Weekend Reading & Soul Searching

Sat, Nov 29, 2014 - 1:05pm

Below are four posts for your reading pleasure. Enjoy. --Jerome



Submitted by JY896 on June 21, 2012 - 11:45pm.

Don't buy. Sell. Get out of PMs. We are all fools for listening to charlatans who are misguided/deluded at best, and probably trying to rip us off. The fiat system will survive, as it always has throughout history. Paper money in hand is a great rainy-day option, but we really all should be rushing to the ironclad safety of bank deposit and that old ultimate safe investment - Treasury bonds. There is no manipulation of the metals, let alone the global financial markets. Even if there were such a thing, those behind it are surely too powerful to stand against -- hang your head, stay on your knees and pray for mercy. The global economy will work its way through this rough patch, like it always has. There are no constraints of resources, capital, capable workforce or anything else standing in the way -- prosperity will soon be here again. We simply have not given central banks and our outstanding civil servants in government leadership -- not to mention the stalwart pillars of finance and industry -- enough time. We've been faithless, nay, downright antagonistic toward our benefactors and rightful guardians.

Why didn't you say so before? When it might have helped? Where, oh where were you here:

You know what? You've convinced me. I now see the error of my ways. This whole foray into trying to protect assets through holding sound money has been a colossal blunder. I've already signed up for my appointment to remedy the situation, and take care of this irrational obsession.

Hmm... Wait. That might be too mild a solution -- who knows -- I could be tempted again by the siren song of all those wild-eyed, smooth-talking snake-oil salesmen that dragged me down this road the first time. No, it's probably best to go with more drastic aversion therapy.

But wait. While there is still a vestige of the original tendencies, curiousity, rationality, seeking to find cause and effect -- there is still a chance, no matter how small, that I might be led back to this path despite the phobia, aversion and nausea. What to do, what to do... Aha! I've got it! Total hard wipe of the entire wetware between the ears, that should do the trick!

Oh no. That's STILL not enough. It's no use. The reality of the world around me, the actual physical input of things plainly, directly affecting me through the senses, through first-person experience. It will eventually lead me to ask questions, even if I were to start over from scratch. I almost forgot about that. How can I get around that, to ensure that I never put myself through this again...

Eureka! By Jove, I've GOT IT! Foolproof solution. All will be well. Goodbye, my deluded friends. I've found the solution. I will find ultimate peace.



I think we may be the ones

Submitted by -SilverIsMoney- on September 30, 2014 - 8:07pm.

I think we may be the ones who have the religious experience... at first anyway. I think Mike Maloney has it right and Jim Rickards is correct when he says the one thing the central banks cannot stop is deflation.

As Mike Maloney predicted the world would be hit by a massive deflation first. We may be going through the beginning stages of this right now. It may happen suddenly and it may not but the root cause is that the individual consumer, who drives the American economy, is too far indebted and cannot continue to consume at a pace they once did. No matter how much the fed prints this will not change the underlying fact that people have been actively TRYING to downsize since 2008 by paying off debts and many have outright given up and chosen to live off the government instead - I think this also explains the velocity of money being so low. But, at the same time price inflation has hit these people hard, like Andy Hoffman has pointed out all the things the middle class NEEDS are going up in price- this is setting up for a terrible situation where deflation ravages people's wages while the price of goods goes up! As the deflation takes hold the central banks ONLY solution will be MORE and MORE and MORE monetary creation. Imagine Krugman's original idea of 300billion QE PER MONTH! Yes 3.6trillion a year is what he would have wanted which is more crazy than Japan. The price and wage distortions will only get worse until it all comes apart and people are forced to give up on the system entirely and find economic order somewhere else. Maloney believes that will come from gold and silver in the form of a new currency.

This is pretty much the story we've come to expect... The world economy implodes as the debt shit hits the Fan and forces a New Monetary Standard with a Gold backing - or at least a revaluation of it - and we all make it into the next paradigm totally fine and maybe far richer than before.

Still, we have to go through this deflation first for the central banks to panic. This is the part I think everyone secretly wanted to think wasn't going to happen and that instead we'd get a "hyperinflation" that hasn't come and probably won't until after the next collapse when gold and silver nose dive AGAIN!

What if the dow drops 4000points tomorrow? You think silver and gold are going to rise in that? No way... if this deflation takes hold we could crash all the way into the single digits in silver and triple digits in gold and really look like idiots.

But of course, for reasons we all know and have reviewed ad nauseam, interest rates cannot be allowed to rise! For that matter NO ONE wants a STRONG currency either. Period. End of story. We all know why I won't go into it. So if Rickards is right and this is a back and forth between the US and Europe then it won't last. Anyone look at a Euro chart lately? It's all apart of the game for now as Europe is letting the US gain strength so they can give it all back in the coming months.

