Ivar's Charts

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ivars
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Shorted silver, got convinced

Shorted silver, got convinced by my chart pointing to 13.5... Most likely too early. But I did not go all in, at least.

First chart, typical bubble ( anti in this case) pattern developing downwards.

Second chart, fractal comparison to 2008 shape.

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I figured out what may happen
I figured out what may happen IF FED cancels the debt to USG, and keeps doing so- "buying" and cancelling. Ultimately of course the money goes to the USG which is able because of this to roll over old UST and add new as needed ( within the 2 trillion space created by FED when "forgiving" the current USG debt to FED in form of the US Treasuries.).
 
1) If FED cancels the USG debt to it, nothing bad will happen as no one really suffers anything since banks are NOT using the reserves FED has created by buying UST. (FED can also cancel MBS debts relieving borrowers in the end, but that is another story. That would be a bit like a jubilee for private persons, perhaps no one is ready yet to forgive these debts). 
 
2) So if FED cancels USG debt to FED in e.g 2 trillion value, creating space between the debt ceiling, and continues to rinse and repeat these operations, it effectively creates 2 types of USG Treasuries- ones which are in public, private, foreign hands and are not defaulted on, and others which are in FED and are defaulted on. Where was 1 degree of freedom, now are 2 -> means the entropy of the USG Treasuries has increased, as expected. 
 
3) If entropy of a monetary instrument increases, its liquidity decreaseas. To overcome this decrease in liquidity, a premium shall be paid by USG to holders of treasuries in form of higher yields- interest rates will raise, pirce of Treasuries decrease, but no catastrophe except that the amount by which the Treasury yield will increase ( after perhaps a short panic period) shall be in some sense proportional to the amount of the defaulting Treasuries vs. total Treasuries. 
 
4) If FED repeats this operation often enough, it is quite possible that after some time the total amount of  USG Treasuries that had been defaulted upon = written of in FED balance sheet will equal total outstanding USG debt in non-defaulting USG Treasuries. When this moment arrives, its quite logical to assume that at best, the interest rates /yields on USG Treasuries will be at least DOUBLE the current ones - regardless of other things that may affect them. 
 
5) If proportion of defaulting Treasuries will go over 1/2 the process will become non-linear and the yields will start to increase faster. This puts natural limit to the Length rinse and repeat can be continued in this model, as Interest payment increases to others apart from FED will grow fast and eat up bigger and bigger part of Government spending until the whole interest will be as big as FED capacity to let USG "default" on UST held by FED. When this happens, and further, continuation of such model will become self defeating. 
 
6) I wonder - taking into account other factors that may lead to yield increase - how long FED in fact printing directly into USG pockets with no debt increase can go on- I think a few years at most.
 
7) From one hand, it will help economy as money will be directly injected in economy via USG spending, from, other hand increasing interest rates will slow down further credit creation - AND strengthen the USD which will become even more liquid then US Treasuries, so charge higher premiums relative to them and possibly other currencies. So in total, most likely it will serve as sustaining the slow economy vs. depression as QE have done. 
 
8) So , after few years of such easing, system will clog up again as it has now with debt ceiling and QE. After that, it looks like there will be no sense after that to create money via USG Treasury- FED system. Some other way must move in place. 
 
9) As to gold, as USD will increase gold may suffer BUT the loss of liquidity of US Treasuries due to 2 types and increased entropy i mentioned above will attract again attention to gold as most liquid collateral plus insurance in case this experiment ends badly to USD and it gets devaluated- then or in the next stage. 
 

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I think I figured It out

Were all fucked

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The current and getting

The current and getting higher debt level is going to paint everything in much more colorful way, polarizing opposing parties more and more

The logic is simple and there is a trap:

High debt levels is bad for the reserve currency status and brings risk to the foundation of machine where perpetual cream appears to be creamed by top 1%

To lower the debt levels there are 2 choices- austerity in government spending or debt forgiveness in any of forms- one time tax on wealth+permanent higher taxes which grows into popularity, or serious devaluation of USD ( debt haircut) as inequality continues to  increase as machine continues to run.

There is no miracle way out- well may be positive trade balance - of what?

Austerity leads to deeper inequality  so the elites shall prepare for more autocratic regime;

More government spending via debt  destroys the structure of the cream feeder itself.  

These two solutions are on collision  course, and high debt level threatens elites as well, including USA and the West international dominance- so something has to be done.

