Idea for Macro:
- Inflation? Deflation? Both exist.
- The bottom line is that there is deflation in demand. The price of Oil/CPI is on a clear decline.
- The Fed and Central Banks do not control economic inflation and deflation, only asset inflation.
- Inflation exists in assets, as made clear by the parabolic prices of nearly every asset class.
- The USA is the world's largest debtor nation, and their debt is increasing at a parabolic rate.
- The US cannot endure deflation. This is why the Fed and Biden administration goes to such extreme measures to engineer asset inflation, in hopes of negating economic deflation.
- Reflexivity states that when prices deviate too far from objective, underlying fundamentals, prices will reverse to converge back toward equilibrium.
- The breaking point is likely not to be either inflation nor deflation. The Black Swan is most likely to be in the implicit short volatility bubble. The world is short volatility in explicit and implicit positions. At any point, reflexivity can crash this bubble in an onslaught of volatility, leading to the unravelling of the monstrous $2.4 quadrillion derivatives bubble.
- We have seen the 'Six Sigma event' in the GME short squeeze.... If you see a 'Six Sigma event' in the market, it's not a 'Six Sigma event'.
- Hedge fund liquidations and near crises are appearing from the smallest events of volatility. The short volatility trade has been normalized, and institutional investors are incredibly leveraged.
- Now the whole world has one language and a common speech: "Buy the Dip".
- Tesla and Bitcoin's previous high marked peak euphoria, and the point of maximum financial risk. The current bounce is simply complacency. When the market is in complacency, anxiety will come next.
- QE Tapering has already begun.
- The tidal wave of volatility to come will be mythical.
- The time has come.
GLHF
- DPT
When He broke the third seal, I heard the third living creature saying, "Come." I looked, and behold, a black horse; and he who sat on it had a pair of scales in his hand. And I heard something like a voice in the center of the four living creatures saying, "A quart of wheat for a denarius, and three quarts of barley for a denarius; but do not damage the oil and the wine." - Revelation 6:5-6
And on every lofty mountain and every high hill there will be brooks running with water, in the day of the great slaughter, when the towers fall. - Isaiah 30:25
- Inflation? Deflation? Both exist.
- The bottom line is that there is deflation in demand. The price of Oil/CPI is on a clear decline.
- The Fed and Central Banks do not control economic inflation and deflation, only asset inflation.
- Inflation exists in assets, as made clear by the parabolic prices of nearly every asset class.
- The USA is the world's largest debtor nation, and their debt is increasing at a parabolic rate.
- The US cannot endure deflation. This is why the Fed and Biden administration goes to such extreme measures to engineer asset inflation, in hopes of negating economic deflation.
- Reflexivity states that when prices deviate too far from objective, underlying fundamentals, prices will reverse to converge back toward equilibrium.
- The breaking point is likely not to be either inflation nor deflation. The Black Swan is most likely to be in the implicit short volatility bubble. The world is short volatility in explicit and implicit positions. At any point, reflexivity can crash this bubble in an onslaught of volatility, leading to the unravelling of the monstrous $2.4 quadrillion derivatives bubble.
- We have seen the 'Six Sigma event' in the GME short squeeze.... If you see a 'Six Sigma event' in the market, it's not a 'Six Sigma event'.
- Hedge fund liquidations and near crises are appearing from the smallest events of volatility. The short volatility trade has been normalized, and institutional investors are incredibly leveraged.
- Now the whole world has one language and a common speech: "Buy the Dip".
- Tesla and Bitcoin's previous high marked peak euphoria, and the point of maximum financial risk. The current bounce is simply complacency. When the market is in complacency, anxiety will come next.
- QE Tapering has already begun.
- The tidal wave of volatility to come will be mythical.
- The time has come.
GLHF
- DPT
When He broke the third seal, I heard the third living creature saying, "Come." I looked, and behold, a black horse; and he who sat on it had a pair of scales in his hand. And I heard something like a voice in the center of the four living creatures saying, "A quart of wheat for a denarius, and three quarts of barley for a denarius; but do not damage the oil and the wine." - Revelation 6:5-6
And on every lofty mountain and every high hill there will be brooks running with water, in the day of the great slaughter, when the towers fall. - Isaiah 30:25
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China Credit Cycle and US Markets Reflexivity:
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"The impact of such a recession may be significantly felt in a few industries, but it does not wreck an entire economy. A nation-wide depression, such as occurred in the United States in the thirties, would not have been possible in a fully free society. It was made possible only by government intervention in the economy—more specifically, by government manipulation of the money supply." (Capitalism: The Unknown Ideal, 1966.)