Ivars has even mentioned this is infact a pre-war deflation that will be used so the US can easily finance the next war on their dollar strength. Positive for gold still but again a very controlled blast. So maybe it's not a back and forth with Europe who knows? What I think we can safely assume is that this is a game that is played on so many levels we can't even begin to understand all the moving parts.

Rob Kirby recently told a story to Sanhu about golfing with a retired Swiss banker in 2004 who told him and his brother that if they understood the forces against gold they'd never invest in it. This is the game! It's been going on for over a century and was really revealed to the world by Ferdinand Lips when he wrote Gold Wars.

Bottom line is the game is winning out again... back and forth it goes like clock work.... whether it's for Europe or for War or for the suppression of Commodities it continues to roll on day after day. You've got to admire the game they've played here and you've got to admire the fact they've twisted price discovery so brilliantly for so long but it's destined to come apart, it always does, but what I struggle with now is that A) every time it comes apart TPTB end up with more power anyway and B) EVERYONE has grossly underestimated TPTB, and so much so that this will go on far longer than any of us could have imagined. Think decades... not years...

Many of you will say it's impossible, and many of you will make great arguments as to why it's not possible, but many of your opinions have been based on assumptions that at this point in time do not seem true and that is in large part why I feel the Maguire issue is VERY important. I understand Craig's apprehension to discuss the issue and think it's totally fine. If i'm wrong about him then i'm wrong and I'll gladly admit it and move on but I do not see what the problem is in prodding people who have appeared to not be totally truthful as its related to the the metals because their "facts" have swayed a lot of people into forming opinions that have now been built on shaky grounds. We should be holding everyone accountable because after all the timing of this is ALL that matters...

Had we timed it right we could have switched from PMs to stocks in 2011 and then switched back to PMs now. Our stack sizes would probably be 2-3X bigger than they are. But obviously almost no one is smart enough, or ballsy enough, to catch a top and bottom like that. What the last couple of years have shown me more than anything is that it's important to diversify as best you can because obviously your assumptions may not be correct - especially in the places you're most certain they are.

Nobody! I mean NOBODY could have predicted the level of intervention we've seen in these markets, NO ONE, and yet they've happened! A lot of us have been burned because of it but understand why still it's still all about timing. Like I've said before my biggest regret is not that i'm holding at these levels it's that I wasn't smart enough to hoard cash instead and wait for this deflation. Part of the reason I did not do this is because people like Andrew Maguire insisted that all of the metal was being withdrawn from London in the summer of 2013 as GOFO went negative for the first time in a decade and stayed there for over a month! I truly believed that there was an immediate supply issue that was being created due to the insane paper massacre we saw in April 2013 and then again in June 2013.

Because of the information he gave, and many others stood by, I believed that even if the deflation were to happen it would make no sense to wait for prices that low because the metal would not be there to buy. Obviously (now that we are in the 16s in silver and near the 2013 lows of gold) there has been NO force majore or delivery failure ANYWHERE! I think it's time to start asking tough questions about the credibility of some of the people we listen to, and that doesn't mean they even need to be right, it means we've got to KNOW that they're being HONEST with us because the timing of all of this is EVERYTHING.

Everyone on the top-list today I could find something against, everyone, but that doesn't matter because at the end of the day people can accept what you're trying to sell them - whether it's a product or viewpoint or service - but what's total and completely CRUCIAL is that we be able to TRUST that the person giving us that information is doing so because it's accurate and NOT because it helps THEM make money.

As for the question of trust I think the jury is still out on Maguire - and a lot of other people for that matter - but I do not know him personally as you do. I can say with full confidence I do not believe Craig to be one of these types of people looking to take advantage of stacker's fear and I completely believe that Craig is a good person trying to weed his way through this mess with the rest of us but we HAVE TO KNOW who we can trust and who we can't. This situation is difficult on one level because I trust Craig's judgment, and many others judgment who all trust Andrew Maguire, but personally it's gotten very hard to trust him at this point as this story has unraveled before us and there seems to be no supply issue with these price levels.

I used to think that a lot of what was said about Maguire was probably exaggerated and hyperbole from Eric King and GATA but I choose to believe he still understood how the markets were truly working/manipulated even if his prowess was over exaggerated by others. Right as this story came out with the article and Cohan I knew it didn't smell right because I have a background in that industry. As the story has unfolded it has made Maguire seem less credible in my eyes and I really do think we deserve an explanation from the guy as to what exactly in the hell is going on. I'm not talking about some statement either but an actual interview where he finally lets all this out in the air.

