Use access key #2 to skip to page content.

What Now? On the Election, World Markets, Deflation into Hyperinflation

Recs

28

October 26, 2008 – Comments (17) | RELATED TICKERS: SKF , SRS

NOTE:

Before you read my Bearish diatribe, I wanted to tell you Fools a few things.

Being born with an American citizenship provides you with a standard of living higher then 90% of those on the planet and a Bill of Rights that is better then 98% of the planet.  Americans have been “living the dream” created by the reserve currency status of the US dollar, a relatively low population density and an eroding Constitution and Bill of Rights. Regardless of the future, your health and citizenship are still the two best assets you have.  To despair about the future is the wrong attitude for an American, it is better to prepare and thank the Lord for what you do have. There will be some changes in the US, but the fact that you are reading this Blog makes me think you are well ahead of “Joe plumber” types. Also these times create opportunities of a lifetime for investors on the right side of the market.       

What Now?

            It's fascinating to read the commentators in mainstream journals like The Financial Times and The Wall Street Journal all strenuously pretending that "the worst is over" (maybe... we hope... fingers crossed... hail Mary full of grace... et cetera). The cluelessness would be funny if it didn't involve a world-changing catastrophe. All nations that have reached the fork-and-spoon level of civilization are now engineering a vast network of cyber-cables that lead directly from their central bank computers to the Death Star that is hovering above world financial affairs like a giant cosmic vacuum cleaner, sucking up dollars, euros, zlotys, forints, krona, what-have-you. As fast as the keystrokes create currency-pixels, the little electron-denominated units of exchange are sucked out of the terrestrial economies into the black hole of money death. That's what the $700-billion bail-out (excuse me, "rescue plan") and all its associated ventures are about.
      To switch metaphors, let's say that we are witnessing the two stages of a tsunami. The current disappearance of wealth in the form of debts repudiated, bets welshed on, contracts canceled, and Lehman Brothers-style sob stories played out is like the withdrawal of the sea. The poor curious little monkey-humans stand on the beach transfixed by the strangeness of the event as the water recedes and the sea floor is exposed and all kinds of exotic creatures are seen thrashing in the mud, while the skeletons of historic wrecks are exposed to view, and a great stench of organic decay wafts toward the strand. Then comes the second stage, the tidal wave itself -- which in this case will be horrific monetary inflation -- roaring back over the mud flats toward the land mass, crashing over the beach, and ripping apart all the hotels and houses and infrastructure there while it drowns the poor curious monkey-humans who were too enthralled by the weird spectacle to make for higher ground. The killer tidal wave washes away all the things they have labored to build for decades, all their poignant little effects and chattels, and the survivors are left keening amidst the wreckage as the sea once again returns to normal in its eternal cradle.
       So, that's what I think we will get: an interval of deflationary depression followed by a destructive wave of inflation that will wipe out both constructed debt and constructed savings, scraping the financial landscape clean. There's no question that stage one is underway. But we can be sure the giant wave of money recklessly loaned into existence in just a few weeks time will wash back through the global economy leaving a swath of destruction.
     And then what? The societies of the world will be faced with the task of rebuilding systems of fruitful activity, i.e., real economies based on productive behavior rather than the smoke-and-mirrors of Frankenstein-finance con games. In fact, excuse me while I switch metaphors again, because the Frankenstein story -- the New Prometheus -- is yet another apt narrative to inform us what we have done. We have "played" with financial fire and brought to life a monster now bent on killing us. One question that this metaphor-narrative raises is: when will the angry peasant mob storm the castle with their flaming brands and cries for blood from the makers of this monster? Rather soon, I think. Perhaps, in some countries (maybe the USA, if we're lucky), this will take the more orderly form of systematic prosecutions, bringing to justice persons who perpetrated swindles involving the alphabet soup of investment "products" that have gone bad in so many accounts (and ruined so many individuals, institutions, and governments). I think it has already begun with the inquisitors summoning the shifty Dick Fuld of Lehman Brothers -- but there are hundreds of other characters like him out there, who scored untold millions of dollars in activities that were simply grand swindles. I wouldn't be surprised if, eventually, Treasury Secretary Hank Paulson found himself in the dock to answer how come, when he ran Goldman Sachs, there was a special unit in the company dedicated to short-selling the very mortgage-backed securities that another unit in the company was so busy pawning off to every pension fund on God's green earth.
       Apart from orderly prosecutions (which can certainly turn harsh and cruel), there is the possibility of sociopolitical upheaval -- revolution, violence, civil war, war between nations, the whole menu of monkey-human mischief that afflicts mankind. We are not necessarily immune to it here in the USA, despite our cherished notion of exceptionalism, which would have us inoculated against all the common vicissitudes of history.