So by buying more time with austerity (say Republicans in current standoff- not the last one)- ruling oligarchy accelerates own end;

By buying more time with distributing money to the poor in a way that increases government debt ( Democrats) - ruling oligarchy accelerates own end as fiscal system it feeds on destabilizes;

Debt forgiveness is what people who rule does not want to see as it will ( at the amounts needed) vaporize the gains made by the savers over the last 30-40 years, especially the top 0,01%, 1% .

But in the end they are left with tax on wealth or devaluation to prolong the existence of system- by debt jubilee ( either state or all debt ( in case of devaluation)- but in worse setting than when it was done in 1970-1980 ties. And in worse setting then in 2008 as society is more radicalized and more masks have fallen off elite and its tools to multiply their wealth.

So, elite is in the corner- non of the usual solutions - not spend or spend - prolongs its existence in status Quo grabbing 95% of all new income as top 1% has done in last 5 years. Debt levels everywhere-public, household and corporate-  are protecting safely the economic growth as well- and will slow down it even more.

As to timing it should be so that as the end of this indecision period  comes nearer, the volatility and crisis become more often- engineered to prevent natural crisis, or natural crisis. Financial crisis hit Sept 2008 with negotiated solution in October 2008. Debt ceiling was last negotiated in 2011 August -  2 years 10 months later. It was then delayed to 2013. january - 1 year 5 months . Next debt ceiling negotiation- now- after 9 months . Next supposedly- not later than February 2014- after 4 months. Next??? -  2 months-April 2014. When does it become permanent negotiation which means some thing radical will happen- apparently approx in June 2014. 

PMs- all the time as these crises continue to arise and debt levels are discussed average PM prices will go down as they have ( gold) since September 2011- straight after budget deal. 

After June 2014 it has to turn around...We can discuss the unconventional options that may appear, but with democratic president and Senate it will not be austerity. With Republican congress there will be no taxes.

Something else must happen to reduce the debt load and continue spending. I would say it all points to a significant devaluation as the less a painful one with heightened inflation as a result- no matter in which way this is achieved- directly or indirectly via causing it by choosing any of options for continuous government operations and interest payments on existing debt without raising the debt ceiling or raising it by move that avoids congress. 

They may turn around a bit earlier when the investors start to see the endgame before it happens. 

This is finally again PM positive. 

Debt forgiveness via transfer of wealth would be PM negative. 

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I remade USG debt crash (

I remade USG debt crash ( reduction by unconventional means) approximation using latest data and narrowing region starting with 1997,  and using USG debt-debt held by FED to cancel out influence of QE on debt levels, leaving mostly fiscal policy (USG spending) created debt. It has better shape, with clear inflection points. We can see that right now it is in decline, but it will move up again very soon ( blue line)

Results are interesting- but - not my fault but may be- return to debt crash date further away then I thought in between my initial predictions and this one- and, it fits the Armstrong 2015, 75 date..- but thats mathematics, it may vary from Armstrong date 1 quarter to each side, but in general it seems to be there:

The fit is VERY good for this type of approximtion, especially over last 6 years since the burst of Morgage bubble.

What are conclusions:

1) Debt ( caused by fiscal actions) will start to accelerate even more rapidly latest in q1 2014. That should mean reversal in PMs out of current bear phase. January 2014 anyone?

2) Politically it means that :

- GOP has lost austerity battle with this lost battle during shutdown, and will NOT recover

-So GOP will continue to cave in in next debt ceiling /budget talks as it can not gain anything

-spending option ( based on fear of collapsing economy ) will win vs. austerity and continue to undermine fiscal basis of the USA and Western world, but meanwhile continue to redistribute more to the top 1 %.

-Most likely, GOP will lose House majority in 2014 

3) FED QE will really continue  at least all 2014, so stocks will continue to grow due to push by beneficiaries of QE (banks) and continued low returns on bonds.

4) If - and I suppose yes - Democrats win House in 2014, an unconventional solution to debt question will be found in Q3 2015-April 2016-sharp reduction of debt-may cause PM crash depending on HOW this is achieved.

Before that, unconventional methods will not be used, but will be discussed more and more openly and in detail;

5) Debt reduction method positive for PMs would be cancellation of debt by FED and other ways leading to further  reduction of trust into US treasuries as collateral ; Or government taking over USD issuance without debt, or similar USD devaluating actions

6) Debt reduction method negative for PMs would be e.g. one time wealth tax (10%) ued to pay of debt partly or similar redistribution of wealth to reduce indebtness of state and may be households and corporations; At least initially if performed fast..somehow. 