Because, you're right, it may not make any damn bit of difference NOTHING may make a damn bit of difference. The FED COULD ADMIT IT and it may not make a damn bit of difference! But if that's the attitude we've come to accept then obviously we've all come to accept the Fed can control price as long as they want and we've made terrible calls based on BAD information about supply issues from people like Maguire who were selling BS from the start for their own gain.

It's important that these people be held accountable for what they did and it's important we not be so naive to think salesmen would not take advantage of us. We are probably the most suspicious minded people on the planet (and i'm sure your friends tell you the same thing) but when it comes to our own people no one wants to ask tough questions...

-Did Eric Sprott really sell silver for charitable obligations in 2013 at the WORST possible time or was he trying to sell out before the entire thing crashed again?

-Does anyone find it odd Ted Butler has been talking about a Silver Shortage for 25 years and despite the insane fluctuations in price there's NEVER been a delivery failure?

-Is anyone ever going to call people like David Morgan, Greg Mannarino, Jim Sinclair, James Turk, Bill Murphy, and everyone else at KWN who has made TERRIBLE price calls in the metals over the past 3 years or do we just accept they cannot predict manipulation in the market so we'll just keep listening to what they won't be able to predict next?

-Is anyone ever going to ask Mike Maloney HOW IN THE HELL he could have made that Debt Collapse video in August of 2011 and seriously sat there with a straight face as he told people gold was screaming buy at all-time highs of 00 (when the guy had been buying at 0 and understood the market better than anyone at the time) and how there was nothing "technically bearish" about the fact the price had gone up 10 straight years without a correction?

-Is anyone going to ask Chris Duane what in the hell really happened with the original SBSS series and all the delays and money that was screwed up? Or perhaps ask him why he used Jesus on a coin to sell to people? Or put a Pot Leaf on a coin to sell to stoners? Anyone going to call him on his obvious attempts to sell out?

-Is anyone going to ask Andy Hoffman how it is the miners are still around when he SWORE in the spring of 2013 that there was NO WAY miners could survive with prices this low and we'd reverse because it was the final washout! Lord behold almost a year and half later the prices are lower and the miners still exist! No delivery failure either!

-Is anyone going to EVER call Bix Weir out on ALL OF HIS NONSENSE! Jesus H. Christ the guy has made one terrible call after another and EVERY time he does he hides from interviews for months and then appears out of nowhere never to give an explanation as to how his crazy last call didn't come true! A year ago he said the banks were months from default and everyone's mortgages would be wiped out LOL!

-Max Keiser? Do I even need to say anything else?

What's the common theme relating to ALL of them? Exactly...

BUT! I'm fine shutting up about most of this because I TRUST most of the people I just mentioned but that's the key. I TRUST THEM and as it relates to Andrew Maguire, and the price today, I think if he has information that could stop this destruction of price discovery in one of the most important price points in the world then he needs to release it to the public and he needs to actually be apart of trying to stop this instead of cowering. I bet he has nothing we don't already know about and I believe he's just a talented trader who needed a good story to sell himself.

We're boiling like frogs here as our country, markets, civil liberties, and God given rights slowly deteriorate away as people would rather say we should just trust Maguire's judgment instead of asking why in the hell he's not trying to do what he can to stop the manipulation of the most important price point.

Maybe it won't make a difference but again if that's the position we're taking now then we're beat and it's already over. They've won. We lost. Time to sell and move on...

Yet, I'm not going to do that and I know many of you won't either so more than anything I think it's time we start demanding more accountability out of the people who got us here and start making damn well sure they are not only trustworthy but doing what they can to further the cause. If they're just in this to make money off of us then there's no reason to support them or believe whatever crap they have to say.

As David Morgan has pointed out time and time again it doesn't matter what you make if you lose your freedom in the process...

In conclusion (combined with my long winded rant about Andy in the other thread I think this explosion of words more than makes up for my lack of posting over the last 4 weeks and most likely my lack of posting over the next 4 weeks LOL) I want everyone to remember something Barfly has pointed out and is totally true.

Charlatans, con-men, bull-shitters, manipulators, central bankers, journalists, presidents, kings, Rothschilds, Rockefellers, and even nobodies wasting a night away commenting on a pay-walled message board LOSE to gold and silver. Gold and silver live forever. They are the constants and despite all the pressure applied to them they're always going to win. The story does not change even if the story tellers are liars and thieves. The story is true and gold and silver are money. Always have been and most likely always will be but more importantly is that the fate of our entire species now rests in understanding this simple fact. We have entered the economic twilight zone... and gold will out-last that as well... the question is if we will.

Many of you would say this opinion is based on assumptions now unconfirmed as I alluded to way back at the beginning of this but recall i'm a title examiner for fidelity and every day I go through massive amounts of real estate paper work relating to transactions. I mention this because once in a blue moon i'll grab a prior title (our starting point in our search) and see that the same people have been living at a house for 30+ years...

