marceau

Yes, that's a deficit, and the plans the conlibs have to reduce it, is what is keeping the markets sweet.

 

If they reduce the deficit as planned (and stop wasting s**t loads as has been happening over the last 20 years), the debt only then increases at the IR charged (debt has been increasing for the last 60 years).

 

Productivity is what brings real growth. And yes, a lot of the growth in the last decade (prior to 2007) was illusionary, and built on debt, but not all of it. A lot of that debt was built to support the bloated public sector, however, through a combination of inflation with no pay rises, redundancies and cost cutting, that bill is being reduced at quite a good rate.

 

The debt isn't really a problem (always been there, probably always will be), the deficit is.

 

The economy has shrunk a lot since then, but heh, we are only back to where we were in about 2005, and as I remember, things weren't so bad back then. Some people are getting a bit poorer yes, others are getting a bit better off (see all those on the lifetime trackers for example).

 

So we are not running out getting a new plasma screen each year, cutting back on that 2nd holiday, not buying that new car each year with the MEW.

 

Good. That was stupid excess and saw a lot of the money going out of the country anyway.

 

 

It seems it is perhaps you that fails to understand that it has always been this way.

 

This is not a new phenomena. The system has always been unsustainable, yet here we are. One day, of course, it will end, but with each crisis comes new ways around it. Seen it all before. Been shouting at the politicians etc all before. All these arguments have been doing the rounds for the last 40-50 years.

 

Do you not remember the ideological (capitalist/socialist) wars of the 70’s and early 80’s etc that were fought over precisely this question?

 

Like it or not (and there seem to be quite a few here that seem to actually want the STHTF for some strange reason) the crisis appears to have bottomed out and now the slow grind to recovery has begun.

 

If you disagree, that's fine, and I respect your view, as it is true that the system is ultimately unsustainable. But I will say here now that I think they've actually pulled it off, once again, and the worst of this crisis appears to be over.

John Doe, I've read what you've written over the last few pages (and few years), and all you seem to offer is misdirection, misrepresentation and confirmation bias - a superficial parroting dogmatist. You're not the only one who's been around a while, but if you can't or won't take the time to understand why this situation is different to the 70s then I see no point in engaging with you further - and I'd recommend that no-one else here attempt it either. A lost cause in every regard.

I think you're a panglossian fool of the most dangerous type. Look away if you must - but don't encourage others to do so.

 

When we get proper rate rises, things will be different. When that finally comes, is another question.

I've said it before and no doubt I'll say it again before this is over. ALL possible outcomes from this situation result in rapid and dramatic rate rises.

It still amazes me that so few understand how fragile, artificial and temporary the current rate environment is. It could last a few more years, but in terms of a 25 year+ mortgage commitment that's the blink of an eye.

Taking on hefty debt at the moment is pure folly.

Ignorance is bliss marceau

 

Besides, they are happy, they "stupidly" borrowed loads back in 2003 to buy (what I told them was) overpriced houses that were about to crash in value. Then they "stupidly" went on to trackers when I told them rates were going to rise in 2006/7. Yep, two actually get paid by the building society as we speak for those "stupid" deals.

 

Boy, what idiots.

 

(Yes of course they were lucky, but there you go)

 

They were not lucky, they followed the advice of those who managed the bailouts. They won a rigged game without any comprehension of the deeper risk of playing in a crooked system. When those who manage the bailouts fail, so will your 'lucky' friends. They have lashed themselves to the mast of rotten ship.

We'll see.

 

As I've said before, for decades I've read & heard about all the impending end of the system prophecies etc, and yes, I have understood all the arguments and reasons why people kept saying it and predicting it.

 

I've even made major decisions based upon it, sometimes helpful, sometimes not.

 

Yet, here we are decades later, still bumbling along.

 

Heard it in the 50's, 60's (from those older than me), heard it myself in the 70's, the 80's the 90's the naughties, and now in the teens.

 

There have always been problems, and probably always will be, but heh ho, here we are. And granted, they seem pretty big at present, but not unsolvable given the right choices and leadership (if/when it comes).