What Now? James Kunstler

abitarePERFECT, and Ares have made their climb up on the Fool latter based on the Deflationary Depression gamble.

aresFinancial is now #1 with 10964 points. I think that might be the record here in Caps

abitarePERFECT is #6 out of 63097

abitarecatania is ·  UpDown ranking: #37 of 98343 (-2)  abitare.. (you)

Today: 5.3%

This Month: 82.2%

YTD: 160.6%

All Fools short the US market and in cash should be on the alert for any signs of hyper-inflation.

Financial Ninja has some Really Scary Charts here:

http://benbittrolff.blogspot.com/2008/10/really-scary-fed-charts-oct-now-crazy.html

On the Election

I will be voting for a Third Party Candidate this year. I hope other Fools in Fooldom have the moral courage to turn their back on this inept and corrupt one party duolopoly that has caused such chaos. The lesser of two evils is still choosing evil. If Americans do not reject these Fools they keep offering, then we will “reap what we have sown”. I hope Fools will not “throw their vote away” on either of these two disasters.

Obama

Obama has not released his birth certificate. It is believed he was born in Kenya. It is another blow to the Constitution that is not needed. I believe if he is elected and tries to go against the elites’ will, they will make this an issue. Not that Obama’s mysterious childhood up bringing, unknown positions and paper thin resume should instill any confidence.  Watch the whole video and draw your own conclusions.

Reference:  

1. Obama Citizenship (3,216,243 Views)

http://www.youtube.com/watch?v=gA6_k3NtXZs

McCain

McCain? What can you say that has not already been said? Corrupt, inept, uber-dumb, hot tempered, elitist, womanizer, a “warrior who is dumb on war” etc, etc, etc,. I cannot imagine what subject he can speak on, which will instill confidence to the masses. Please help me here.  

Reference:

1. McCain's YouTube Problem Just Became a Nightmare (Views: 7,659,315)

2. Make-Believe Maverick

A closer look at the life and career of John McCain reveals a disturbing record of recklessness and dishonesty

http://www.rollingstone.com/news/coverstory/make_believe_maverick_the_real_john_mccain

 

Do you need more on McCain?

 

Palin? Totally dangerous insanity…a mockery of the Office

Matt Damon covers it here:

http://www.youtube.com/watch?v=anxkrm9uEJk

 

I am aligned with the US favorite Persian Noureil Roubini here:

http://www.youtube.com/watch?v=USmm6utTo1E

 

I am still betting on deflation unless there is a greater war.  Intrade has odds at 30% for a greater war.

A U shaped or L shaped recession until then.

 

If you think the US market is bad or has seen the bottom look at the rest of the world:

Many world stock markets now off 50% or more from peaks

Los Angeles Times 24 Oct 08

http://latimesblogs.latimes.com/money_co/2008/10/heres-a-club-no.html

Markets down more than 70%:

Vietnam (-70.5%), Peru (-73.2%), Ireland (-73.4%), Russia (-73.9%), Iceland (-88.7%).

Markets down between 60% and 70%:

Hong Kong (-60.1%), Poland (-62.6%), China (-69.8%).