All time record for me? 54 years in one house! Lady just sold it a few months ago after her husband died. Every time I come across one of these old prior files where the people are still there, and have been their entire lives, I ALWAYS PULL OUT MY CALCULATOR and I ALWAYS crunch the numbers. You see everyone of these prior titles has a purchase amount on it and EVERYTIME I run it against GOLD. Every time I ask myself... what would they have if they invested in Gold instead?

Gold wins... Every. Time.

I come across these files about once a week and have for over a year now. GOLD WINS. Every. Time. I've never thought to keep track of the numbers but today I finally ran into one so I did:

In 1966 this lady and her husband bought a house in Illinois for 22k - imagine that folks 22 freaking K for a nice single family house! Anyway... crunch the numbers boys...

(forgetting of course GOLD WAS ILLEGAL TO OWN in 1966)

22k at an OZ would have netted you 628.5OZs of gold in 1966

Today 628.5 OZs of gold is worth 4,200.00

The house was sold today for? 1,500.00

I have run this example on over 40 houses in the past year when the right prior comes along. GOLD. ALWAYS. WINS. The true shame of it is that the lady sold her house today for almost 7X what she bought it for and thinks she probably made it out OK. What she doesn't realize is had she spent her life being paid in real money she would likely have much more in her savings now in terms of purchasing power and wouldn't have needed to downsize. We are ruining our old people's savings by driving rates to zero while simultaneously are screwing over the youth out of any decent paying goods.

The irony is that despite what that Swiss banker told Kirby the fundamentals still won out! They will never change so long as this system survives! Gold has won out DESPITE all that has been against it. More importantly we're the only ones offering an honest solution to money - beyond that it doesn't matter!

The problem is this game has been going on for over 100 years. How will it end? Can it end? and most importantly - Does anyone even care to try? Should we really waste our lives trying to do anything about this if there's no hope in converting hearts and minds? Why not play the game? These are the types of questions that leave me up at night but if we stop fighting, accept defeat, sell out for our own gain, and go down this line of thinking then we'll lose our hope in changing anything and then ALL is lost and we'll deserve every bit of the tyranny that awaits us at the end of the Keynesian road...

Prepare Accordingly.



JAWS and Loss Aversion

By Pining 4 the Fjords | Tuesday, June 25, 2013 at 9:17 pm

Why the movie Jaws offers significant insight into preparing for the end of the Keynesian experiment. And no, I’m not kidding.

I have to admit the movie JAWS is a weakness of mine. Whenever I am channel surfing, trying to find something not entirely odious to watch and I see those four magic letters I am – pun intended – hooked. It never gets old watching the sleepy New England resort town of Amity be terrorized by a giant predatory shark! I still find the movie as compelling as I did when I saw it for the first time as a nine year old, whose parents accidentally took him to see his first “horror” movie. Turns out, I’m not alone in loving this film. JAWS became the first movie to record 100 million dollars at the box office, the first to take in 100 million in rentals, and was the highest grossing film of all time until it was supplanted by Star Wars. Adjusted for inflation, Jaws has earned almost billion worldwide. All of which is truly incredible, given that the whole story was built around fear of a giant shark, and in this movie the shark itself was a rubbery, mechanical joke that looked entirely fake in almost every scene in which it appears.

So why the popularity? Why has it stood the test of time and is still eminently re-watchable? Why is this unquestionably a great movie? First and foremost, it is just plain good entertainment- Spielberg strikes a perfect story-telling note by crafting moods, developing a plot, and pacing the action masterfully. But films that are truly great do far more than just entertain us; at their very best, they provide genuine insight into the human condition and allow us to glimpse, as if passing a mirror on a city street, a reflection of ourselves. Jaws does this brilliantly.

The three major figures of the movie are well known, and all three roles were beautifully portrayed in the film. The role of “decent man who faces his fears and redeems himself” Chief Brody was played in solid but genuine fashion by Roy Schieder. The audience knows from the start that he is a good man and we believe that the chief will ultimately do the right thing, even when the aquaphobic Brody shrinks from his first encounter with the shark, retreating into the shelter of Quint’s cabin pleading “You’re gonna need a bigger boat”. Brody, however, is pretty standard cinematic fare- Mr. Smith goes sharking.

Richard Dreyfus played Mr. Hooper, a young scientist and shark expert. The Hooper character has been described as emblematic of “modern, technological man” in some reviews of the film, while others claim he is the younger half of a classic odd couple / buddy film relationship with ship captain Quint. Regardless, his character development is also fairly typical, the “plucky youngster who earns the respect of the old veteran” found in everything from sports movies to war films.