So it seems that big trade is closer than I thought- January 2014.. The real big one may come after q3 2015, or not. It will be different.

Nothing new , really. I am moving in circles...surprise

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Just one Question

Hi Ivars

Long time no see :) How you doing?

I just have a question about your hypothesis that some uber rich tycoons are pulling the strings behind the scenes. You state that because austerity has failed there are 2 ways out (print and devalue or deflation and default) and both these ways are bad for these elite.

But if I were the Wizard behind the curtain I would try true austerity - cutting back government spending massively. This would perhaps be detrimental in the short term to the pork barrel spending I usually benefit from but it would avoid the bigger problem of devaluing my assets. If there really is someone behind the scenes why are they not trying this?

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Hi ,I am fine, all the time

Hi ,

I am fine, all the time lagging behind what is happening:) 

To impose true austerity political system has to be changed -in the USA- into autocratic one. Its coming, but not there yet. With current system, all austerity imposers will fly out of offices very fast, as will Republican House members in 2014. Of course, the Republicans voted in may be more Tea Party types, polarizing congress more, but total amount of Republicans will be reduced.

I think because of this , austerity in the USA can only follow political change. I doubt, even if all signs point to movement in that direction, autocratic regime can take place in the USA before 2016. Another issue, in autocracies the trend is that political power overshadows wealth power which rules in oligarchy, and wealth gets confiscated from people to new favorites. That is also a lot of risk for current elite to move power from wealthy oligarch to populist fuhrers. 

In Eastern Europe where people still have memories of totalitarian regime and have not got used to so many government subsidies - they will take much more austerity from democratic representatives before starting to punish them. Today, they vote mostly by their feet with emigration - e.g. Latvia and Lithuania have lost 10% of total population each since 2009. 

I am not sure salaried/subsidized/unemployed  Americans will do that soon,  or that there are many places they would like to emigrate to. With USD a reserve currency, USA elites have this option to continue feeding it into financial markets and deficit spend until its too late to save the currency in  its current form. 

Elites though have the option to move out from USD assets into non-finacial assets-I think that is what happens/will happen. 

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If it was an elite me

If it was an elite me deciding on the playbook I would have put Ron Paul in power at the last election. He would have reigned in spending without creating an autocracy, although you are probably right he would have only lasted one term. That would have been a very pro business solution.

I am not sure there are enough non financial assets for the uber rich rotate into. Only real estate is big enough and most of it is not for sale.

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Quote:If it was an elite me

Quote:
If it was an elite me deciding on the playbook I would have put Ron Paul in power at the last election.

No, that was impossible. Too unconventional - people do not like shifting radically from their previously fed propaganda based worldview so fast. Marginal views may become mainstream politically only after serious suffering is inflicted. Propaganda is not so powerful in the USA- that could happen in the USSR or China, not in the West.

In 2008, letting banks fail,no QE, depression- after that maybe Paul would have had a chance...- if he had not been suggesting that, so getting the blame.

Biggest wrench in business is high debt levels - both private and state-which arise from inequality increase above the optimum ( could be Pareto - 20% holding 80% of wealth) - which in turn happens based on fact that in most greed based primitive democracies there  are no checks for keeping inequality stable as they are voted away. 

BTW more radical thing is that inequality between countries also have to be kept under control.

But what is interesting many models are being tested now on countries with no reserve currency- Latvia, Estonia, Ireland, Iceland, Greece, Cyprus, Portugal, Spain, Italy, -etc. to see what works where. 

Bail-ins in Cyprus was definitely a move forward-time deposits can not be insured as they take part in risky bank businesses. Quite logical. Then money may also find more direct way into private business or investment, with more involvement of savers instead of taking part in financial instrument speculation via banks.

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This was correlation I found

This was correlation I found in March 2013:

And this is how it looks today:

Being bullish on PMs and doom scenarious did not allow me to trade this.

However, there seems to be some more potential for S&P to the upside- provided QE does not end in 2014 ( it should not given the need for USG  to borrow cheeply that will move up after GOP defeat on austerity ). 