Markets down between 50% and 60%:

South Korea (-54.5%), Italy (-55.2%), Egypt (-56.9%), Brazil (-57.2%), Japan (-58.1%), Singapore (-58.2%), Turkey (-58.5%), India (-58.3%).

Markets down between 40% and 50%:

Great Britain (-42.3%), Australia (-43.3%), U.S.-S&P 500 (-44.0%), Spain (-46.4%), Germany (-47.0%), Mexico (-48.3%).

17 Comments – Post Your Own

#1) On October 26, 2008 at 1:33 PM, Option1307 (29.65) wrote:

Excellant post, strange analogies and all. I hope your thesis will in time be proven incorrect; however, I am not naive enough to think that this scenario is not a real possibility.

I share your thought in regards to this election, I will be voting third party because I cannot stand the two clowns that we have been offered by the two awesome parties out there. Whoever wins, most likely Obmama, is going to continue ruining our country until it is completely unrecognizable. Either way, both of these retards are not going to do half of the stuff they promise now, and will only cater to the special interest groups that have gotten us here in the first place. Hopefully we will have a peaceful revolutino as you describe. We need somethin, quickly, or we won't have anything to save...

 Thanks for the links, stellar as usual. I'm glad you chose to not "retire" from blogging...

Report this comment
#2) On October 26, 2008 at 1:49 PM, dwot (42.57) wrote:

I like the tsunami reference.  I think it is going to be years before a turn around.  There will be enough hurting to go around people will actually wait until they can pay for things before buying them. 

Having made my first home purchase at the top of a bubble, not having any kind of pension plan and losing 40% of my retirement savings with the tech bubble, well, debt was always a challenge. I just traded in the 19 year old vehicle this past summer.  I remember when it was 10 years old thinking, I hope it gives me 3 to 5 more years because it will wipe out 3 years of what I can pay down on my mortgage when I have to replace it.  I think people will drive their vehicles much longer. 

I think family income wise I was in the top 20 or so percent because my husband had a good job, we never had kids, shared a vehicle for 12 years, but paying for that bubble home essentially kept us close to house poor and looking at age 60 to get clear title on the mortgage.  We were supposed to be the ones spending money, but we truly weren't, we just paid back debt.

When you move to an economy where so many are obsessing about getting their debt under control, well, here comes the slug economy for years.

Report this comment
#3) On October 26, 2008 at 2:15 PM, MarketBottom (29.15) wrote:

McCain wins election in historic landslide

Report this comment
#4) On October 26, 2008 at 2:45 PM, jgseattle (34.21) wrote:

Dwot - a 1986 Toyata SR5 paid for my college.  How?  Purchased it for cash in 1988 for $5000 and drove it until someone decided they wanted it more than I needed it in 2003.  At that time it has 250000 miles on it.  from 1990 to 1995 I drove over 100000 miles for work at .32/mile all the time going to college.  I also saved over $200/month in car payments.  I have not done a NPV of my SR5 bet it kills the NPV of any lease executed in 1988!

So in 2003 I HAD to buy another car, i hope that theif chokes on his dinner, and paid cash for a 1998 Acura.  I have now put over 100000 miles on it with 50000 miles being business at .42/mile. 

The car companies love the annuity of leases but I think with the coming tide of lease experations we will see some great deals moving forward. 

So if you want some good advice to prepare for the coming recession.  Get out from under you lease, buy a used car that is dependable and keep it for 10 - 15 years and maybe it will pay for your college or maybe dinner.

 

Report this comment
#5) On October 26, 2008 at 2:52 PM, RonChapmanJr (90.28) wrote:

"matt damon covers it here".

oh brother.  yes, palin isn't the brightest person ever, but does having jason bourne say it make it more true?