Ship Captain and shark-hunter Quint was played in a tour de force performance by veteran actor Robert Shaw. The character was such an overt reference to Melville’s Captain Ahab that Director Steven Spielberg wanted to include a scene of Quint sitting in a theater watching Moby Dick and laughing so raucously and inappropriately that patrons around him got up and left. Unable to secure the rights from Gregory Peck to show even a short cut of Moby Dick, Spielberg was forced to give up on the scene, though the idea persisted and was eventually used in the movie Cape Fear. Despite the power of Shaw’s portrayal and the intensity of the character, Quint is an archetypal figure dating back to the ancient Greeks- the driven hero whose intensity turns to obsession, and ultimately self-destruction. Like Ahab, Quint is dragged beneath the waves by the thing he both hates and loves most.

But of all the outstanding performances, taut suspense and gripping action of Jaws, do you know what haunts me the most about that film? It’s certainly not the rubber Carcharadon Carcharius. It’s not Brody having to shark-hunt from a small boat despite his fear of the water, nor Hooper climbing into an aluminum shark cage with a three ton monster just waiting to rip it to shreds. It’s not even Quint slamming the throttle of his crippled engine full ahead in a maniacal act of self-destruction. No, the most haunting and frankly disturbing aspect of this movie is the pitch-perfect performance of Murray Hamilton as Larry Vaughn, the Mayor of Amity.

Why, yes- the blue “sea anchor” blazer is indeed frightening. Haunting, even. But examine this character more closely, scrutinize his actions and motivations, and you will see something truly worth realizing and internalizing; Mayor Vaughn is a perfect blueprint of how our leaders will act during the End of the Great Keynesian Experiment. He provides us with a veritable roadmap demonstrating exactly what we can expect in the near future, and indeed how some of our leaders are reacting at this very moment, to the great unwinding of the debt-based economy and governmental structure.

To understand Vaughn, and the politicians who are going to be making the decisions that will affect our wealth, safety, and freedom through possibly the biggest unwinding of bad debt and mal-investment in the history of economics, the crucial ideas to understand are the psychological principles of “Prospect Theory” and its constituent part, “Loss Aversion”. Prospect theory is a behavioral economic theory that describes the way people choose between alternatives that involve risk. The theory states that people make decisions based on the potential value of losses and gains rather than the probability of final outcome, and that people evaluate these losses and gains using certain heuristics. Loss Aversion is the finding that people tend to be risk-averse for gains but simultaneously to be risk-acceptant for losses. To put it simply, gaining ten dollars gratifies us far less than losing ten dollars will upset us. Additionally, people will risk far more in order not to lose ten dollars than we would to possibly gain ten dollars. Rationally, it seems nuts, right? But it is thoroughly well research and has been proven true in experiment after experiment.

What this means is that, when it comes to assessing risk in relation to potential gains, people tend to be fairly conservative and will generally take on only those risks that are commensurate, and make sense in light of, the potential gains. But what is strange, and in the context of this discussion is actually quite frightening, is that people will engage in FAR riskier behavior in service of the goal of avoiding losses, often to a degree that seems to make no rational sense.

Let’s talk about some examples. It is a well-known that the final race at any race track will be see the heaviest betting of the entire day. This is not because people suddenly have an insight into the field, it is because by that point most people betting at the track that day have incurred substantial losses, and rather than simply accept their losses and go home, they are willing to bet an inordinately heavy amount on the final race in hopes of avoiding the finality of having to book their losses by going home. They are willing to wager (risk) more than they normally would to avoid losses, even if this rationally makes no sense at all! Traders, at least beginning traders, often make the exact same mistake in the markets- rather than book losses and get out of a losing trade, they irrationally hold a deteriorating position (because if you don’t sell, the losses aren’t made “real”) or they even double down on what has been a poorly performing investment, making a riskier bet in the hopes of a big comeback to avoid their losses.

This is classic Loss-Aversion, and it is deeply hardwired into the human psyche. Studies have shown that when people are presented with two versions of the exact same problem, they are willing to take far greater risks when the problem is phrased as “avoiding losses” than when it is phrased in terms of” potential gains”. Keep this principle in mind, and let’s take a good, hard look at Mayor Larry Vaughn and see what we can learn.

For those who haven’t seen the movie but have somehow managed to crawl out from beneath their rock long enough to locate a computer and read this blog (a rather unlikely prospect, I’ll grant you) here’s the gist: a pretty young lass is skinny-dipping at night near the resort town of Amity, Mass. and gets torn to shreds by a huge shark. A few bits and pieces wash up on shore and the horrifying prospect of this happening to someone else prompts the local Sheriff (Brody) to have a talk with the mayor about closing the beaches until something can be done, which seems a very reasonable course of action under the circumstances. The mayor, however, steadfastly refuses and in doing so gives us our first key insight:Leaders benefit most from the status quo, and will perceive that its preservation is of enormous importance, all out of proportion to its true value. They therefore cannot rationally assess the real cost of maintaining the status quo.