Also , from the charts its possible to see how easily markets dismissed the second debt ceiling standoff compared to one in summer 2011. This time, there was no dent in the stock upturn drive. 

Obviously, markets were right, as the result of negotiations was nothing, no spending cuts. It seems that coming debt ceiling negotiations in January 2014 will just drive stocks into stratosphere as excess reserves available for speculation continue to swell. 

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it was perfectly possible for

it was perfectly possible for Ron Paul to become president. In fact the mainstream media were so terrified of the possibility they deliberately blacked out his public appearances. Perhaps the reason it didn't happen was because a man like Paul with strong principles would be too hard to control as a puppet.

Regarding the reason for debt expanding beyond stable levels, surely the reason is as simple as a centrally planned interest rate. This is the one price that governments do not leave to market forces. Is it a surprise that the level of debt is sub optimal?

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Listening and reading about

Listening and reading about French asignats as per AM homework task. I think this is a moment we can identify and which also corresponds to a point in asignat and Inverted gold USD curve:

Quote:

The third outgrowth of the vast issue of fiat money was the Maximum. As far back as November, 1792, the Terrorist associate of Robespierre, St. Just, in view of the steady rise in prices of the necessaries of life, had proposed a scheme by which these prices should be established by law, at a rate proportionate to the wages of the working classes. This plan lingered in men's minds, taking shape in various resolutions and 

decrees until the whole culminated on September 29,  1793, in the Law of the Maximum.

.

 
This led to a jump in value of asignat from 30 to 50 ecus. 
 
The modern analogue to this is -the first debt ceiling debate which tried to put a Maximum on debt and brought in Grand Bargain budget with following sequester. That solution- application of analoque of Maximum to the issuance and source of USD supply- USG debt. French National convention tried to cap the prices in paper currency; US congress tried to cap the amount of issued paper currency; both failed against a law of nature, it seems:
 
Quote:

On July 31, 2011,  two days prior to when the Treasury estimated the borrowing authority of the United States would be exhausted, Republicans agreed to raise the debt ceiling in exchange for a complex deal of significant future spending cuts.

 
In what followed the USD price in gold went up - gold price went down. And is still down. However, more analogy follows:
 
A little sidemove - Modern Money Theory appears along with paper money: 
 
Quote:

And now was seen, taking possession of the nation, that idea which developed so easily out of the fiat money system;—the idea that the ordinary needs of government may be legitimately met wholly by the means of paper currency;—that taxes may be 

dispensed with. As a result, it was found that the assignat printing press was the one resource left to the government, and the increase in the volume of paper money became every day more appalling.
 
Back to debt  ceiling analogy with Maximum:
 
Quote:

Ultimately, the General Maximum proved to be controversial and unenforceable. In December 1794, it was repealed.

 
So law of Maximum lasted from September 29, 1793 to December 1794, or 1 year and 2 months. According to AM overlay of 2 charts in his Main Street post, what was 1 year in asignat history, is approximately 2,3  years in the last chapter of USD history. 
 
So we take July 31st, 2011 and add 2,3*1,2 years= 2, 66 years ( 2 years and 8 months) , and what do we get: February 2014!
 
So we continue the history of the USD which is paper(electronic)  that is issued =net issuance equals  USG debt:
Quote:

Ultimately, the Debt Ceiling proved to be controversial and unenforceable. In February 2014, it was repealed.

 

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Nothing to argue with there.

Nothing to argue with there. According to the chart overlaying the Assignat price on the gold price of dollars (below) time is compressed by a factor of 2:1 with current events playing out about twice as slowly. This would put the death knell for the dollar around 2017.

Very nice analogies here https://www.tfmetalsreport.com/blog/5170/french-history-fascinating between the French Revolution hyperinflation and the current US decline. The main difference is now there is a "War on Terror" and in that period the revolution had already occurred and instead there was a "Reign of Terror". The revolutionaries at the time were in control of the printing press whereas now it's still the old guard in charge. I am not sure if it matters, but things really took a turn for the worse after Robespierre was beheaded. Perhaps it would take a monumental event in the US to trigger a full blown meltdown?

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Indirectly the devaluation of

Indirectly the devaluation of money in France prior to assignat could be measured by levels of hoarding of gold- but that is possibly not known as well. Of course, there was a hike in hoarding trend  after revolution, which corresponds so nicely to year 2001...So we may say that YEAR 2001 in the USA is the analog of 1789 revolution in France. 9/11.So simple, yet so effective. Not mobs or bourgeoisie, but oppressed Muslims - demographically pressured yet economically marginalized - or orchestrated revolution- again, the analogies may be find in France- did Royal court organize  revolution?

