The Long Cold Winter

[thisisthatwhichis]

In fact when it comes to providing health care as a right, I see that as a limited right for a basic level of preventative and emergency care.

Well, there you go...... making the same "evil" decisions on behalf of the sick..... just like the nasty money hoarding "Corporations"........ And the same thing the Gov will do, until you can elect the folks that give more and more "Health Care Rights" to all........

It all costs a boat load of money, and didn't, not so long ago, in the past...... Follow the money..........

[1durphul]

In fact when it comes to providing health care as a right, I see that as a limited right for a basic level of preventative and emergency care.

Well, there you go...... making the same "evil" decisions on behalf of the sick..... just like the nasty money hoarding "Corporations"........ And the same thing the Gov will do, until you can elect the folks that give more and more "Health Care Rights" to all........

It all costs a boat load of money, and didn't, not so long ago, in the past...... Follow the money..........

The current system's way of delivering health care to the sick, via emergency room visits is unbelievably expensive. None of this is happening in a vacuum.

Every corporation must run their health care benefit program. Large corporations have entire teams devoted to it. The benefit the corporation provides employees is very expensive for the corporation, without even counting in the cost of maintaining the benefit team itself. That is EVERY SINGLE corporation.

The cost reductions alone just by removing that responsibility from the corporation would probably cover the cost of a national health system. Every large corporation would probably save 10s or hundreds of millions annually which could be used to pay employees more, reduce expenses whatever. I mean, consider for a moment that Cisco has 40k employees and pays about 4k per year per employee for their health care. If I did my math right that's 160 million dollars that Cisco can now use in some other way.

So I just did some looking up stats and info. There are aprox 900 employers in the US with more than 10k employees. Some have a lot more than 10k, some are probably just above 10k. So I'm going to say that the average is 15k for those 900.

15k X 4k = 54 billion that those 900 corporations can apply elsewhere. And while those are the largest employers, they are not the largest percentage of employers.

What about all employers? Alright, so I found a number that 77% of all employees (112,400,654 americans) are eligible for group health benefits through their employer.

112.4M (employees) x .77 (eligibility) x 4k (cost) = 346,192,000,000 (~ 350 billion.)

That's right, it costs employers $350 billion dollars a year in premiums to insure their employees in the United States. That doesn't even factor in the cost of maintaining the benefit program, and benefit teams at most corporations. HOLY CRAP that's a lot money those corporations are not spending on making their products better, expanding into new markets, or just become profitable and surviving as a business.

Now, I can't find cost estimates for a nation public health plan from the google searches I just tried. But I'm pretty sure that it was in the neighborhood of 500 billion per year. And once you add in the costs of uninsured hospital care and the myriad of other expenses of our current system, you'd probably find a savings, and everybody would be insured.


http://www.census.gov/epcd/www/smallbus.html
http://www.ahrq.gov/research/empspria/e ... .htm#rates
http://healthinsurance.about.com/od/hea ... urance.htm

[Trishntek]

I can give you two prime examples why costs seem higher than necessary that happened to me just this week. I run a little business which treats a common illness. Our service is mobile so we go to various healthcare facilities in SoCal.

The equipment is prohibitively expensive for all but the largest Medical Centers to possess their own. It is much more equitable for ours to be utilized daily among several sites than have several machines sitting idle the majority of the time.

Twice this week, I've arrived at the facility to do one patient. I set it all up in the Operating Room, calibrate, teach the patient about the procedure and what to expect after treatment, get them on the table and ready to go, and for reasons of unprecedented high blood pressure or heart rhythms or other unforeseen reasons the treatment is canceled.

So I spend a few hours driving (an F550 Ford at about 9mpg) plus wear and tear on equipment while moving 2 tons of stuff worth $700k for no pay. This is cost we eat. We pay $80k per year just for equipment maintenance and have to carry $1M liability insurance policy. So, yeah there is considerable overhead costs which simply cannot be avoided.

Do we make a profit? Of course! Is it a necessary service? Well it's much better than going under the knife and spending 6 weeks recovering (recovery from our treatment is 36 hours). But we take great risk hauling expensive medical equipment an average of 2400 miles per month on some of the most high volume highways in the world.