What could possibly be worse than a young girl being mutilated and dying a horrible death? Well mayor Vaughn seems to think that closing the beaches and losing tourist dollars would be worse. Is he a monster? Absolutely not- in fact, he sees himself as behaving in a manner entirely consistent with his duty as he sees it; protecting and defending the prosperity of Amity. “I'm only trying to say that Amity is a summer town. Weneed summer dollars. Now, if the people can't swim here, they'll be glad to swim at the beaches of Cape Cod, the Hamptons, Long Island...”. It’s not that the mayor wants anyone to be killed, it’s just that that threat doesn’t seem as ‘real’ to him as the economic costs (losses) of closing the beaches. Loss aversion.

We have already seen numerous examples of this type of ‘Mayor Vaughn’ behavior in the maintenance of the public and private debt Ponzi. One could cite George W. Bush reacting to the financial crisis of 2008 by approving massive government bailouts of the banking sector, and defending what can only be described as the ushering in of a truly Fascist/Socialist monetary regime by saying “I had to abandon free-market principles in order to save the free-market”. One could argue that the entire TARP bailout, followed by QE1, QE2, QE lite, QE3, ZIRP, and QE infinity have all been examples of risky strategy and “doubling down” to preserve the status quo- i.e., to prevent incurring losses just as Prospect Theory predicts. Regardless, the bottom line is that the more an individual owes their status/position/wealth to the current system, the more irrational they will be about trying to save it, regardless of the costs involved. Think about who is and will be deciding what to do, what strategies to pursue, and what actions to take as the great debt Ponzi unwinds. Do you think they will be rational about costs/benefits of saving the current system? Think again.

Additionally, back in 1975 Mayor Vaughn foreshadowed modern MOPE- Management Of Perception Economics. To Vaughn, and countless politicians like him, public perception is reality. Vaughn is an exemplar nonpareil of the ability to dissemble, to rationalize his actions, and to put an almost pathologically positive public spin on the situation. Notice, for example, that when Chief Brody wants to shut down the beaches and prevent anyone else from becoming shark food, Vaughn manages to portray his own position (exposing the public to great danger) of keeping the beaches open as the rational, responsible thing to do. He says “Martin, it's all psychological. You yell “Barracuda!” everybody says, "Huh? What?" But you yell “Shark!”… and we've got a panic on our hands on the Fourth of July!” It is easy to hear shades of Mayor Vaughn in the public pronouncements of numerous Fed lackeys post-2008 about the importance of “calming investors” (we wouldn’t want a panic on our hands) and “backstopping” the markets, “supporting asset prices”, the Bernanke Put guaranteeing stocks will never go down, etc. Never mind that people might be entirely rational to avoid or want to wind-down risky investments. Never mind that by managing perception you are both distorting the clearest signal of risk – the cost of borrowing – that exists, but you are also deliberately tricking people into risky behavior by encouraging them to deploy their hard-eared capital in ways they might not otherwise do if they understood the true dangers… but apparently the IMPORTANT thing is to reassure the public that everything is fine. Isn’t it? Thus, lesson number two: Count on being given distorted, incomplete, or deliberately misleading information at every turn, and when it comes to the true dangers and actual risks to you, count on being lied to.

In the movie, the shark kills a second victim whose mother then offers a bounty to anyone that can kill the shark. This sets off a wild amateur fishing spree culminating in a shark (that is obviously not the killer) being caught. Mayor Vaughn, of course, pounces on this opportunity (and again is the pitch-perfect model for our current leaders) mixing truths, half-truths, and outright lies into the most comforting story he could possibly tell to the public:

[to reporter] I'm pleased and happy to repeat the news that we have, in fact, caught and killed a large predator that supposedly injured some bathers. But, as you see, it's a beautiful day, the beaches are open and people are having a wonderful time. Amity, as you know, means "friendship". Sounds strangely like a Janet Yellen interview on CNBC, doesn’t it? Liquidity, as you know Maria, means prosperity.

And the parallels just keep coming! How does the mayor deal with the multiple deaths and mounting evidence that he has a catastrophe on his hands? This is lesson number 3: As the crisis deepens, leaders will engage in ever riskier behaviors including the aggressive denial of the obvious danger of the situation, and will attack those pointing out the danger, accusing them of acting in bad faith.

Hooper: Mr. Vaughn, what we are dealing with here is a perfect engine, an eating machine. It's really a miracle of evolution. All this machine does is swim and eat and make little sharks, and that's all. Now, why don't you take a long, close look at this sign [refers to the graffitied billboard] Those proportions are correct.
Mayor Vaughn: Love to prove that, wouldn't ya? Get your name into the National Geographic?