In the book, it was mentioned that Mirabeau was paid agent of Royal court. Aha? So someone in Congress /Senate   was  Mirabeau- or was it Cheyney or some "tribune" outside elected bodies forming public opinion via press , the frontman was Bush , but who are Royal Court?

Quote:

This Mémoire gives insight into Mirabeau's genius for politics: The main position was that the king was not free in Paris; he must therefore leave Paris towards the interior of France to a provincial capital, best of all to Rouen, and there he must appeal to the people and summon a great convention. It would be ruin to appeal to the nobility, as the queen advised. At this great convention the king must show himself ready to recognize that great changes had taken place, that feudalism and absolutism had for ever disappeared, and that a new relationship between king and people must arise, which must be loyally observed on both sides in the future. To establish this new constitutional position between king and people would not be difficult, because the indivisibility of the monarch and his people is anchored in the heart of the French people.

This was Mirabeau's programme[citation needed], from which he never diverged, but which was far too statesmanlike to be understood by the king, and far too assertive of the altered condition of the monarchy to be palatable to the queen. Mirabeau followed up his Mémoire with a scheme for a great ministry containing all the most notable men: Necker would be prime minister, "to render him as powerless as he is incapable, and yet preserve his popularity for the king"; the duc de Liancourt, the Duc de la Rochefoucauld; La Marck; TalleyrandBishop of Autun; Mirabeau, without portfolio; Target, mayor of Paris; Lafayette, as generalissimo of the army; Louis Philippe, comte de Ségur, as foreign minister; Mounier; and le Chapelier.

This scheme got noised abroad, and was ruined by a decree of the Assembly of 7 November 1789, such that no member of the Assembly could become a minister; this decree destroyed any chance of the sort of harmony between ministers and parliament which existed in England, and dashed Mirabeau's hopes. The queen utterly refused to take Mirabeau's counsel saying "I hope that we shall never sink so low that we shall have to ask for aid from Mirabeau.",[16] and La Marck left Paris. However, in April 1790 La Marck was suddenly recalled by the comte de Mercy-Argenteau, the Austrian ambassador to Paris and became the queen's most trusted political adviser. From this time to Mirabeau's death, he was the bearer of almost daily communications between Mirabeau and the queen. Mirabeau at first attempted to make an alliance with Lafayette, but it was useless, for Lafayette was not a strong man himself.[citation needed] From May 1790, to his death in April 1791, Mirabeau retained a close connection with the court, and drew up many state papers for it. In return the court paid his debts and gave him a monthly subsidy of six thousand francs; [17]

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As for Feb 16 as low point in

As for Feb 16 as low point in PMs. I am just guessing, but was not it so that Bush victory was in fact almost a loss but the Supreme court stopped recounts in Florida. Now if we know who was there then ( of course we do, but I do not know)  we know who got orders from the Royal Court about who shall win in this "revolution". Bush shall.

Because I can not conceive any other event than Bush being sworn in and starting his presidency on January 20, 2001, that would mark the beginning of "flower revolution" :) in the USA leading to immediate devaluation of the USD vs. gold=the same happened with livre in France as revolution struck.  

Of course, cycles are more powerful than events,  but those events that move with cycles are not always coincidences, people can read cycles and be ready to ship along the river of time gaining advantage with the least effort. Of course, depends how far ahead they see the river. Chinese might a bit longer vision, but for a meantime, Bush installment was a revolution, and , if one considers the consequences, clearly so- one would not expect mobs and riots- we live in civilized society, games are played as much as possible behind the curtains. Then some blood is spilled in Afghanistan and Iraq- but not in the States-well except for 9/11.

Can someone define the driving force and motives - winner class  from this revolution? The Royal court is behind the scenes- but it uses some class eager to establish its position in society which so far has been denied to it... Which part of society? Military? Investment bankers? Or.. tech billionaires/garage engineers swept on the scene of power via dotcom bubble during 1997-2000 and willing to protect their positions also after dotcom bust? The investors behind them? The bankers behind this bubble willing to continue this newfound source of wealth-Mega bubble , learning from Japanese  ( well it happened in 1920 -ties as well, who was it then?). No wonder they follow the Japanese also today with 10 year delay..

