Karl Denniger: Hurricane Warning - Mercedes-Benz Forum

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post #1 of 51 (permalink) Old 10-25-2008, 11:32 PM Thread Starter
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Karl Denniger: Hurricane Warning

McBear, if you get a moment I'd be interested in your perception of this guy's argument. His style is a tad overwrought, and his politics don't agree with mine (or yours, I don't think). But I'm unable to dismiss his points, what do you think? Was going to PM this to you but I figured others might be interested too. It's a little bit scary.

Fiscal Cat 5 Hurricane Warning - The Market Ticker
"As each new facility is rolled out by Ben and Hank, a new area of debt becomes backstopped by the government in some fashion, thereby forcing money out of other instruments and causing those instruments to become distressed!

We are rapidly reaching the point where only The Fed and Treasury are providing any lending at all."
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post #2 of 51 (permalink) Old 10-25-2008, 11:41 PM
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I need to read this again tomorrow morning when the brain is functioning better. I just drove a big box truck back and forth from Lex-Cincy-Lex and it's claim of Quiet Cab Ride was a bit misleading.

I will start again when the ringing in my ears subsides.

McBear,
Kentucky

Being smart is knowing the difference, in a sticky situation between a well delivered anecdote and a well delivered antidote - bear.
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post #3 of 51 (permalink) Old 10-26-2008, 03:42 AM
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Excellent article Mars, scary as well...........


Jay called, He said you were a Chicken Little............
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post #4 of 51 (permalink) Old 10-26-2008, 10:01 AM
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Lot of tin foil hats coming out lately, but this article makes some really excellent points. If the treasury starts printing money like crazy to cover all these insane commitments, say hello to hyper-inflation. We as consumers have been forced to either make drastic cuts to our budgets to live within our means or face insolvency. Businesses are failing left and right or not making hard decision to live within 25% less revenue.

The federal gov't is no different. We've got an interesting 10 years ahead of us.
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post #5 of 51 (permalink) Old 10-26-2008, 10:03 AM
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post #6 of 51 (permalink) Old 10-26-2008, 11:50 AM
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Drew, take that clothespin off your nose.

My kids enjoy sending me college campus shit from another dimension, and this is another "Zeitgeist" production:

Zeitgeist - The Movie

Pretty odd perspective, but not entirely off base. Scary shit this money society. Jim
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post #7 of 51 (permalink) Old 10-26-2008, 12:16 PM
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Originally Posted by gerkbei
Lot of tin foil hats coming out lately, but this article makes some really excellent points. If the treasury starts printing money like crazy to cover all these insane commitments, say hello to hyper-inflation. We as consumers have been forced to either make drastic cuts to our budgets to live within our means or face insolvency. Businesses are failing left and right or not making hard decision to live within 25% less revenue.

The federal gov't is no different. We've got an interesting 10 years ahead of us.
This is not IF, it is a fact and the only solution to take care of the 5T national debt. Read and wait what going to happen when the G20 have a meeting in late Nov. 2008. Every citizen of US owed $20K. China and Russia already gang up not to support our bond as much, they knew we are not going able to pay back at current level. The world knew the current system based on US greenback as world currency will not work and will cost the world going into Recession. Some modification will be coming. Fed already increase the size of the balance twice. Ben already told you in congress, he will increase the M1 even more if the market needs more liquidity.

500SEC 1984 retired at 192K
Porsche 928S GT 1984 (euro) retired at 243K
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post #8 of 51 (permalink) Old 10-26-2008, 12:19 PM
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dépriment mais puissant
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post #9 of 51 (permalink) Old 10-26-2008, 03:48 PM
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The main problem with waiting on everyone to come to the party is that, when everyone finally shows up, I have had about 10 glasses of tea and have to go pee.

I think CatFIVE Warning is accurate only because the scale does not go to Six or Seven.

I think the most important comment he made in the piece is:
We must stop forcing money in the debt markets out of various portions of the market and into the "guaranteed" ones by removing the guarantees, or we will wind up guaranteeing all of it - an impossible task, as there is some $53 trillion of private credit in the marketplace and we don't have the money! Bernanke is a trapped rat and his desperate actions are now threatening the sovereign debt of The United States.

While there is an obvious need to stabilize the markets, there is a BIG difference between stabilize and guarantee.

Daisound is correct that we have to manage the National Debt. It is, however $10Trillion and not $5Trillion and really soon will be tickling $13T with all the obligations to which we have committed.

That is going to be problematic on an epic level. The very closest comparisons we have to this is moving out of the Great Depression and the costs of World War 2. And this is exponentially more expensive and complex.

McBear,
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post #10 of 51 (permalink) Old 10-26-2008, 06:12 PM Thread Starter
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Bush's doubling of the National Debt has several negative consequences. Primary among them are the subsequent inability to address fiscal and monetary issues with any authority, the distortion of the credit markets and ultimately the rush toward Mr Denninger's 'tipping point' -- "this Treasury Issue could force GDP return on new debt below zero."

And, of course, we've all lately seen the results of stimulating the economy with borrowed money. All of those people who so irresponsibly bought houses they couldn't afford? They were doing exactly what the Bush Administration has been doing. (Unluckily for them, they don't get off scot-free when their term ends.)

The Bush Economic Doctrine, whereby we slash taxes (especially on the wealthy) and then dramatically increase public spending, is endorsed by McCain despite its obvious results, and I doubt even Barack will be able to do much about these results, if elected. The hole Bush has dug is too deep. I expect all Barack will be able to do is shoulder the blame for the conflagration. The principal result has been to concentrate the nation’s wealth into fewer and fewer hands, and then ultimately to reduce the nation's wealth as a whole. (As an aside, though, it has occurred to me that Barack may be better situated from a social perspective to inform Americans that their benefits have to be cut. One more reason to hope McCain wins )

The "Debt/GDP" argument that Bush partisans previously mounted in his defense will now come back to bite them in the rear as GDP shifts into reverse. But lucky them, their man will be out of office. I repeat that this country deserves McCain! (Well, half of us do.) If only arrogance and stupidity could have helped, Bush would have triumphed. Instead, oddly enough, they seem to have hurt us in countless ways. Go figure, huh. It's worth noting that debt and spending have never been reduced when Republicans controlled both the Presidency and Congress.

The spectre of deflation now haunts the globe. The only cure seems to be manic hyperinflation--the central banks "printing money". I'm still unsure when & how the inflection point occurs, although Mr Denninger identifies a "bond market dislocation" as one obvious turning point. Notice gold went up 10% in one day on Friday, and that was before we attacked Syria. I had this feeling that Thursday was an ultimate buying opportunity! (A lot of people disagree with this, btw.)

Any other obvious defenses, anyone? Cash has lately been the safe haven what with all of the asset deflation, but according to this scenario (the one which has me most convinced) cash is about to become trash. I notice the Japanese Yen has lately become attractive to investors though.

One of the scary aspects of Mr Denninger's article is the projection of interest rates. This free-spending orgy (which our leaders are now desperately trying to resuscitate) will end with a bang, not a whimper.
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