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12 hours ago, screwball said:

Not sure what's going on.  Tried to post in the pot thread and I get some kind of thing that says "didn't meet my search critera."  Strange.  Bad cookie I assume.

Didn't know you were into edibles.

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On 9/5/2019 at 9:13 PM, Gehringer_2 said:

passed

My apologies - thank you.  I could see it, but I didn't think about if anyone else could.  Duh!

Funny, really.  I tried to post in the pot thread and got a "bad search rejection kinda thing" so I tested here (cause you guys know I do all kinds of crazy stuff :-)).  I put a note in the thingy elsewhere on the board.  That is the only place I couldn't post (pot thread).

Maybe there is a message in that - post here, or the pot thread, and run like **** from the others. 🙂

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The end of money as we know it

Quote

The basic principles of investment are being upended, perhaps irreversibly, as the world enters an era of ultra-low and even negative interest rates.

What's happening: American consumers have seen the interest rates they're paid on savings accounts, bonds and CDs tumble this year, and in places where central banks have actually set negative rates — like Japan and the eurozone — some consumers are actually being forced to pay in order to save money.

This is supremely ****** up.

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28 minutes ago, Euphdude said:

The end of money as we know it

This is supremely ****** up.

No doubt.

A few more tidbits from that article;

Quote

While the goal is to spur people to spend or take financial risk rather than save, the policies haven't worked, and new data shows that negative rates may be doing more harm than good.

It used to be good to save.  Now "they" don't want us to.

Quote

The Federal Reserve is gearing up to cut interest rates for the second time this year when it meets later this month, and banks are already cutting rates on savings accounts.

Why?  Stock market close to all time highs, and unemployment at 3.7.

Seasonally-Adj-U-3-Unemployment-Rate-sin

A case could be made to raise them.

Quote

The big picture: The low-to-negative interest rate environment poses a major problem for people looking to save for retirement. The traditional 60/40 portfolio (60% stocks and 40% bonds) that fund managers have used to craft retirement accounts for decades doesn't work in the long-term if bonds yield nothing or have negative rates.

Pension funds are getting killed, and they can't afford that.  They will never meet their promised return.  To even have a chance they have to chase high yield assets, which of course means high risk. Not good for them or their clients (the article does say this so I am being redundant).

Quote

The bottom line: A fundamental element of our entire economic system — saving earns money and borrowing costs money — is being unhinged before our eyes.

And has been for quite some time.  Nice to see they are talking about it.

The question is; what you going to do about it?

 

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1 hour ago, screwball said:

I think you mean U-6

LOL. Lets try U6 is at 7.2%. If I had just typed it that way the first time I'd have been OK!

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27 minutes ago, tiger337 said:

Alan Greenspan says it’s ‘only a matter of time’ before negative rates spread to the US

That was a week ago.  Of course they are.

FTA:

Quote

“You’re seeing it pretty much throughout the world. It’s only a matter of time before it’s more in the United States,” Alan Greenspan says.

Quote

There is currently more than $16 trillion in negative yielding debt around the world as central banks try to ease monetary conditions to sustain the global economy.

Read the second one and think about what that really says/means.

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2 minutes ago, screwball said:

Read the second one and think about what that really says/means.

So if the world adopts negative interest rates and we experience a recession, what can be done at a fiscal level if the tools that have been used before are being abused to keep economies growing unnaturally?

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7 hours ago, Euphdude said:

So if the world adopts negative interest rates and we experience a recession, what can be done at a fiscal level if the tools that have been used before are being abused to keep economies growing unnaturally?

We can't do jack ****.

They are trying to prop up a failed (or soon to fail) system.  "Growing unnaturally" is an interesting way to put it, and forcing negative interest rates on the population is proof the end game is getting near. But to address my first sentence - they have to.

Books are written (and many of them) on where we are, and how we got here.  The simple fact is we must continue to feed the "ponzi."  IOW, the debt monster.

Debt must continue to grow or the entire ****house blows up.  Like a giant Ponzi scheme.

Debt "is" money.  No debt - no money.

We have lived beyond our means for 30 plus years (spin up a chart of interest rates);

Long-Term-SPY-10yr-Note-Chart.png

Forget the yellow S&P line (but a nice backdrop I must say).  Money has been getting cheaper for 30+ years.  That is how we've done it.  Cheaper and cheaper money.  Now almost free (soon to not free in the other direction).

As George would say "buying **** we don't need, with money we don't have." Easy and free money is the only way to cheat (for the time being) the long term problem - you cannot have infinite growth on a finite planet.