For good measure, Vaughn steadfastly refuses to own the consequences of his choice to desperately clinging to the status quo, shifting the responsibility for making good on his dangerous gamble to others, declaring “You boys do what you need to do to keep people safe, but these beaches will remain open… it’s gonna be our best 4th of July ever!” Sounds just like the glorious ‘Summer of Recovery’ of 2010!

In the film, the danger from the killer shark that Mayor Vaughn worked so assiduously to ignore finally hits home, of course. Both Vaughn’s and Brody’s sons are in a small sailboat when the shark kills an adult boater within feet of them. This, you expect, is the moment when Vaughn finally comes to terms with the true enormity of his misguided actions; the moment when he realizes that he has been risking people’s lives for a few extra tourist dollars and it nearly cost him his own son. Yet even when the disaster and danger is obvious and touches his family directly, even when he is a shaken, mumbling idiot whose son was almost killed… he must be almost manhandled by Brody into signing the hunting order to close the beaches and kill the shark.

This is the final, and most important thing we can learn from the good mayor: The defenders of the status quo are psychologically incapable of changing their mindset even when the dangers of their course are undeniable- they will engage in riskier and riskier behavior regardess of the costs, until disaster leaves them no other choice.

* * *

We live in a world where misguided economists, venal politicians, and a culpable, grasping public have all conspired to construct an economy and indeed a society predicated on the status quo of unlimited debt creation. The creation of value (goods, services, technologies) has been superseded and largely replaced by the creation of currency. It is a simple fact of mathematics that this status quo cannot endure permanently, and prudent individuals are planning today for the inevitable changes that are coming tomorrow. In formulating a strategy for surviving and possibly even thriving in such a situation, it will be crucial to understand exactly how our leaders will react during the inevitable crisis. Prospect Theory and Loss Aversion give us well-researched signposts and predictions, but on a more human level I think Mayor Vaughn shows us exactly how we can expect our leaders to react to the great unwinding of the public and private debt Ponzi- i.e., the status quo. It isn’t a pretty picture:

1. Leaders benefit most from the status quo, and will perceive that its preservation is of enormous importance, all out of proportion to its true value. They therefore cannot rationally assess the real cost of maintaining the status quo.

2. Count on being given distorted, incomplete, or deliberately misleading information at every turn, and when it comes to the true dangers and actual risks to you, count on being lied to.

3. As the crisis deepens, leaders will engage in ever riskier behaviors including aggressive denial of the obvious danger of the situation, and will attack those pointing out the danger, accusing them of acting in bad faith.

4. Leaders will shift the responsibility for making good on their dangerous gamble to others

5. The defenders of the status quo are psychologically incapable of changing their mindset even when the dangers of their course are undeniable- they will engage in riskier and riskier behavior regardless of the costs, until disaster leaves them no other choice.




And finally ... in the holiday spirit:

A Turdville tale

Submitted by Pining 4 the Fjords on May 3, 2013 - 1:58pm.

About the Author


Nov 29, 2014 - 1:34pm


Wow, this is great!

Nov 29, 2014 - 2:06pm


enjoyed the trip down memory lane of the last couple of years Silver66

Nov 29, 2014 - 2:31pm


an i read it all twice~!

very nice

Nov 29, 2014 - 2:37pm

Honored to be up there...

Pining's Grinch take has always been my favorite... recently with all these smashings I thought about it again as the last time he posted it was shortly after the worst moment for me personally as it relates to the metals (April 2013) and yet here we are, despite the onslaught from April 2013 onward, still singing around our tree and that's just got to really piss the buggers off... Ha! That thought always brings a smile to my face my fellow who's.

Nov 29, 2014 - 3:04pm

Hilariously poignant conjurings and great selections, Dr. J.!!

And very enjoyable re-reads, kudos to one and all!

Nov 29, 2014 - 3:23pm


JAWS was a big movie down South where we live but not for any of the reasons you might think.

We loved it because we could watch arrogant, ultra liberal, leftist, socialist, communist yankee arse holes from New England get their butts bitten off by a great white. Now that's what we call entertainment !

Nov 29, 2014 - 3:24pm



Perhaps that Great White had a glimmer of a gold strip down its side?

You gotta respect nature, and gold is natural, while paper fiat is most unnatural.

AlienEyes Doctor J
Nov 29, 2014 - 4:17pm

Dr J

It was a glint of silver, Dr Jerome. I did see a gold cap in the mouth of one of the victims gaping, screaming face.

Nov 29, 2014 - 6:03pm

Thanks Dr. Jerome

I somehow managed to leave off a picture between Clockwork Orange and the Matrix:

But all in all, I much prefer this picture (courtesy of P4TF, of course):

Happy Thanksgiving weekend to all. Next week should be quite interesting...