 

Besides, wasn't everyone here telling me 2011 would be the end game? Massive house price falls, 3.5m unemployed (even on the fiddled figures). Didn’t happen. Indeed, if the EU hadn’t pi**ed about so much, the great slow recovery would still be continuing (just like it is in the US, even with all the potential problems).

Normalcy bias.

 

The world has an uncanny knack for managing to walk that tightrope. It's been doing it for a long time now.

 

And yes, one day a fall will probably come, and what will happen then?

 

Yep, worldwide co-ordinated printing and debt jubilees, enabling a parachute for those in the know to land safely, and for the rest of us perhaps a bit of a bump. System reboot, here we go again.

 

Until then, the best we can do is enjoy the view and prepare the best we can in case the worst happens, withought stoping living, yes?

I don't recall anyone on this board killing themselves or living in nuclear shelters, most here appear to run businesses. Despite increasingly an increasingly hostile and barren environment, 2011 was the most profitable year of my life so far, I'm not giving up, I intend to prosper. Do not confuse pragmatism with nihilism.

Possibly. It could all blow up. I was just pointing out that the people I spoke with seem to have understood that this level of growth and credit availability is the new norm, and are actually managing their expectations accordingly. This time last year, they all thought it was the end of the world.

If they think that then they quite clearly still don't understand anything.

I just don't see the end of the world. As soon as the ECB prints, the crisis stage will be over, and the slow grind of deleverage can resume its course along with muted growth for several years, which is what was generally happening from 2009 (until the EU politicians screwed up with their indecision and power playing).

The slow grind is the least likely outcome. Even in the most flexible indebted economies this option is the equivalent of walking a tightrope over a 1000ft drop with a faulty balancing pole, where the weight at each end of the pole keeps changing randomly and dramatically without warning. Oh, and the tightrope will take 25 years to cross.

A generation of low growth is the BEST we can hope for and credit availability still has a long way to fall IMO. How far? Look at the South American credit systems and weep. We're going exactly the same way for almost exactly the same reasons.

Terrible news everyone - it looks like Bubb was right:

The plentiful hidden gold starts to emerge.

Or... $0.

 

What if there is far more gold than you can imagine in the world?

What would the price be then?

And how would you see the "mission" of JS ?

 

I have a very hard time crediting the rumors, but there are stories like that being heard now on the web, and they are triggering serious matters like death threats.

There are stories on the web that say giant space lizards run the world, that doesn't mean the subject is credible. Oh, and consipracy loons and death threats go together like coffee and cream, there's a word used to describe these people - unhinged.

Anecdotal: European relatives, who have some already, seem to be wanting to get more asap.

Haha, ditto. I've maintained a disciplined silence on my financial beliefs (like it's some kind of weird religion lol) since 2007, when it was clear the level of delusion was so absolute that I just couldn't win by trying to warn people. Ever since then I've just paitiently watched and chuckled at the complete surprise of those around me as it all played out.

This year has seen a noticable increase in the number of people coming to me for 'my take on the situation' - this month, however, the numbers have gone through the roof. All are talking about inflation, gold, house prices, debt (although, critically, not deficits) and what they should do next.

This may sound harsh, but with most I stay silent - their continued ignorance is necessary for my 'Personality Indicator' to keep working. Back in 2007 I selected the opinion and behaviour of certain individuals as a measure of how far along we've come on the bubble lifecycle for various assets. It nailed the recent gold selloff, much to my delight - and I just need two more people to 'turn' and we'll be into the enthusiasm phase!

Just what the Dr markets ordered, the "bazooka" option!.

 

EU rescue fund to be increased "several fold".

 

FTSE 6000 by xmas?

 

Get them assets quick guys

 

Euro Bailout Fund 'To Be Boosted Several Fold'

 

 

 

Of course, you do realise that if they actually do this, along with the recap of the banks and ~50% haircut for Greece, that pretty much means the crisis is over (well for a few months to a year at least ).