"When the inevitable end of a force-fed credit cycle arrives, the collapse in credit and business activity is so severe that not just weak businesses are swept away, but also the strong. There is no benefit to a herd from indiscriminate slaughter and likewise no benefit to an economy from the indiscriminate ruin of businesses."
"The flood of paper money, as you well know, had produced an exaggeration of nominal prices and at the same time a facility of obtaining money, which not only encouraged speculations on fictitious capital, but seduced those of real capital, even in private life, to contract debts too freely."
—Thomas Jefferson. Letter to Albert Gallatin, Monticello, December 26, 1820.
"When the inevitable end of a force-fed credit cycle arrives, the collapse in credit and business activity is so severe that not just weak businesses are swept away, but also the strong. There is no benefit to a herd from indiscriminate slaughter and likewise no benefit to an economy from the indiscriminate ruin of businesses."
"The flood of paper money, as you well know, had produced an exaggeration of nominal prices and at the same time a facility of obtaining money, which not only encouraged speculations on fictitious capital, but seduced those of real capital, even in private life, to contract debts too freely."
—Thomas Jefferson. Letter to Albert Gallatin, Monticello, December 26, 1820.
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"Common sense could have told them, that credit is the most uncertain and most fluctuating thing in the world, especially when it is applied to stock-jobbing; that it had long before been exalted higher than it could well stand, even before it was come to twenty above par; and therefore always tottered, and was always tumbling down at every little accident and rumour. A story of a Spanish frigate, or of a few thieves in the dark dens in the Highlands, or the sickness of a foreign prince, or the saying of a broker in a coffee-house; all, or any of these contemptible causes were able to reduce that same credit into a very slender figure, and sometimes within her old bounds: But particularly, they might have seen, that it was now mounted to such an outrageous height, as all the silver and gold in Europe could not support; and therefore, when people came in any considerable number to sell (and to sell was the whole end of their buying), it would have a dreadful fall, even to the crushing of the nation."
—Thomas Gordon. Cato’s Letters No. 16, How easily the people are bubbled by deceivers. Further caution against deceitful remedies for the public sufferings from the wicked execution of the South-Sea scheme, Saturday, December 10, 1710.
—Thomas Gordon. Cato’s Letters No. 16, How easily the people are bubbled by deceivers. Further caution against deceitful remedies for the public sufferings from the wicked execution of the South-Sea scheme, Saturday, December 10, 1710.
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"Credit expansion initially can produce a boom. But such a boom is bound to end in a slump, in a depression. What brings about the recurrence of periods of economic crises are precisely the reiterated attempts of governments and banks supervised by them to expand credit in order to make business good by cheap interest rates." (The Theory of Money and Credit, 1912.)
"A ‘cheap money’ policy was the guiding idea and goal of these officials. Banks were no longer to be limited in making loans by the amount of their gold reserves. Interest rates were no longer to rise in response to increasing speculation and increasing demands for funds. Credit was to remain readily available—until and unless the Federal Reserve decided otherwise …
Throughout most of the 1920s, the government compelled banks to keep interest rates artificially and uneconomically low. As a consequence, money was poured into every sort of speculative venture. By 1928, the warning signals of danger were clearly apparent: unjustified investment was rampant and stocks were increasingly overvalued. The government chose to ignore these danger signals …
The boom and the wild speculation … were allowed to rise unchecked, involving, in a widening network of mal-investments and miscalculations, the entire economic structure of the nation. People were investing in virtually everything and making fortunes overnight—on paper." —Nathaniel Brandon. Capitalism: The Unknown Ideal, 1996.
"A ‘cheap money’ policy was the guiding idea and goal of these officials. Banks were no longer to be limited in making loans by the amount of their gold reserves. Interest rates were no longer to rise in response to increasing speculation and increasing demands for funds. Credit was to remain readily available—until and unless the Federal Reserve decided otherwise …
Throughout most of the 1920s, the government compelled banks to keep interest rates artificially and uneconomically low. As a consequence, money was poured into every sort of speculative venture. By 1928, the warning signals of danger were clearly apparent: unjustified investment was rampant and stocks were increasingly overvalued. The government chose to ignore these danger signals …
The boom and the wild speculation … were allowed to rise unchecked, involving, in a widening network of mal-investments and miscalculations, the entire economic structure of the nation. People were investing in virtually everything and making fortunes overnight—on paper." —Nathaniel Brandon. Capitalism: The Unknown Ideal, 1996.
