In one of his recent speeches he mentioned he's long gold from $400 and also at mid teens. Maybe he's half right and half wrong as of today? We're in the mother of all reflexive trends... Cheap credit has been its fuel, reinforcing the notion that we can get away with an ever increasing debt burden. At some point, some event will seriously break that bias. I think it's already been tested once in the response to the 2008 financial crisis, so we're more than likely now at the peak in bond prices. Any delay in tapering will only get us faster to the breaking point at which our interest cover ratio craters. I'm thinking $1,100 or even a dip below $1,000 is a key level to watch in gold. If Paulson cries uncle around there, that'd probably be a good entry point to test Vic's thesis in the near term. What say you?
We'll never see high interest rates again. Even if the economy recovers, half the national debt matures in a 5 year window. The size of the deficit and QE are resounding proof this economy sucks. We can't burn the furniture forever. We're boxed in.
see this is the thing with making predictions...when said "guru" is wrong you never hear from him again...but god forbid if he was right...he would be on the air claiming how smart he was for predicting it...lmao
This is a case of 'pick your poison'... If you are right about ZIRP being status quo going forward, then it only exacerbates the magnitude of the eventual collapse, wouldn't you say? The only corrective event that can avert collapse is a return to fiscal sanity, which is well past the point of no return.
Yup. Like everything, I think fiscal and monetary policy is largely political. Who has the stones or the clout to pull a Volker? I think things are just too intertwined, there's far too much global capital at stake and way too many power brokers that get flushed, if we return to sanity. Yellen got appointed. Nothing will change. This train continues. Not to the mention, the broader ramifications to the economy, if a rouge FED chairman decides to force austerity. And ya, ZIRP creates a bigger bubble and a bigger collapse. Just like the housing bubble. Except this one might end up a USD/Treasury bubble... I don't know, man. I just don't see any possible way out of this except new technology.
What most miss, even Soros in his views on reflexivity, is the following very unpalatable reality: fallibility and political leadership do not mix and never will mix. In fact the latter has always undermined the former. The only framework that can truly allow fallibility to influence the course of events for the better is one in which there is an unshakeable commitment to that which is morally good, basically, Kingdom Come. I know, blasphemy... but it is what it is. The palpable irony behind the idea of fallibility being an asset is this: it ought to be derivative of the idea that there is such a thing as infallible morals. But even fallibility when in the hands of those who have no absolute basis for the existence of that which is morally good, is of no use. Technology while perhaps helpful in the short term can never be sufficient, precisely because it does not have the answers to the above. It is not even asking the right questions... So what does one do when not even precious metal will be of any help? (Zephaniah 1:18)
I think I understand what you mean. Given the conversation is turning Biblical, in my estimation, the entire problem is spiritual. Not just economics, but everything. With no moral compass, who can define what is right? Or left? Or up? Or down? I think political leadership, however and whoever we define them to be, are aware of the opportunity costs associated with each scenario and chose the option most expeditious to their own interests and that of their privileged brethren, at the expense of the nation. It's interesting you turned the conversation towards philosophy. It took me a long time to realize it. But in my own life, after much reflection, I realized the world is literally designed to be the way it is due to mans corrupt nature. It's not that there's a problem of scarcity, or inequality or poverty or lack of resources, in the often-cited sense of the terms. It's that fat cats sit on top and engineer their own fiefdoms to squeeze the productive class for their own benefit, at the expense of common people. The degree and means to which it's accomplished varies from one economy to the next, and from one era to the next. But it's all the same - a small, parasitic class on top, that feed off the many, below. The symptoms of poverty and scarcity and sickness and death, are the result of the parasites feeding off the host. The same symptoms the elite tell us have no logic or consequence or source. They can only be rectified (temporarily) if we donate generously to the Red Cross... Going back to your point about fallibility and it's usefulness only in the pursuit of infallible morals - who has the courage to do what is right, in this environment? And is one man enough? Volker did it. But perhaps America was comprised of a different moral fabric then, and understood, or at least had an inkling, that he was right and it had to be done! Can Americans today even contemplate they might not get their Social Security check? Or that their 401ks and real estate wealth may have to take a serious nominal hit to preserve the longevity of the Country? About technology, I don't get it. Explain that one to me again?
