Sunday, October 09, 2011

Why we're fucked

Quick, where does any money that Ben Bernanke prints go? Here's a hint:

There will be an exam in the morning. I expect you to have the answer then.

-- Badtux the Professor Penguin


  1. That reminds me of something an Econ professor once said to me about the Fed. That how they play around with the money supply is just one of those things where once you know how they do it, you'll wish you didnt. Kind of like making hot dogs. ;)

  2. I have this crazy feeling that th "rich" or whomever, are actually trying to "take" all the money for themselves.
    Not unlike a spoiled child at a game of Monoply that grabs all the available $ and gets possieve as if it were real.
    That can't be tho Right?
    After all our "system" is set on supply and demand, right . And even IF there were lots of Supply but there were no demand as in $$ available to buy with, the system will crash.
    No body is that crazy outside of Comic Books and TV programs RIGHT???
    I mean even the most Greedy politician or executive understands the marks have to win occasionally, Right?
    Am I going to have to produce everything I need myself due to high prices and lack of income ?
    So the real thing is "they" want us back in the 1800's.
    Christ on a cracker.

  3. Really don't need a chart to know the answer.

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  5. I drove and ferried to an island in the middle of Puget Sound Sunday to catch a talk by Doom-blogger Dmitry Orlov, who achieved Internet fame (in Doomer circles) with his 2006 essay titled "The Collapse Gap."

    It posited that communist citizens in the old USSR were better positioned to muddle through the collapse of their society than the richer citizens of the U.S. will be. The Soviets had backyard gardens, networks of friends who would help them through, their housing was owned by the government so they didn't get foreclosed into homelessness, etc.

    Anyway, Orlov addressed the issue of how the uber-rich have so much "money" provided by The FedRez. It's essentially fake money, Orlov pointed out, ginned up through fractional reserve leverage and consisting mainly of electronic digits.

    When -- not IF -- a systemic collapse of the financial system happens because it's all built on bogosity, those piles of fake money will evaporate. What good is billions of dollars in corporate stock after the corporations go out of business? Ditto for government bonds in a widespread sovereign default situation.

    Even their yachts, cars and mansions will be less valuable when the support systems that keep them operational are falling apart. Plus, property rights are less respected in times of collapse. The servants might just decide to live in your house in the Hamptons, and the security guards won't kick them out, because they're occupying your garage.

    For the first time, I felt some pre-schadenfreude toward the MOTU* fcukers. Bring on the collapse, baybee! I will be knocked down a peg, but so will the rich bastards. I can deal with it better than they can.

    (*MOTU = "Masters of the Universe" from Tom Wolfe's "Bonfire of the Vanities" book.)

  6. Lynne, the point of that graph is that Bernanke has printed around $1.8T. Which has in turn simply been deposited right back into the Federal Reserve as deposits, because the banks aren't lending, because they don't see anybody worth lending to because the economy sucks because everybody is unemployed or underwater on their mortgages and can't afford anything. So yes, the Fed can print money, but if the money just disappears under (virtual) mattresses, all they're doing is increasing the supply of (lumpy) mattress stuffing.

    w3ski, that's somewhat related to today's tangent. By causing deflation by monopolizing all the money, the MOTU get to buy up the assets of the nation for pennies on the dollar, turning us all into renters of the wealth that we ourselves produced. After all, the rich and wealthy didn't build all those houses that they're foreclosing upon. Probably some redneck and Mexican carpenters and plumbers and electricians did. They're obtaining the wealth of the nation without doing a thing to actually create wealth. They are, in essence, looters... then have the gall to call *us*, the producers, "looters" because we dare demand a bit of the wealth that we produce as wage slaves to them!

    Ruckus: Shorter answer is: WASF :).

    Bukko: Our lords and masters have already thought of that. They are consolidating ownership of real assets, with a large class of private security forces under their direct control to enforce their ownership. As public finances wane and public infrastructure collapses, they will step in and assume ownership of everything -- farm land, water systems, houses, highways, everything -- then force us to slave as their servants for even the most meagre of existences, or die of thirst and starvation.

    Orlov (and you) are looking for hyperinflation, but that's not what we're going to see. We're not going to see that because deflation is what benefits our MOTU. Deflation allows them to buy assets for pennies on the dollar as people go bankrupt trying to pay back debts taken out when the dollar was cheap with salaries received when dollars are rare and expensive. Our overlords will stuff any freshly printed money under their own mattresses so that you and I never see it, and laugh as people like you look for hyperinflation that will never come -- because the money will come out from under mattresses only grudgingly, and only to buy assets from a bankrupt nation for pennies on the dollar.