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"National credit can never be supported by lending money without security, or drawing in other people to do so; by raising stocks and commodities by artifice and fraud, to unnatural and imaginary values; and consequently, delivering up helpless women and orphans, with the ignorant and unwary, but industrious subject, to be devoured by pick-pockets and stock-jobbers; a sort of vermin that are bred and nourished in the corruption of the state." (Cato’s Letters No. 4, Against false methods of restoring public credit, Saturday, November 26, 1720.)
"None of the arguments that economics advances against the inflationist and expansionist doctrine is likely to impress demagogues. For the demagogue does not bother about the remoter consequences of his policies. He chooses inflation and credit expansion although he knows that the boom they create is short-lived and must inevitably end in a slump. He may even boast of his neglect of the long-run effects. In the long run, he repeats, we are all dead; it is only the short run that counts." —Ludwig Von Mises. The Theory of Money and Credit, 1912.
"None of the arguments that economics advances against the inflationist and expansionist doctrine is likely to impress demagogues. For the demagogue does not bother about the remoter consequences of his policies. He chooses inflation and credit expansion although he knows that the boom they create is short-lived and must inevitably end in a slump. He may even boast of his neglect of the long-run effects. In the long run, he repeats, we are all dead; it is only the short run that counts." —Ludwig Von Mises. The Theory of Money and Credit, 1912.
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What caused the great recession to become the Great Depression was the massive ongoing interference by the U.S. Federal Reserve and U.S. Federal Government against the forces of the market. These interferences, on a scale which would be disastrous during prosperous times, were catastrophic when taken in the middle of a heavy recession. They prevented necessary adjustments being made and thereby made recovery take longer as resources continued to be misallocated and incentives undermined.
Politicians love force-fed credit booms for the same reason disk jockeys love cocaine dealers: they know it will make the crowd feel good and they will get the kudos. This was the motivation behind George H. W. Bush’s hostility towards Alan Greenspan when Greenspan kept interest rates high in 1991.
- Principles of Good Government
Politicians love force-fed credit booms for the same reason disk jockeys love cocaine dealers: they know it will make the crowd feel good and they will get the kudos. This was the motivation behind George H. W. Bush’s hostility towards Alan Greenspan when Greenspan kept interest rates high in 1991.
- Principles of Good Government
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The sub-prime mortgage crisis of 2008, which triggered the worldwide credit crunch known as the Global Financial Crisis, was a classic example of a force-fed credit cycle. The Federal Reserve progressively lowered interest rates from 6.5 percent in 2000 down to 1 percent in 2003, then kept them at less than 3 percent until May 2005. The Federal Reserve claimed that these low rates were needed to ‘cushion’ the economy from the effects of the September 11, 2001 terrorist attacks and the bursting of the dot com bubble. This was true in as much as those two factors threatened to act as catalysts to end an existing force-fed credit inflation boom. However, prescribing low interest rates as a fix for a force-fed credit inflation boom is akin to prescribing a bottle of whiskey to cure a threatened hangover—it may delay the inevitable but it only makes it far worse.
With so much cheap credit (low interest rates), the banks and shadow banking sector had no choice but to begin lending on risky loans once the market for good borrowers had been saturated. So extreme was the situation that lenders could not even pretend to be lending wisely. So instead they created a name for what they were doing to give it credibility: ‘sub-prime.’ They told investors that through a combination of new arrears-tracking-technology and mortgage insurance, they could (for the first time in history) make risky loans safe. As a result of the hallucinogenic effect of Reserve Bank force-fed credit, investors were not thinking straight and swallowed these delusional claims. The bursting of the credit bubble was inevitable, and should have taken place in 2001—and would have done so with far less damage to worldwide prosperity. The longer it was forestalled, the higher the rates of delusion grew, the more mal-investment, and the worse the fallout was when the end finally came. Yet, despite the clear and repeated lessons of history, when the bubble finally did burst in 2008, the demagogues in the United States Congress did not blame the Federal Reserve. Instead they blamed:
- Drops in the housing market;
- High-risk mortgage loans;
- Wall Street greed and risky new financial products;
- Fraudulent loan brokers;
- Predatory lending practices;
- Securitization practices;
- Incentive structures;
- Mortgage insurers;
- Inaccurate credit ratings;
- Financial institution over-gearing.