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Two outcomes of the USA

Two outcomes of the USA revolution in 2001:

So the winners are- corporations.. I am not sure how big or small enterprises this includes. And the losers are salaried workers :

The last log-periodic wave sequence starts in 1970 as all mid term sequences related to removal of gold from international  monetary stage. Applying the same fibo ratio back, we get years around   1937-1940 (something during Great Depression) and 1885-1890 ( real end of bimetallism?)  and  1800-1810  ( slave trade ends? Slaves were also substitutes for money ?) . Not 1913. 

Anyway, the second chart is most instructive. It shows-again-the characteristic reduction of cycle lengths while increase in cycle amplitude characteristic for non-sustainable super exponential processes approaching crash ( in this case crash would mean sharp, unnatural under current system reduction in average unemployment length- e.g. killing all people unemployed longer than 40 weeks during 4 week time- just to make clearer what crash means in this context).

But before that, again with our nice end of 2015-2016 time point, the average unemployment duration should almost double - to 70-80 weeks. Under no statistics would this lead to reduced unemployment percentages- on the contrary, they will shoot up, never having reached even with current accounting the FED's 6,5%.

Now, as unemployment trend will start to turn around, the political will to spend will become irresistible- as they know no other solutions. Again, move to direct government money issuance is almost guaranteed given the Democratic congress and Senate and President and Yellen.    

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I am not convinced of the

I am not convinced of the Royal Court analogy. From what I have read so far Mirabeau was not so much an agent of the Royal court than a man who saw a new vision for France where the people worked together with royalty to govern (still a revolution). Obviously royalty were not interested in this scenario, and whilst they sought his assistance to calm down popular anger and mediate they really did not envisage a change in the status quo and just wanted the problems to go away.

He was a mediator who saw the need for change but ultimately Mirabeau failed in his goal of a moderate outcome. The question is who is the modern day Robspierre who would turn the US on its head? A uncompromising sociopath (perhaps psychopath) who will do anything to achieve his goals of social equality regardless of the cost. There must be many candidates waiting for the opportunity right now in the Democratic party.  Whoever he is, he is not a moderate :)

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Who are the Royal Court

Who are the Royal Court behind ( and at power) before the USA 2001 revolution? And hoping to steer it through while maybe not being so lucky ( French King was beheaded in January 1793, which would correspond to approximately 4x2,3 +2001 = 2010-2011  in present history, followed by internal Reign of terror from June 1793 ( 2011-2012 ) till August 1795 ( 2015-2016). This is superfluous I understand on other hand drone strikes reached its maximum  ( outside the USA, of course, in 2010). Where will they hit next remains to be seen. 

Also, for terror to work its not necessary to kill. Modern terror- it is enough to demonstrate its possible, and also let people know that their whereabouts, intentions and coordinates are known in real time by agencies who can feed it into drone and kill at will; 

30 years old Snowden flies out and informs everyone in a wide publicity stint. Nothing happens to him or information; he is living as guest of Putin who no doubt is happy to hear what is possible- and level of fear creeps up in subconscious of masses;

establishing few precedents with killing the USA citizens helps as well as NO ONE FEELS SAFE ANYMORE.

Well, that is the modern reign of TERROR. It is here ( I mean in the USA), voting "present"

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Any future development must involve changing something which people have never challenged up to the present,and which will not be shown up by an axiomatic formulation.

P.A.M.Dirac

ivars
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Ok, four of the 5 judges

Ok, four of the 5 judges voting for stopping recount in Florida in Bush vs. Gore were appointed by Reigan, 1 by Bushes father. That moves the revolution of 2001 preparations back at least  20 years to Reagan's first term. It could be linked to the plans created as to how things have change in the aftermath of coming collapse of the Soviet Union and ideologically, the last backstop and also funding source for salaried workers. It should have been accompanied by takedown of the unions, as we also experienced most strikingly in the UK Thatcher vs. coal miners case in 1984-1985. I bet SU collapse was  a clear thing for USG strategists since 1982, and became obvious in 1985 when Gorbachev lifted the lid, perhaps a bit too much, perhaps knowing that openness will bring the end to communism.