Yup. Buys time, fixes nothing. That 50% haircut in itself will probably eat the whole bailout fund. All I can say is LOL.

Millions of people take no notice of the macro economic/political system they live in. They discount their importance and it affects them as much as it affects you. Or do you have a way of not be affected?

 

 

 

What would reading hundreds of posts on this forum achieve - in terms of dealing with what is, allegedly, ahead? Having some gold buried in the garden doesn't sound as though it will be much use. I buy enough insurance to pay the mortgage off if I die. That's it - oh and what I am legally required to have.

 

 

You seem unable to resist the temptation to try to portray me as some sort of hippy nutter. But what's your prescription? In fact whistling happy tunes - if this means carrying on as normal and not starting to stockpile food and fuel then I'd say it's not such a bad idea.

 

 

 

I assume from what you have written that you are busy building a bunker and stockpiling food and fuel - hidden away somewhere so the marauding hordes won't find it when everything you predict takes place.

All of your points are rebutted elsewhere in my post. Please re-read.

My final comment is that stockpiling will not work. Make of that what you will.

Marceau, do you mean the 'compound debt spiral', when you say google the maths?

 

I'm a bit maths challenged, could you spell out what in the maths makes doom inevitable after a certain point? Is it the reinhardt and rogoff 90% debt to gdp you are referring to?

Yes, BUT.

Take a look at Keen and (I hate to say it) Denninger. They explain the basic figures in simple and understandable terms. Personally I don't think the R&R 90% can be applied to this crisis. It may work in isolation, but not for the multiple concurrent debt burdens we have at the moment, the critical level of debt to GDP could be much, much higher in these circumstances. Admittedly, though, the historical comparisons using the R&R figures are devastating.

For more depth take in viewpoints not usually seen here, including the accounting offered by the chartalists. Their appraisal of the process which got us here and continues to this day is impeccable IMO. Their conclusions, however, seem to be totally disconnected from reality - for them deficits really don't matter and it's a real eye opener. Once you can understand the differences between their appraisal, the neo-classical and austrian approaches I think you have enough to form your own basic view.

Compounding debt is only part of the problem, albeit a very big one. The real issue is structural and cultural. Unwinding promises and changing embedded practices can be extremely challenging, even on a small scale. In the case of western societies the scale is unprecedented and I doubt the ship can be turned around while maintaining any semblance of order. It's the order that is important, without it events spiral out of control. My take is the maths drives the viability of good order, then order (of lack thereof) drives the sentiment, speeding the process. For what it's worth I think we get a long emergency with a short catastrophe at the end. Then we see what those zeros really mean.

It's all justs zeroes and ones in a computer. You're taking it all way too seriously.

Unless you live in the wilderness, those zeros are part of the fabric of your existence. Discount their importance at your peril.

The larder might be clean ... yet the supermarkets are full of food and most people can afford to eat, clothe themselves and keep warm. At least, that's how it looks to me.

The key words here are at present. The supply chains that enable this bounty are fragile, complex and operate on the thinnest of margins. I don't personally expect food shortages, but it is a distinct possibility in a systemic financial collapse, or even just in a severe recession.

What do you suggest people do? You talk about systemic failure - I wonder what on earth that means? Should people get up in the morning and go to work - or is the whole thing about to fall apart (whatever that may mean).

The world will still turn, people will still work. A whole lot of other things can change and that would still be true. I take it you never buy insurance? Or plan ahead? Or read any of the hundreds of posts on this subject in this very forum?

We had all this in the late 80s when the housing market tanked - recession - lots of people lost their jobs in areas where that had never really happened before - i.e. London and the South East. I was one of them. We had it in the 70s with the energy crisis and the 3 day week. Lots of people were muttering about crises then, and systemic failure, and the end of our economy/society etc. Yet, weirdly, we got through all that.

Maybe, but for many those times were indeed catastrophic, and IMO we'll be very lucky to get off as lightly. Either way, you're right, we will get through it. That doesn't mean everyone should just look away and whistle happy tunes.