Ultimately, interest rates are set by the market. Lets say the US started to experience higher rates of price inflation, but the Fed refused to increase short term rates and continued with ZIRP and with QE. What would happen in the markets? Dollar crashes, bond market crashes and long term rates rise?
"But in my own life, after much reflection, I realized the world is literally designed to be the way it is due to mans corrupt nature. It's not that there's a problem of scarcity, or inequality or poverty or lack of resources, in the often-cited sense of the terms. It's that fat cats sit on top and engineer their own fiefdoms to squeeze the productive class for their own benefit, at the expense of common people." +10 Morality is a facade. Darwinian theory and Machiavellian principles would be a more worthwhile course of study when attempting to decipher reality. There's a reason a very small coterie of rascals made off to Jekyll Island to secretly sell the future of a country to private European banks.
Yes, just as economics in its physics-envy has ignored reflexivity, so does reflexivity ignore the need for an unshakeable moral compass, as you point out. Soros' analysis is definitely a step up from economic dogma, but nevertheless it is also philosophically flawed: we cannot begin to talk about a moral compass, if we believe morality is a social construct that is always open to revision. For such a belief is truly one of the bitter logical out-workings of reflexivity, which itself is very much akin to evolutionary theory. That, to me, is the unnoticed tragedy of his analysis. The Volker example is a fair point: yes, it took moral courage to do raise rates high enough to break inflation, incurring major pain in the short run for longer term stability. It does feel as though we have lost even that modicum of decency however, as the political class is ever beholden to their interest groups and without a will to do what's right, regardless. Soros talks about the need for regulators to intervene against the dangers of market fundamentalism. He is right in a sense but ultimately finally wrong in that regulators themselves are operating under uncertainty (which he recognizes to his credit) and therefore also prone to a fundamentalism of their own, driven by a relentless liberal bias, the other poison (something he might not be so willing to admit). We can expect the 'regulators' to eventually ban the purchase of gold and silver, and to make it illegal as a store of money when the wheels really start to come off. They did it in 18th century France and they will do it again here. Interestingly, it was the response to Volker's act that shows the weakening in the already weak moral fabric of the regulators. It is fundamentally immoral to spend more than you take in because it eventually leads to default and tremendous pain for all. That should be obvious. But it isn't now is it? Greenspan and Bernanke took over and failed to courageously stand against the dangers of cheap credit, reflexively glorying in their short sighted results and reinforcing each other's results. But it's all a mirage. As a result, we are now in the mother of all bubbles, a sovereign debt bubble. I'm thinking Japan will be the catalyst that unravels our own, but the timing of this is hard to pinpoint. Abe's failure might be the spark... The danger is not in preventing the excesses of capitalistic greed, that's indeed morally good. Ironically, the danger is in such a success by regulators reflexively hampering awareness of their own fallibility. Which is why I said earlier that top down political leadership (without a spiritual/theological and therefore a fixed moral referent ), cannot mix with fallibility. This stance of humility driving policy/leadership is ultimately a spiritual stance...it can be grounded in nothing else if it is to have any lasting value. Technology can only be a tool toward moral outcomes, it cannot in and of itself, promote them. As an example, think of Google's motto "Don't be evil...". And then they turn around and promote Google Glass, to the horror of everyone hanging on to a thread of what's left of privacy... Capitalism left unfettered goes awry as does a Command driven economy, and we have veered from one to the other, going from the frying pan to the fire. There ought to have been a checks and balances approach with the American people countering and correcting the mistakes of their leaders through the vote. But instead, there's now a two way reinforcing relationship between voters and politicians: the votes are a function of entitlements granted, and the entitlements granted are a function of the votes. And this regardless of morality. Down the drain we go. Soros' thinking is a step forward, but it ironically fails to recognize that the only way to break the curse of a self referential system is by realizing that the answer lies Outside of ourselves, in the revelation of the One who is Greater than ourselves. No amount of education and talks can change that if this true fallibility is missing from our self examination.