    Will there be a collapse? Sure, but not the one you and Orlov are looking for. The groundwork has already been laid for turning the majority of the world's citizens into serfs. All that's left is the endgame.

    - Badtux the Serfin' USA Penguin

  7. Boy, I wish I had a good argument about that serf thing. But I don't. I've seen too many employers here in Michigan treat their employees as horribly as the law allows while working doggedly to change what few remaining laws protect workers.

    I know this is a tangent but it happens so frequently that I sometimes find myself thinking of that famous Stanford prison experiment. You know the one...where they divided the students into prisoners and guards and then had to end the experiment early because the guards were abusing the prisoners. It just seems that when a labor market gets to be like the labor market has been around here for the past decade, where the bosses have a lot of power, the bosses start to get a little abusive. I could go on and on about what went down at the old buggy whip company I used to work for.

    And then on top of it, the powers that be seem to be doing everything they can to prevent people from becoming entrepreneurs. They oppose things like universal health care coverage which would allow people to strike it out on their own without risking their very health. And of course they hold onto the money/capital with iron fists, etc etc. This is why I support peer to peer lending but here in Michigan, that is regulated to the point of being nearly impossible because the banks dont seem to want that kind of competition.

    I understand all of that. But from a "collapse" point of view, excess deposits in the Fed may not be a huge problem or at least there is a positive side to it too in that it does make the banks a little more stable. Small silver lining I know but there you go.

    And I still say that all of this banking is a lot like making hotdogs. The more you know, the grosser it gets and the more you wish you didn't know ;)

  8. And OMG, I just heard on the news of a new bill being proposed in our state legislature designed I am sure to allow employers to be extra evil to their employees. It is a bill that will override any local ordinances that protect employees from being discriminated against due to their sexuality. Yes that is right, the Michigan legislature is working very hard to protect employers rights to be bigots. Disgusting.

  9. Have you ever read an econoblog called Jesse's Cafe Americain? In a recent post, he makes use of the monetary base expansion graphyou have, and comes to a "stagflation" conclusion. I like the guy, because he has a heart. He writes about finance with a moral, old-fashioned Christian (not rabid X'ian) perspective. He's an American living in Paris, I think some kind of a professor. He doesn't give much away about his personal life. I learn a lot about financial theory from "Jesse" (he takes his screen name after 1920s speculator Jesse Livermore.)

    I have read theories countervailing yours about how the MOTUs want inflation instead of deflation, because they want to protect the value of their imaginary financial assets. Among my many reads is The Automatic Earth, which is a staunch deflationist blog with two great minds behind it and many intelligent commenters. The amount of knowledge out there is stunning. I try to absorb what I can, and my mind is constantly expanding.

    What's going to happen is anybody's guess, because I think that no one is in control. It's a crazy, chaos-theory experiment underway, and everyone on Earth who's living higher than the subsistence level in a jungle somewhere is a lab rat. All we can do is prepare as well as possible and hang on, try to survive the ride. I feel like a tsunami is coming. I don't know exactly when, or from what direction. But just knowing it's out there might help me react so I can swim, or climb up on something high, so as not to get swept away.

    One of Orlov's other prognostications is that major changes will occur rapidly when the collapse comes. Complex systems do not slowly degrade -- they fail suddenly and spectacularly. The things that make the systems strong also make them resistant to change, so they get brittle and prone to cracking. In 1986, almost no one inside the USSR was predicting it would be a failed state. It had a massive military, a large population and a seeming iron grip on what it controlled. But in less than half a decade, it had fallen to pieces. I can foresee a similar fate for the U.S.

    Lastly, your point about the MOTUs taking control of physical assets applies only if there's a system of law and order. Orlov pointed out that property rights get disrespected when there's a systems collapse. The local police force, or your hired militia, might not be enough to protect your gated community. Hirelings might become thieves, or they'll throw their lot in with a different master. The MOTUs might be able to hold onto ONE mansion, but the rest will slip from their grasp. Neo-feudalism doesn't work in a society where the peasants are ingrainedly fractious and disobedient. Less religion and ideology about the divine rights of the overlords to control the behaviour of the rabble.

    When the USSR fell apart, Orlov said (which you know already) that the communist apparatchiks were supplanted by ethnic mafias like the Chechens. There were new bosses who played by different rules. It still sucked to be a peasant, of course. But it's also going to suck to be a pasty-faced, soft-handed schlemiel like Lloyd Blankcheque. He, and others of his class, will get their balls cut off and stuffed down their throats, hopefully literally.

    Unfortunately, the winners will be vicious fascist murderers like Erik Prince. We'll have some new bosses, all right. But they'll be bosses of shitholes.

  10. Maddow video covers the growing Occupy...protests

    Dude, we know we're fucked, and we know why


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