And we'll get through this a lot better if people stop using phrases like 'systemic failure' without a coherent explanation of what it means, why it will happen and what will happen when it happens. Because, one way or another, we will get through this.

Systemic failure. Your bank no longer exists. Your pension and savings are gone. Your salary is meaningless. Traditional units of exchange are no longer recognized. Governments can't pay their employees. There is no social safety net. International trade ceases along with the flow of goods. Businesses cannot function. Supply chains cannot function. Food and other essentials become hard to obtain. Rioting. Bloodshed. War. Fire and brimstone. Dogs and cats living together.

All of these have happened to a developed country somewhere in the world in just the last 20 years (apart from the last few maybe). Then look back 50 years, then 100, then 200. Systemic financial and associated social crises are so common that historically they're almost the norm.

And yes, we'll still get through it. Some better than others - that's the point.

Surely we've already seen that when we're short of capital, we can just create some. Again, that's how it looks to me anyway.

You have correctly identified current worldwide economic policy. Same result, different route. Possibly different time line (unknown, in case you ask). Google the maths, google historical comparisons. Weep.

Edit: Just noticed another word you used. "The figures are CATASTROPHIC". In what way do the figures mean we are to suffer a catastrophe. A catastrophe to me is a flood, or an earthquake. What do you mean by a catastrophe? Meanwhile, in a high street near me someone is spending 50k refurbishing their pub. Why are they bothering? I'd say it's because after they re-open (new menu, of course) they'll be heaving for a year and recoup their investment and a lot more. Or are you saying they won't?

Catastrophe is always relative. A flood or earthquake wouldn't appear catastrophic next to a giant meteor strike - ask any dinosaur, preferably a happy one. In the context of a thread about housing and the financial system it shouldn't be too hard to figure out the meaning.

Edit: Just noticed this: " Positive thinking, fairies and rainbows will make no difference" - why do you try to equate my point that the endless diet of bad news from the media - the same news repeated over and over again, day in, day out, endlessly - has a very negative effect on many people and is, in fact, contributing to the problem - with fairies and rainbows? I didn't mention a belief in fairies. I met someone the other night who believes in angels - but, hey, each to their own.

Maybe I should have used the word Panglossian. Fairies or not, positivity will not trump mathematics. Although I've heard that what you can't see can't hurt you, apparently.

I don't buy your basic premise - the global economy is not in crisis.

 

But if you repeat it often enough, it will become true.

 

If I buy a house when I'm young and borrow a load of money to do it - it doesn't mean I have a crisis. It just means I've borrowed a load of money and need to pay it back.

 

In this country we need to pay down our debts and make more and import less. It's not a crisis.

 

No doubt some debt forgiveness will be involved globally. Maybe the political and banking classes that run things will learn something.

 

One thing is for certain - we need to positive and optimistic.

Sorry matey, don't agree. The figures involved ARE catastrophic.

And even if they weren't, it appears you think that paying down debt is just an issue of time. Even at a supra-national level, let alone household, that's simply not the case.

Leaving aside the (killer) issue of interest, that debt burden will rob Western economies of fresh capital for decades. That's less money for business, innovation, welfare and a million other things we take for granted that the rest of the world doesn't have. That capital was our edge, it was that capital that kept us ahead, gave us time, allowed for innovation, broadened our horizons - and now we've not merely consumed it, we've also consumed the next generation's worth of it.

So, even assuming the level of debt isn't high enough to cause systemic failure (which it is), every year we spend paying it down sends us closer to the worldwide average - and that's a hell of a long way down from where we are at the moment.

You're correct when you say the media are dead wrong - but it's because they're UNDERSTATING the problem, having failed to understand it. Positive thinking, fairies and rainbows will make no difference. The best case is that we write it off and start from scratch. The worst case doesn't bear thinking about. We've eaten the larder clean and we've already started to eat ourselves.

This is excellent stuff. The correction I've been waiting for. Buying GDX, GDXJ and silver/gold as it falls - in small quantities. Shall continue to do so.