Report this comment
#6) On October 26, 2008 at 3:55 PM, lquadland10 (< 20) wrote:

You are so much closer than you can ever know. If oil reaches 50.00 a barrel then the world has no choice to dump the us dollar. The powers don't have to wait for Palin to get elected and discover oil in anwar all the powers have to do is sell some gold bullion and presto deflation. Manipulate some currency and voila low oil. That makes the dollar rise and just like the preacher and rogers and shift said they will sell the dollar and so will the opec nations. Then what do you think will happen. If the powers can't do it one way they will do it another. ( The art of war is a good book.)

Report this comment
#7) On October 26, 2008 at 4:39 PM, lquadland10 (< 20) wrote:

http://www.freerepublic.com/focus/f-news/1940665/posts   

The Ron Paul Plot

 

Sun, Dec 16, 2007 at 8:46:48 am PST

 

A dastardly plot is afoot to silence

 

The Only Man Who Can Save America: They Want To Kill Ron Paul.

 

Best-selling author and Bilderberg sleuth Daniel Estulin says he has received information from sources inside the U.S. intelligence community which suggests that people from the highest levels of the U.S. government are considering an assassination attempt against Congressman Ron Paul because they are threatened by his burgeoning popularity.

 

Estulin, whose information has unfortunately proven very accurate in the past, went public with the bombshell news during an appearance on The Alex Jones Show today.

 

“I am getting information from my sources that there are people involved from a higher level of the American establishment who are seriously considering - this has not been confirmed - but assassination is definitely on the agenda and I pray to God that this is not the case,” said Estulin.

Report this comment
#8) On October 26, 2008 at 7:34 PM, lquadland10 (< 20) wrote:

Hey Ares can you re post mc cain ask palyn to be vice pres. I need it and it also be a good re post> I can't find yours.

Report this comment
#9) On October 26, 2008 at 8:17 PM, abitare (31.77) wrote:

ALCON,

 

Thanks for the replies.

 

Option1307

I hope your thesis will in time be proven incorrect;

We both hope I am incorrect.  Pray for the best, be prepare for the worst.

A prudent man seeth the evil, and hideth himself; But the simple pass on, and suffer for it.

Proverbs 22:3

My people are destroyed for lack of knowledge.
Hosea 4:1-6

dwot

 

Good to hear from you.

I like the tsunami reference. 

Stolen from Kunstler.

I think it is going to be years before a turn around. 

Years, yes. L or U shaped recession? Depends on the policies the government enacts.

When you move to an economy where so many are obsessing about getting their debt under control, well, here comes the slug economy for years.

MarketBottom,

 

McCain wins election in historic landslide

Pre Palin, I had a write up, that McCain would win.

"Nobody will mention his color or his wife to a pollster, but in the booth, millions will vote for McCain. It's called the Bradley effect. Los Angeles' black mayor Tom Bradley ran for governor of California in 1982. He was leading in the polls right up to election day. He was trounced by an Armenian. The Armenian voting bloc was not the cause. This happened to Obama in California in February in the primary. He led in the polls until voting day. There is nothing the Democrats can do about this. Hardly anyone admits publicly that the problem exists, except columnist Robert Novak.

McCain is perceived as a tough guy, a leader, a person who goes his own way. Americans like this in a President. Obama doesn't have this persona."

John McCain is a Lying, Insane, Corrupt, Idiot and NEOCON Puppet. But He will be the next President.

Recs 13  June 07, 2008

RonChapmanJr

 

If Matt Damon gets it, do you think the rest of the nation does not? That is the point. Matt Damon can put it together, why did they choose this women? It is insanely dangerous. There are other sources, SNL, CNN Caferty has a nice comment to Palin’s interview with Couric.

 

lquadland10

 

I will have to take a look. I think if they kill Dr Paul, there will be blow back, that they do not want to deal with. IMO

Report this comment
#10) On October 26, 2008 at 10:52 PM, Ph1sh55 (28.25) wrote:

Why pepper a rather well reasoned assesment with pockets of crazy?

http://www.snopes.com/politics/obama/birthcertificate.asp

Report this comment
#11) On October 26, 2008 at 11:08 PM, abitare (31.77) wrote:

Ph1sh55,

Good find. Last update 25 Oct 08? on Snopes.com. I standby my third party support.