Nov 29, 2014 - 7:43pm

Subscribe or login to read all comments.


Donate Shop

Get Your Subscriber Benefits

Private iTunes feed for all TF Metals Report podcasts, and access to Vault member forum discussions!

Key Economic Events Week of 8/19

8/21 10:00 ET Existing home sales
8/21 2:00 ET July FOMC minutes
8/22 9:45 ET Markit Manu and Svc PMIs
8/22 Jackson Holedown begins
8/23 10:00 ET Chief Goon Powell speaks

Key Economic Events Week of 8/12

8/13 8:30 ET Consumer Price Index
8/14 8:30 ET Retail Sales
8/14 8:30 ET Productivity & Labor Costs
8/14 8:30 ET Philly Fed
8/14 9:15 ET Ind Prod and Cap Ute
8/14 10:00 ET Business Inventories
8/15 8:30 ET Housing Starts & Bldg Permits

Key Economic Events Week of 8/5

8/5 9:45 ET Markit services PMI
8/5 10:00 ET ISM services PMI
8/6 10:00 ET Job Openings
8/8 10:00 ET Wholesale Inventories
8/9 8:30 ET Producer Price Index

Key Economic Events Week of 7/29

7/30 8:30 ET Personal Inc/Spending & Core Inflation
7/30 10:00 ET Consumer Confidence
7/31 8:15 ET ADP employment
7/31 2:00 pm ET FOMC Fedlines
7/31 2:30 pm ET CGP presser
8/1 9:45 ET Markit Manu PMI
8/1 10:00 ET ISM Manu PMI
8/2 8:30 ET BLSBS
8/2 10:00 ET Factory Orders

Key Economic Events Week of 7/22

7/23 10:00 ET Existing home sales
7/23 10:00 ET Richmond Fed Manu Idx
7/24 9:45 ET flash Markit PMIs
7/25 8:00 ET Count Draghi/ECB policy meeting
7/25 8:30 ET Durable Goods
7/25 8:30 ET Wholesale Inventories
7/26 8:30 ET Q2 GDP first guess

Key Economic Events Week of 7/15

7/15 8:30 ET Empire State Fed Index
7/16 8:30 ET Retail Sales and Import Price Index
7/16 9:15 ET Cap Ute and Ind Prod
7/16 10:00 ET Business Inventories
7/17 8:30 ET Housing Starts and Building Permits
7/18 8:30 ET Philly Fed
7/19 10:00 ET Consumer Sentiment

Key Economic Events Week of 7/8

7/9 8:45 ET Fed Stress Conference, three Goon speeches
7/10 8:30 ET CGP Hump-Hawk prepared remarks
7/10 10:00 ET CGP Hump-Hawk House
7/10 10:00 ET Wholesale Inventories
7/10 2:00 ET June FOMC minutes
7/11 8:30 ET CPI
7/11 10:00 ET CGP Hump-Hawk Senate
7/11 12:30 ET Goon Williams
7/12 8:30 ET PPI

Key Economic Events Week of 7/1

7/1 9:45 ET Markit Manu PMI
7/1 10:00 ET ISM Manu PMI
7/1 10:00 ET Construction Spending
7/2 6:35 ET Goon Williams
7/3 8:15 ET ADP June employment
7/3 8:30 ET Trade Deficit
7/3 9:45 ET Markit Services PMI
7/3 10:00 ET ISM Services PMI
7/3 10:00 ET Factory Orders
7/4 US Market Holiday
7/5 8:30 ET BLSBS

Key Economic Events Week of 6/24

6/25 10:00 ET New Home Sales
6/25 1:00 pm ET Chief Goon Powell
6/25 5:30 pm ET Goon Bullard
6/26 8:30 ET Durable Goods
6/27 8:30 ET Q1 GDP final guess
6/28 8:30 ET Personal Income and Consumer Spending
6/28 8:30 ET Core Inflation
6/28 9:45 ET Chicago PMI

Key Economic Events Week of 6/17

6/18 8:30 ET Housing Starts and Building Permits
6/19 2:00 ET FOMC Fedlines
6/19 2:30 ET CGP presser
6/20 8:30 ET Philly Fed
6/21 9:45 ET Markit flash June PMIs

Recent Comments

by Outback, 17 min 24 sec ago
by procog, 28 min 4 sec ago
by DeaconBenjamin, 28 min 29 sec ago
by RW, 28 min 36 sec ago

Forum Discussion

by sierra skier, 1 hour 27 min ago
by NW VIEW, 2 hours 28 min ago
by Porros, Aug 21, 2019 - 5:00am
by sierra skier, Aug 20, 2019 - 5:12pm
by zman, Aug 20, 2019 - 4:53pm