Strange to feel relief at a fall like this, but that's exactly my sensation at the moment. Maybe, just maybe, I'll be able to buy under £1000 just one last time.

So, it seems QE3 will be all about bringing long term interest rates down. That has got to end up being inflationary, has it not?

 

So, the question is, when do I go for the 10 year fix rate.

 

Now, or wait a few months for the once in a lifetime rate (which I thought we were already close to)?

 

Decisions, decisions.

'It's the deal of a lifetime!'

The knife catchers mantra.....

Yes, it is magic. (See my french lessons are working, Je faire du progress toute les jours! )

 

But just watch what they will pull out the hat if things get really dire.

 

Debt jubilee? I wouldn’t rule it out if things are as bad as I (and many here) believe!

 

I actually read her speech as being along the lines of Bernanke, basically they are all on the same hymn sheet.

 

No more printing directly, but time for other approaches, including mortgage re-pricing, debt forgiveness and s**t loads of gov spending while slowing down the cuts.

 

Stimulus, stimulus, stimulus.

 

I'm sure he will give a balanced veiw then

 

His "Glacier Fund" wouldn't happen to make lots of money if prices fell would it?

 

He says house buying more than 40% more expensive than renting. WRONG, it is buy all accounts now, cheaper to buy than rent in 80% of the country. Even if it was equal, this 40% statement is nonsense.

 

He is basing over-value on earnings and not affordability. In this ZIRP environment, this is the WRONG comparison.

 

He says what s**t we are in, then how Osborne is the darling of the market, then thinks rates are going to go up

 

Big mistake. Rates ain't going nowhere for a long time (and that is because things ARE bad).

 

Please ladies and gents, let's have some balance

Your certainty worries me John.

They are choosing slow strangulation over a quick hanging, and will continue to do so as long as the market permits them. The result will still be the same. In both real and nominal terms house prices will eventually return to an affordability level based on earnings. The only question is how long it takes, and there are far too many variables to allow sensible prediction.

Those wishing for debt jubilee and/or government helicopters could end up very, very disappointed and substantially poorer, as could those wishing for the return of sound money policies and the real/nominal convergance that would entail. Governments can become powerless overnight, likewise they can somtimes influence markets to a ridiculous degree. The current dynamic could turn on a dime and head to either extreme before we reach the end.

There is no way to predict either the path we take to the collapse or its length, but we will get there.

When do you see the new paradigm emerging?

Steady on there - we haven't even completed the 'first sell off' bear trap yet.

Right on cue, and it's not just landlords being bailed out now.

 

 

 

http://uk.finance.yahoo.com/news/Ireland-mull-mortgage-reuters_molt-121866087.html?x=0

 

Coming soon to an economy near you?

This will kill Ireland's credit market stone dead for decades. TBH that's probably a good thing.

Oh there are plenty of magic bullets left.

 

You are forgetting the huge mortgage write offs occurring now in the US and Eire, 50% debt reductions ARE occurring in over-indebted households.

 

Then there is the true debt jubilee,

 

And now comes Extreme QE!

 

 

 

http://www.bbc.co.uk/news/business-14589325

 

 

 

 

Pah, hasn't fell anything like as much as the banks!

These bullets will directly compromise the currency involved. Their impact is too obvious and direct for them to be considered fantasy material.

Still, I'm sure they will happen nonetheless. Primarily because desperation will make those in charge turn a blind eye to the consequences. This is the road to those extreme dow/housing/anything else:gold ratios becoming reality.

 

The slide to new lows is hardly foreshadowing a "surging" UK property market.

There's a real possibility that the UK property market is set to fall off the cliff.

And those Upbeat Headlines are nothing more than "damage control" by those with vested interest.

 

"Stick a fork in it!"

Yep, and the government has no fantasy bullets left. All that has happened to over leveraged mortgage holders in the last 3 years is a squeeze from the opposite direction, as living costs rose while real wages fell. The bottom line is they still can't afford the house!