Report this comment
#12) On October 26, 2008 at 11:25 PM, abitare (31.77) wrote:

FYI - Sat, Oct. 25, 2008

Judge rejects Montco lawyer's bid to have Obama removed from ballot

By MICHAEL HINKELMAN
Philadelphia Daily News

hinkelm@phillynews.com 215-854-2656

A federal judge in Philadelphia last night threw out a complaint by a Montgomery County lawyer who claimed that Democratic presidential candidate Barack Obama was not qualified to be president and that his name should be removed from the Nov. 4 ballot.

Report this comment
#13) On October 27, 2008 at 12:43 AM, StockSpreadsheet (71.62) wrote:

Maybe Obama is an isidious plot by the Democrats to get Biden elected.  After all, if Obama is not a U.S.-born citizen, he can't be president.  If this comes out after he gets elected, he would be removed from office and the Vice-President, (Biden), would assume the presidency.  Maybe they just figured that Biden would have no chance whatsoever of getting elected so they are using Obama as a back-door way to get Biden elected president.

Just a thought.

Craig 

Report this comment
#14) On October 27, 2008 at 7:04 AM, DemonDoug (81.27) wrote:

Unsolicited advice: stick with economics, lay off the elections before you make yourself look any more stupid (re: citizenship falsehoods).

More on topic, there is a difference between deflation and disinflation.  Disinflation is with the CPI and other consumer goods and services inflate by minute numbers, less than 2% annually.  Deflation cannot happen unless there is a true contraction or limitation in the money supply, which was common when the money supply had to be dug up and lifted on the backs of hard working miners, but nowadays you just need one guy to press a few buttons presto a few billion more into the system.

What are the price of eggs looking like compared to this time last year?  Where I am, they are still 50-100% higher than 1 year ago.

Report this comment
#15) On October 27, 2008 at 7:44 AM, abitare (31.77) wrote:

StockSpreadsheet,

From my view Biden is marginially better then Palin. He has been in DC for decades and has had a part in the debacle that is now unwinding. But I have no idea, why the Democrats did not get a stronger VP choice is beyond me.

DemonDoug,

Fair call. I posted on 26 Oct, Judge made the call on 25 Oct, the video has been seen 7.5 million times. Maybe the issue is buried. But as you may recall under Clinton's sexual harassment cases dragged out for years and nearly bankrupt him. He was selling pardons and Hillary was stealing Whitehouse silverwear to recover some losses. Some things can haunt you much longer and do more damage then you would expect. But who knows...maybe the PA judge buried it.

"nowadays you just need one guy to press a few buttons presto a few billion more into the system. "

Yep, look at my scary chart link.

I think some things may rise in price somethings are falling. Stocks, real estate, traded commodities etc... are falling. Eggs in CA? no idea, near term or long term.

 

Report this comment
#16) On October 27, 2008 at 1:10 PM, russiangambit (29.12) wrote:

On the Obama issue, does he have to be a US-born citizen, i.e. a citzen from birth, who he is because his mother was a citzen, or does he have to be born on the US soil specifically?

I think he has to be a ctizen from birth, not necessarily born in the US. Because otherwise all kids born to US military abroad would be also disqualified? That wouldn't make sense.

I remember I had this question as one of questions in the US immigration exam. The answer was, a candidate must be a native US citizen, i.e. a citizen from birth, i.e. not naturalized. There was no stipulation that one must be born on the US soil.

So, I think the Obama's birth issue is much ado about nothing.

Report this comment
#17) On October 27, 2008 at 7:08 PM, jegr5347 (< 20) wrote:

He could have been born in Karachi, Pakistan. All his mother had to do was take him to the embassy after birth and fill out the paperwork, which she did if your statements are true since he is a citizen from birth as opposed to a naturalized citizen. Done, finito.

You guys are drowining in a cup of water.

Report this comment

Featured Broker Partners


Advertisement