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Missive #124

“In this sophisticated yet readable book, Vox Day — one of the few economics writers to predict the current worldwide financial crisis — explains why it is likely to continue.   Day shows that the policies being pursued in Europe, Asia, and the United States are very similar to Japan’s failed policies of the past twenty years and, therefore, doomed to similar results. According to Day, the economic theories behind those policies are flawed and account for why most economists were unable to anticipate the recession or see that their expectations of an imminent recovery are incorrect. Day applies a different theory, A very good book written by someone that is not an economist that believes the current ideology. The reviewers that give the book low ratings are such true believers. I for one agree with what he says and think we are now in that depression and it will get worse before it gets better.the one he used to predict the current crisis, to show that the world is in the early stages of a massive economic contraction. Then he turns to the six scenarios presently envisioned by the world’s leading economists and assesses which is most likely to unfold. As the title suggests, Day concludes that the most probable scenario is a Great Depression 2.0 that will be larger in scale and scope than that of the 1930s.” — Book promo @ goodreads.com

Some quotes from the book.

The reason the amount of debt being created is tracked so closely is that the current financial system is similar to a white shark that must keep swimming in order to stay alive. While some sharks can pump water over their gills simply by opening and closing their mouths, white sharks are among those that have to keep moving in order to avoid death by oxygen deprivation. Just as reducing the amount of oxygenated water flowing over the shark’s  gills will weaken a shark by reducing the amount of oxygen its body is receiving, reducing the amount of debt being created weakens a modern debt-based economy. If a white shark stops swimming, its body will receive none of the oxygen it needs and it will therefore die. In like manner, if the financial institutions stop creating new debt by making loans, they will receive no interest income and they will eventually go bankrupt as they pay out interest on the deposits they are holding. Since the financial institutions hold the majority of American savings, a sufficient number of them going bankrupt will therefore cause the financial system to collapse.

…a debt-based economy is little more than an economy-sized Ponzi scheme. Yesterday’s loans are paid off with the money created by loans taken out today, which will then be paid off by the creation of even more loans tomorrow. Unlike other monetary systems of the past, a debt-money system must grow or die,…

A central banker has no more ability to correctly ascertain the intersection of the collective supply and demand curves for money in a modern economy than the historical communist planner was able to calculate the correct number of shoes required in the now-defunct socialist economies. The significant point is not the Federal Reserve’s inability to enforce its target price of money or control the size of the money supply, but its inability to know independent valuations of money set on a dynamic basis by its various buyers and sellers according to their momentary needs. Lacking this godlike knowledge, its actions will inevitably be incorrect no matter what it does, which necessarily casts serious doubt on the utility of the concept of central banking.

It is difficult to definitively categorize a financial product. Is a certificate of share ownership investment or is it a consumer good more akin to a baseball card? If a share of Toyota is deemed to be capital, why isn’t a share in defunct Enron? If solvency is the issue,  at precisely what point did shares in General Motors cease to be capital, and what did they become? Is a stock option a capital good or is it more accurately viewed as a lottery ticket? And what is the fundamental difference between trading derivatives and doubling down at the blackjack table?
None of these questions become relevant once we recognize that it is not necessary to place various goods and services into one category or the other in order to understand that they are all affected in the same way by an increase in the availability and affordability of debt. The debate over when gasoline magically transforms from a consumer good into a capital good, or vice-versa, becomes entirely irrelevant once it is understood that the debt-fueled demand for it in either of its forms is going to eventually run into a material limit when no amount of inexpensive credit is going to cause a consumer to drive one additional mile or tempt a producer into ordering one additional delivery of manufacturing supplies. The limits on the demand for financial goods are not material, but they are no less real. Investments can be securitized, divided, repackaged, and leveraged to the point that there are 40 theoretical dollars stacked on top of $1 of actual earnings, and stocks can rocket skyward for longer than any reasonable analyst believes possible, but eventually, the time always arrives when a new buyer cannot be found. The failure of the greater fool to appear and shoulder the risk of the previous fool is the financial equivalent of the first car to roll off the production line for which there is no buyer.

“The tremendous inflation of the past 76 years has occurred primarily by way of instruments of credit, not banknotes. Credit can implode. The only monetary outcome that will make sense of the Elliott wave structure is for the market value of dollar-denominated credit to shrink by over 90 percent. Given the eroded state of capital goods in the U.S. and the depletion of manufacturing capacity, it is not hard to see why all these IOUs have a deteriorating basis of repayment. The future has already been fully mortgaged; it’s time to pay. But there is no money to pay, only more IOUs, which cannot be paid either. So the credit supply (after a brief respite) will continue to shrink, which means that wealth, and therefore purchasing power, will disappear along with it….I expect that the final implosion in credit value will be so swift that the authorities will not act in time to counter it. They will continue to try to maintain the fictions of full face value for  IOUs until they fail spectacularly to keep up the scam. Then they will start to scramble, but it will be too late.”
—Robert Prechter, The Elliott Wave Theorist, April 18, 2009

My Verizon problem seems to be a failed MIFI. I can connect laptop and both tablets to the MIFI but the MIFI is not connecting to the Verizon tower signal. I spent a lot of Chat time with a Verizon representative on Friday and Saturday trying to get the MIFI to reset and failed. So for now I’m relying totally on the Parks WIFI which varies from being good to very poor. The representative is going to make an appointment for me with the Sierra Vista Verizon store and I’ll take the device in and have them check it out and probably buy another one. My problems do come in bunches but maybe that is for the best; get them all taken care of together.

It is not just the West’s animosity towards Russia that is fueling discontent. China, Iran and Saudi Arabia are three large economies that have been regularly targeted by U.S. sanctions. And there are a host of other nations, especially in Africa, that see themselves as victims of U.S. economic imperialism. I believe the world has reached critical mass where a combination of countries rich in natural resources and commodities are now quite willing to follow the lead of Russia and China in circumventing Washington’s bullying. — The Rise of Brics and the Fall of the G20 by Larry Johnson

Mexico’s two main political groups have chosen women presidential candidatessetting up an unprecedented election next year. The main opposition, the Broad Front for Mexico, chose Xóchitl Gálvez, an outspoken senator, to represent their coalition. And the governing Morena party picked the former mayor of Mexico City, Claudia Sheinbaum, to be its nominee. That means — barring any upsets by a third-party candidate — Mexico will elect a woman president, shattering the glass ceiling in a notoriously patriarchal country. — Mexico Is On Course To Elect Its First Woman President by Eyder Peralta

I don’t think either of these women as President will be good News for the United States. Mexico has had a love-hate relationship with the United States since 1848 and I see no reason for it to improve.

Go to WalMart and head into a fitting room. After a few minutes, yell out “Hey! There’s no toilet paper in here!”

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