Longterm Logarithmic Gold USD Chart. The big question for me is, are we going to break on through to the other side?

 

I reckon it won't be too long before the curve makes gold actually start to move backwards in time.

Ouch. 150 oz broken. Only another 100 to go!

 

http://gold.approximity.com/gold-silver_watch.html

 

http://gold.approximity.com/since1930/UK_House_Prices_in_Gold.html

Please can someone post this on HPC right now.

Gold totally parabolic now. Realistically only the big round number at $2000 will be significant enough to stop an advance like this.

Then a correction to $1650 (please)?

Interesting ...

 

Hugo Chavez Announces He Will Nationalize Venezuela's Entire Gold Industry - http://www.zerohedge.com/news/hugo-chavez-announces-he-will-nationalize-venezuelas-entire-gold-industry

That will not be healthy for the South American mining firms. I know Venezuela is an extreme example, but that's it for me, I'm going to start scaling out of any mining stock with geographical/political risk tomorrow - it's simply not worth it.

For those that are interested in another good warning example look at what happened to Bear Creek in supposedly stable Peru. I'm really not a fan of 'rolling the dice' at times like these.

Thanks everyone for the input. Marceau you're right with the management issues and dilution. It is like a minefield out there. That's why I appreciate analysts like John Doody, Brent Cook, but also our very own Frizzers to see through the fog. Anyway, that's most likely also why I will stick with mid Tier producers and won't go too risky. Although, I just bought Gold Resource Corp. (GORO), but given that Doody and Frizzers recommend them, I thought I could risk it. After all, they are obviously producing.

The bulk of my portfolio is in Royal Gold and Silver Wheaton, with another small royalty co, Sandstorm as a (so far successful) speculative play. They seem to offer constant appreciation in line with the metals. Other than that I have minor exposure to over 20 juniors and explorers. Unfortunately, outside the royalty streamers the risk is phenomenal regardless of the gold price or market cap (the mid caps and large caps are the worst offenders in my book, as they have absolutely no excuse for their consistently shambolic performances).

Good management is one thing, but it can't mitigate the level of fear, both real and imagined, attached to the sector. Look at what happened to Bear Creek, they had a great deposit and a superb management and they were fast tracking towards profitable production. Then national politics kicked in and they dropped 50% overnight. Taking that level of risk is at a time of global crisis isn't that smart an idea IMO.

I've picked my miners well since I started investing here, and to be fair some of my explorers have been multibaggers. There are good firms out there, but they make up a laughably small percentage of the sector and, crucially, even the winners haven't leveraged the upside of the metals. Considering the risks I've taken my overall portfolio should be several times higher given the rise in underlying PM prices. The fact that it isn't, even with good entry timing, risk management and stock selection, warrants careful consideration for anyone wanting to invest in this area.

I am very intrigued by gold miners/explorers that are still plumbing (nominal!) 2008 depths, such as Axmin Inc. and Endeavour Mining, to mention two that John Embry had looked at 2-3 years ago. Do we have a thread that actually discusses why some of these companies are still dirt cheap while others have recovered? I am usually less into the stocks, so I am possibly not quite aware of corresponding discussions on here.

 

Related to this, I will put some money into larger producers sometime soon. Does anyone see a good reason why I should not buy Goldcorp or Yamana? Note that I am talking of larger companies here, so I know there is also less upside potential when compared with juniors.

The bottom line is that they are so badly run that they aren't making money. They can have untold riches in the ground, but if their management isn't up to scratch then the only thing they suceed in doing is burning truckloads of cash, hence the endless dilution. It's the mark of incredible incompetence that most of these firms haven't made a single dime during a decade long bull market. Why would anyone invest in them when 10 years of evidence points to them being money pits?

Miners are the riskiest of risk assets, so the mainstream market won't touch them regardless of the gold price. In most cases the leverage has only worked on the downside and you'd have been much better off just owning bullion. It's sad, but true.

I'm glad I put most of my money into the royalty companies, at last they've shown a consistent profit.