Supposedly, finishing of (Trade) Unions was one of the key aims of the 2001 revolution, and redistributing the pie in favor of capital, and successful so far. But there might be a backlash, counterrevolution, in the terms used here. Question remains for e why was it necessary, was business cycle expected to stagnate and national unity/focus  to become too flexible  after the end of ideological and physical collapse of perpetual enemy- the Soviet Union? Was there a risk of downturn in corporate profits? Was there a realization of the need of new propaganda direction to replace the perpetual enemy that always helps those who rule to maintain power balance inside the country?

__________________

Any future development must involve changing something which people have never challenged up to the present,and which will not be shown up by an axiomatic formulation.

P.A.M.Dirac

worldend666
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In 2001 the US was in the

In 2001 the US was in the middle of a severe downturn. Greenspan was afraid of deflation, something pretty much unheard of  since there had been a gold standard. Maybe the US just needed a war to prime the economy and it wasn't part of some decade-spanning master plan? I don't think you can use the revolution analogy because there has not been a popular uprising yet. 

Still, perhaps it doesn't matter. Whilst there has not been a revolution there definitely is a fiat experiment underway that is reminiscent of the French experience of paper money. The US money base is up 300% since 2008, something that happened in about 2 years between 1790 and 1792.

If the French experience is anything to go by it's already too late to stop. From 1790 to 1792 the Assignat lost about 30% of its value. Since 2008 the dollar has lost about 40% to gold. Around 1792 debtors with mortgages became a powerful lobby and argued for more money printing. Today we have all kinds of debtors arguing for more of the same. They will win the argument. I am sure opinion leaders like Paul Krugman have a big fat mortgage. The tide already looks unstoppable.

So what do we have to look forward to according to the French experience?

1) The law of accelerating issue and depreciation according to Dickson White

2) The rise of gambling (CFDs, spread betting, futures trading) as it becomes unpopular to work for a living

3) The moneyed class in cities will become even more wealthy and seek frivolous luxuries. The poor in the city will become poorer.

4) Popular delusion and intoxication associated with the illusion that money creates wealth. More and more political speeches will call for new QE rationalizing that what we have now is still not enough and that market weakness is due to all kinds of reasons except a weak currency.

5) A rapid and bumpy decline of industry with brief upswings as new money is issued. Factories will close. All activity with long time horizons will cease.

6) Prices will begin rising rapidly. Shopkeepers, initially pleased with the rises will soon notice a slowdown in business. At some point there will be popular unrest, rioting and looting of the shops. This will be condoned by local officials as "only fair" under the circumstances, but the rioters will be paid to go home.

7) Payment in gold will be outlawed. Foreign exchange will be outlawed. 

8) Price controls will be brought in to popular demand. Severe penalties will be made for breaking the law. As a direct consequence there will be a rapid reduction in output as factories choose not to produce. Imported goods will not be for sale as their prices will already exceed the legal limit. Once price controls are brought in the decline in wealth will accelerate markedly. Penalties will become worse as the pressure increases. 

9) Confiscation will loom large. Everything will be confiscated from abandoned property to assets left behind by people who fled the country to "fair game" such as the property of wealthy individuals. Certainly financial markets will be tapped for windfall profit taxes.

10) At the time of the French revolution the wealthy, and eventually anyone of any means were forced to loan up to half their salary to the state. These days a loan is not necessary as we have analogous levels of income tax. Still, tax rates will rise to unbearable levels.

11) Facing rapid devaluation, and to restore confidence, the government may attempt to back the currency with anything from confiscated assets to subprime mortgages and maybe even the promise of loot from foreign conquests. The worse the situation gets the more outlandish the security.

12) Debtors will find it easy to pay off debts as the currency declines. New rules will be made to enable fair repayment by adjusting the debt for the money supply at the time of repayment. This will also fail because wages and prices will not rise at the same rate.

13) When price controls are removed (because even life in jail is not enough to deter people from trading at a fair price) prices will shoot to the moon, but the price of labour will stay subdued. Prices will seem impossibly high.

14) Absolute essentials such as flour will increase in price more than sugar. Shoes will increase more than hats or gloves. Wages will trail all price rises.

15) There will be an attempt to issue a new currency to be backed by easily redeemable assets.. It will also fail within 2 or 3 years because the assets will be too large to redeem for most people.

16) Finally there will be a return to a metal-backed economy. 

17) The damage done will set the country back 40 years or more.

I don't know how many of these predictions come to pass. Some of them are hard to imagine today, but it was also hard to imagine where we are now back in 2007.

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