With so much cheap credit (low interest rates), the banks and shadow banking sector had no choice but to begin lending on risky loans once the market for good borrowers had been saturated. So extreme was the situation that lenders could not even pretend to be lending wisely. So instead they created a name for what they were doing to give it credibility: ‘sub-prime.’ They told investors that through a combination of new arrears-tracking-technology and mortgage insurance, they could (for the first time in history) make risky loans safe. As a result of the hallucinogenic effect of Reserve Bank force-fed credit, investors were not thinking straight and swallowed these delusional claims. The bursting of the credit bubble was inevitable, and should have taken place in 2001—and would have done so with far less damage to worldwide prosperity. The longer it was forestalled, the higher the rates of delusion grew, the more mal-investment, and the worse the fallout was when the end finally came. Yet, despite the clear and repeated lessons of history, when the bubble finally did burst in 2008, the demagogues in the United States Congress did not blame the Federal Reserve. Instead they blamed:
- Drops in the housing market;
- High-risk mortgage loans;
- Wall Street greed and risky new financial products;
- Fraudulent loan brokers;
- Predatory lending practices;
- Securitization practices;
- Incentive structures;
- Mortgage insurers;
- Inaccurate credit ratings;
- Financial institution over-gearing.
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However, all these were merely symptoms of force-fed credit—not the cause. The basic observed phenomenon of economics is “have cheap money, will invest,” and if there is nothing real to invest in, then the surplus credit will be invested in fictitious capital.
In the case of the 2008 crash, the fictitious capital was house prices. These were bid up way beyond their real value by over-geared borrowers wielding their non-conforming loans.
After the crash, the U.S. Federal Reserve, instead of allowing the credit markets to find their own equilibrium, began offering credit at 0 percent. As Japan discovered in the 1990s, prescribing whiskey to cure a hangover simply leads to lost decades.
In the case of the 2008 crash, the fictitious capital was house prices. These were bid up way beyond their real value by over-geared borrowers wielding their non-conforming loans.
After the crash, the U.S. Federal Reserve, instead of allowing the credit markets to find their own equilibrium, began offering credit at 0 percent. As Japan discovered in the 1990s, prescribing whiskey to cure a hangover simply leads to lost decades.
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I understand now, the force-fed credit cycle is coming to an end.
There is no monetary inflation, because the money created does not enter the economy... however there is credit inflation because credit is created with that money as collateral.
When credit can no longer inflate, credit inflators will begin to sell assets so that they can redeem their asset appreciation for money to redeem for the debt they have lent or borrowed.
Where is the money that was injected into the economy? Where did it come from? Who loses here?
YOU!
The money created from high salaries caused by the speculative asset bubble, and the middle class who invest their hard-earned dollars into the asset bubble, creating more jobs and easy money, which is in turn invested back into the bubble for effortless paper wealth... The inflated prices you pay for food, education, housing, health care... When credit inflators decide to redeem their asset appreciation. It all returns to ashes.
There is no monetary inflation, because the money created does not enter the economy... however there is credit inflation because credit is created with that money as collateral.
When credit can no longer inflate, credit inflators will begin to sell assets so that they can redeem their asset appreciation for money to redeem for the debt they have lent or borrowed.
Where is the money that was injected into the economy? Where did it come from? Who loses here?
YOU!
The money created from high salaries caused by the speculative asset bubble, and the middle class who invest their hard-earned dollars into the asset bubble, creating more jobs and easy money, which is in turn invested back into the bubble for effortless paper wealth... The inflated prices you pay for food, education, housing, health care... When credit inflators decide to redeem their asset appreciation. It all returns to ashes.
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I speculate a Generational top in the nearest future.
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CBOE SKEW predicting a crash:
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If it wasn't obvious that QE tapering has begun, Fed announces winding down corporate credit: www.federalreserve.g...onetary20210602a.htm
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Lumber tends to lead the crashes:
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Fed Reverse Repurchase Agreements at an ATH and climbing. It is clear that Tapering is in full force.
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How ironic it would it be if the exact opposite of what people were scared of and what the bulls wanted to happen was the catalyst:
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Fed Balance sheet liquidity providing components turn down, inflation at highest point since Lehman's
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China Credit Impulse 12M change again drops
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"The sucker has always tried to get something for nothing." - Thomas F. Woodlock
