Former Fed and Treasury Staffer Predicts collapse of Stocks and Bonds
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2019 Dec 12, 8:09am 2,796 views 54 comments
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49
Heraclitusstudent
2019 Dec 13, 2:24pm
Heraclitusstudent
2019 Dec 13, 2:24pm
Normally debt is a bet on the future. Low rates mean people trust the future.
Now globally, debts are going through the roof: $240 TRILLIONS.
Does it mean people actually trust the future to actually pay back these debts? Does it mean we are about to see an economic boom?
Worse: it can't stop, otherwise the economy implodes.
Where is THIS runaway train going? I don't know but probably nowhere we want to be. This doesn't mean we're boat people waiting to happen.
But it does mean you want some wealth not bound to the banking system & governments.
Now globally, debts are going through the roof: $240 TRILLIONS.
Does it mean people actually trust the future to actually pay back these debts? Does it mean we are about to see an economic boom?
Worse: it can't stop, otherwise the economy implodes.
Where is THIS runaway train going? I don't know but probably nowhere we want to be. This doesn't mean we're boat people waiting to happen.
But it does mean you want some wealth not bound to the banking system & governments.
50
Chiromancer
2019 Dec 13, 5:03pm
NuttBoxer says
Like in a mattress?
So you believe cash will have value if things get so bad that the banks collapse?
Seems to me with that scenario all bets are off, farm land and weaponry to protect it are your best investments.
I meant cash on hand, not in a bank.
Like in a mattress?
So you believe cash will have value if things get so bad that the banks collapse?
Seems to me with that scenario all bets are off, farm land and weaponry to protect it are your best investments.
51
B.A.C.A.H.
2019 Dec 13, 6:11pm
B.A.C.A.H.
2019 Dec 13, 6:11pm
NuttBoxer says
Good idea to have some.
We can learn from banking crises that have already happened in recent history. Iceland. Cypress. Greece. And even in the US with some failures, - IndyMac and others: The government makes a bank holiday. Then, daily withdrawal limits for a time. Maybe even a long time. Good to have some ready cash for such an occurence, which has happened and will happen again.
As long as you stay under the insurance limit, your deposit will be there. Just may not be able to get it all, right away. Now... supposing there's a systemic crisis... (like in Iceland)... once the capital controls are lifted, your deposit will be there.... but... like in Iceland, the purchasing power of it might be a whole lot lower.
I meant cash on hand, not in a bank.
Good idea to have some.
We can learn from banking crises that have already happened in recent history. Iceland. Cypress. Greece. And even in the US with some failures, - IndyMac and others: The government makes a bank holiday. Then, daily withdrawal limits for a time. Maybe even a long time. Good to have some ready cash for such an occurence, which has happened and will happen again.
As long as you stay under the insurance limit, your deposit will be there. Just may not be able to get it all, right away. Now... supposing there's a systemic crisis... (like in Iceland)... once the capital controls are lifted, your deposit will be there.... but... like in Iceland, the purchasing power of it might be a whole lot lower.
52
marcus
2019 Dec 13, 7:24pm
marcus
2019 Dec 13, 7:24pm
Heraclitusstudent says
Interest rates are typically considered equal to inflation expectations plus some real interest rate. What I believe we've had since 2008 is deflationary or anti-inflationary pressure due to the amount of debt out there. Debt has to be paid back - and the nature of the market place is that it won't easily allow it to be paid back in dollars that are worth far less than the dollars that were borrowed (at least not in an orderly fashion).
You might say, then how do we have such upward pressure on financial assets if inflation is so low ? The short answer is that financial assets as well as many real assets such as real estate (that can be financed with low interest rate debt) often move inversely to interest rates. That is low interest rates are good for financial assets, becasue for one thing, financial assets compete with interest bearing securities for where money (all that excess capital) gets invested (or parked). For another thing, low cost money is borrowed to trade financial assets or to invest short term, or long term in the case of real estate. Ever heard of the so called "carry trade?" The term used to apply to Japanese yen borrowed on the cheap to invest in whatever that could earn more than the low interest cost. But in recent years there was a period when US interest rates were close to zero. Even now, interest rates are probably close to negative, if you subtract out the inflation rate.
Bottom line: I'm not so sure that low interest rates so much mean that people trust the future as it means that interest rates can't easily go up in an environment of excessive debt. Because if they did, it would mean one of two things. Either inflation has finally kicked in as Trump and others want it to (meaning debt can be paid back in cheaper dollars).
OR real interest rates (interest rates minus inflation) are very very high, which would be death to the economy.
Is it possible that the problems that led to 2008 have not yet been solved ?
Low rates mean people trust the future.
Interest rates are typically considered equal to inflation expectations plus some real interest rate. What I believe we've had since 2008 is deflationary or anti-inflationary pressure due to the amount of debt out there. Debt has to be paid back - and the nature of the market place is that it won't easily allow it to be paid back in dollars that are worth far less than the dollars that were borrowed (at least not in an orderly fashion).
You might say, then how do we have such upward pressure on financial assets if inflation is so low ? The short answer is that financial assets as well as many real assets such as real estate (that can be financed with low interest rate debt) often move inversely to interest rates. That is low interest rates are good for financial assets, becasue for one thing, financial assets compete with interest bearing securities for where money (all that excess capital) gets invested (or parked). For another thing, low cost money is borrowed to trade financial assets or to invest short term, or long term in the case of real estate. Ever heard of the so called "carry trade?" The term used to apply to Japanese yen borrowed on the cheap to invest in whatever that could earn more than the low interest cost. But in recent years there was a period when US interest rates were close to zero. Even now, interest rates are probably close to negative, if you subtract out the inflation rate.
Bottom line: I'm not so sure that low interest rates so much mean that people trust the future as it means that interest rates can't easily go up in an environment of excessive debt. Because if they did, it would mean one of two things. Either inflation has finally kicked in as Trump and others want it to (meaning debt can be paid back in cheaper dollars).
OR real interest rates (interest rates minus inflation) are very very high, which would be death to the economy.
Is it possible that the problems that led to 2008 have not yet been solved ?
53
just_passing_through
2019 Dec 13, 9:31pm
just_passing_through
2019 Dec 13, 9:31pm
NoCoupForYou says
I wonder what happened to the chick who used to argue with wookie and pumped bitcoin. It's been trending down every since then.
Fiat! Currency! Will! Collapse! Gold is $30k/oz! Silver to $5000/oz! You'll see, disbeliever! Muh Axioms are always right! Start you Acme Gold IRA today!
I wonder what happened to the chick who used to argue with wookie and pumped bitcoin. It's been trending down every since then.
54
Misc
2019 Dec 14, 2:56pm
It is perfectly reasonable to have the stock market appreciate 25% in a year with a 4% increase in earnings and a 2%ish GPD growth rate. This while there has been more selling of equities by general public than buying because the Boomers are selling to fund their retirements, while the Millenials are buying fractional shares (the latest thing).
… or …
there could just be a massive increase in debt purchasing the assets.
However, I don't see what could stop this trend in the short term, but it could collapse overnight.
… or …
there could just be a massive increase in debt purchasing the assets.
However, I don't see what could stop this trend in the short term, but it could collapse overnight.
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