Growth. Growth is everything. Listen to the economists, the Bubblevision pundits, the politicians.  Growing GDP, beating expectations, forward guidance, future growth projections (read earnings).  Always about growth.  Until it no longer works.

Like him or not, Ludwig Von Mises said it best;

Quote

There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.  - Von Mises

That's it in a nutshell.  Plan accordingly.

I know.

tin3.jpg

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10 hours ago, screwball said:

Alan Greenspan says it’s ‘only a matter of time’ before negative rates spread to the US

That was a week ago.  Of course they are.

FTA:

Read the second one and think about what that really says/means.

Greenspan's brain still working at 93. but he has lost enough steps that that kind of interview is not kind for him. 

Your chart is where I agree the danger is biggest. I don't see the negative interest rates at central banks as that big a deal because in the end it is just another kind of big business subsidy - in this case for banks - and its effect is not much different from any other kind of big business subsidy. It's counterproductive in the long run, but not a hill I would die on economic policy wise. What is to me a bigger issue is just that in general as rates on all fixed income investments have fallen continually since the peak of the 70's inflation and then continuing with the greying of the population today, I think it has produced two really bad effects - both the result of big investors desperate for returns 1) money that has left the bond market bidding up the stock market to levels completely unjustified by  earnings and 2) the money that remains in the bond market chasing instruments that are so derivatized and leveraged that they are also dangerously unstable should rates turn up even slightly. This later was such a big part of the issue in 2008 in the mortgage market,  and there are claims that better backstops are in place, and maybe they are in at least the mortgage business, but I have my doubts about anywhere else, not to mention that they are busy trying to roll back any and all restraints put in place after 2008.

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In short, negative rates are really just a way to increase (by force) the velocity of money - which in turn creates inflation (because we don't have enough even through it is higher than stated because they lie).  They want to inflate the debt away.  That hurts everyone, especially the poor.

We Я ****ed.

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4 hours ago, screwball said:

 They want to inflate the debt away.  That hurts everyone, 

It's just another thing that picks winners and losers almost at random. Homeowners with mortgages can end up on the good side of the inflation equation as long as their employment holds. There are millions of boomer SoCal homeowners sitting on over a million in equity today in houses they bought with <200K mortgages and paid back with cheapened dollars. 

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As everyone I meant average Americans.

There are always winners and losers.  The trick is to be on the right side of the trade (if you can be).

Winners and losers if inflation skyrockets - Bankrate.com

Not that we will see skyrocketing inflation, but even rising inflation makes this valid.  Looks like more losers than winners.  And the winning is offset by other things making the winning not as good.

Anytime we lose purchasing power of our money (which inflation does) it's a bad thing for the average Joe 6 Pack.  I don't know how anyone can argue that.  But I suppose some will.

 

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On 9/12/2019 at 2:15 PM, screwball said:

As everyone I meant average Americans.

There are always winners and losers.  The trick is to be on the right side of the trade (if you can be).

Winners and losers if inflation skyrockets - Bankrate.com

Not that we will see skyrocketing inflation, but even rising inflation makes this valid.  Looks like more losers than winners.  And the winning is offset by other things making the winning not as good.

Anytime we lose purchasing power of our money (which inflation does) it's a bad thing for the average Joe 6 Pack.  I don't know how anyone can argue that.  But I suppose some will.

 

have to disagree with one statement at the link:

"Stockholders get some protection from inflation because the same factors that raise the price of goods also raise the values of companies."

US history says clearly that inflation hammers the stock market. In general, inflation causes interest rates to go up, and P/E ratios tend to track as the inverse of interests rates, so as interest rates rise with inflation, the market's P/E ratio falls, which means valuations fall. That is just what happened in the 1960's-1970's. As inflation rose from the mid 1960's (kicked off by the unfunded war spending) to 1979 (when Volcker and the monetarists took over the Fed) , stocks stagnated badly. Just before Volcker started to clamp down on inflation the inflation adjusted S&P was sitting at the same level it had been at in 1955. Zero appreciation over almost 25 yrs. So I would disagree inflation offers anything at all positive to stock investors.

OTOH, as inflation falls, bond yields fall, the P/E ratios people are willing to pay for stock increase, the market rises. The stock market turned around once Volcker's anti-inflation recession was over and it has had a fabulous run up through all the years since while inflation and interest rates have kept falling.

https://www.macrotrends.net/2324/sp-500-historical-chart-data

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