Until we get a quarter where the Fed isn't raising rates, I'm not buying gold, stocks or real estate. I'm deleveraging.
Of all the possible scenarios that could lead to the EOTWAWKI-- EMP, war, economic recession, invasion by Martians, depletion of oil, massive failure of crops etc etc, the most likely is that national debt will rise to the point that no one will buy US bonds anymore & the Fed runs out of green ink. The welfare checks will stop coming in the mail and chaos will ensue.
While I don't agree that it is the most likely, I would say it is one of the most likely.
Right now, others around the world are buying our bonds, at a fair pace. Not spectacular, as they were doing in 2007, however. But the current outstanding debts I talk about are not only the US gov, but state and local governments (IL and a few others especially) are out of control. Also personal debt.
I think the possibility of someone, somewhere, detonating a nuclear weapon to intentionally damage the U.S. is pretty high on the possible scenarios, as are pandemics and a couple of others, but the debt bubble definitely ranks high on the list of possibilities.
Now a lot of prepping is based on specific item scarcity. If normal commerce is interrupted, then that surplus during scarcity will be rewarded for a smooth transition during an event and easy replenishment afterwards. If you chose correctly and if your own stockpile can be maintained safely both during the event and subsequently during increasing scarcity. The problem is if you cannot replenish it like the self-sufficiency would advocate, then really it's just something that's less scarce for you. It almost makes you a target.
...
You have such an elegant way of putting things.
The above paragraph is pretty much what drives my prep efforts.
The cnbc article is basically a mild form of "yellow journalism"
There wasn't any problem with "liquidity" last week, (higher interest
rates tend to prevent liquidity problems until people lose confidence)
but a public announcement of a possible liquidity problem could spur
a run on the banks, which could then cause one.
OTOH, there could be liquidity problem in some other country, and
he may be simply insuring that it couldn't spread to the U.S.
The cnbc article is basically a mild form of "yellow journalism"
There wasn't any problem with "liquidity" last week, (higher interest
rates tend to prevent liquidity problems until people lose confidence)
but a public announcement of a possible liquidity problem could spur
a run on the banks, which could then cause one.
OTOH, there could be liquidity problem in some other country, and
he may be simply insuring that it couldn't spread to the U.S.
How rare/common is something like this happening? I can't recall it happening recently?
The cynic in me determined it can't be positive and really the only logical conclusion (at least from what I know, I'm still learning more about finance and the economy) is that this is likely bad news and they are trying to get ahead of or prevent an anticipated crisis.
How rare/common is something like this happening? I can't recall it happening recently?
The cynic in me determined it can't be positive and really the only logical conclusion (at least from what I know, I'm still learning more about finance and the economy) is that this is likely bad news and they are trying to get ahead of or prevent an anticipated crisis.
In 2008 and again in 2013 (more or less, I don't remember exactly), the world banking system teetered on the brink of collapse. Almost everyone watching knew about the 2008 crisis, though not many knew the world came within two hours of a worldwide financial collapse. Some people remember, we injected around $800B into our banking system to keep it going. Almost no one knows we also injected another ~$800B more into the World banking system.
The 2014 crisis was less visible, and only a few of us were watching it.
we see that immediately following the Lehman collapse in mid-September 2008, the Fed expanded the supply of reserves from $45 billion to more than $800 billion in a matter of weeks. Over the next four years, the Fed continued this massive expansion of reserves. Today, U.S. banks hold nearly $3 trillion in reserves (see our earlier post on the size of central bank balance sheets). This rise is what analysts commonly refer to as “quantitative easing” (QE).
but what isn't obvious to most people is that you have to subtract the Fed Balance sheet
Quote:
In 2007, the Fed’s balance sheet was less than $1 trillion. Today, it is nearly $4.5 trillion. The U.S. experience is far from unique. Since 2007, global central bank balance sheets have nearly tripled to more than $22 trillion as of mid-2014. And, the increase is split evenly between advanced and emerging market economies (EMEs) (see chart).
In any case, we can see that the real balances are below zero.
In 2008 and again in 2013 (more or less, I don't remember exactly), the world banking system teetered on the brink of collapse. Almost everyone watching knew about the 2008 crisis, though not many knew the world came within two hours of a worldwide financial collapse. Some people remember, we injected around $800B into our banking system to keep it going. Almost no one knows we also injected another ~$800B more into the World banking system.
The 2014 crisis was less visible, and only a few of us were watching it.
but what isn't obvious to most people is that you have to subtract the Fed Balance sheet
In any case, we can see that the real balances are below zero.
Thanks as always.
Merry Christmas as well
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