If we do a treatment, we get $1000 from the facility. What the facility charges for it? I honestly do not know. But you need to understand that these sorts of things are expected to be available on demand. The facility has to provide the OR, a nurse and an anesthesiologist. All have their own maintenance issues and overhead costs. Nobody see's the hours spent in preventive maintenance and driving to assure good service.

Sorry, but I get a bit defensive when the cost of healthcare is brought to my attention. I can only tell you the expense of equipment and disposables have built-in additional cost in anticipation of litigation at some point. R&D have costs paid out years before the machines or materials come to market.

An associate of mine dropped a piece of equipment off the back of the truck back in February. The price of repairs? $78,129. Just that alone will take us 78 cases to pay. We average around 1000 cases per year.

[1durphul]

Sorry, but I get a bit defensive when the cost of healthcare is brought to my attention. I can only tell you the expense of equipment and disposables have built-in additional cost in anticipation of litigation at some point. R&D have costs paid out years before the machines or materials come to market.

I'm not sure who you are replying to, if you're replying to me, my analysis was merely based on the cost of providing benefits to employees at major corporations.

[thisisthatwhichis]

I'm not saying the costs are related to the providers, they are mostly passing them on...... Litigation is out of control, as is med equip and drug providers (their stock is nice in my portfolio, though.... )

As far as Corps saving money because the Gov is just going to pick up the tab, is a misnomer..... The Gov will take that extra money from the Corps.... If not now, eventually.......

[Ugly Dougly]

An ounce of prevention is worth a pound of cure.-Benjamin Franklin

Now, if the goverment provided preventive care, that would probably keep people from getting sick. Would Big Medicine like it? They might say that they did, but it might not benefit them in the long run.

Whatcha thimk?

[ygmir]

I'm always suspicious, and, mostly against, anything "provided" by the gov.

If insurance didn't exist, I wonder, if medical prices would fall, due to "supply and demand"?
if people didn't run to the E.R. because the sprained their ankles...........
if, we took care of ourselves,
If high priced people and things, sat unused because no one could afford them, would the price drop?
Would the doc have to sell his Audi?

Not saying it should or will, but, just wondering..........

and, yes, I know, "hell would be empty if not for the word "if""..........

there is no "free lunch", if the gov. took over for corps. on the medical front, they'd charge us all, at least the same as it costs now, but, probably more, due to inefficiency in gov. run program and bureaucracy.

I still don't see it as a "right", I see it as a "benefit"..........maybe one we all feel we "deserve" for living in the (arguably) richest nation on earth, but, still, not a "right", as in "life, liberty, and the pursuit of happiness"

(pickin that scab Trishntek.......hahaha)

[thisisthatwhichis]

Well, I mean even check this kinda crap out that I saw today......

http://www.msnbc.msn.com/id/37645205/ns ... ealth_care

Insurer sues Pfizer for paying kickbacks to docs
Blue Cross of Texas says drug maker encouraged prescribing meds off label

I'm saying there's a lot more to the back-end of health care costs, that are accepted, and ignored, by both Gov and private insurance (because of the litigation)....... Who the f*ck wants to pay $30 for a box of kleenex, or $250 for a bedpan..... Or $$$$ for Prescription drugs that cost .$ to make......

Like I said.... follow the money....... Neither Gov nor Private insurance can successfully provide for all the costs until the crazy back end source gets fixed.

Oh, and the change to copyright/patent laws in the late '90s fucked all that up........... so good luck..........

I don't know... we can't try to blame and fix the effect, without going back to the cause(s)............IMHO........

[Trishntek]

The point I was trying to make in my prior post was that without the willingness to take risks and provide something of benefit for profit, the "going under the knife" alternative is cheaper. The patient suffers a long recovery, but hey,,,, you get what you pay for,,,, right?

Efficiency must have reward or else there is no motive. If it is cheaper to go under the knife, that could be considered cutting the cost of healthcare. The physical and logistical cost to the patient is unrelated to the "cost of healthcare" so it looks good on paper. That is all a bureaucrat cares about.

[thisisthatwhichis]

I'm with you 100% Trishntek........ I've tried to bring to light, that, following the money and costs you have to deal with, are more the root of the whole issue........... Thanks, for what you do.........

[can't sit still]

I've been gone for 10 days. It's good to see others posting relevant stuff. I've got a bunch of stuff to post. It's not necessarily organized,,, you know me
This is from a newsletter;
"Washington was unprepared for the fall of the Soviet Union back in 1991. Washington was surprised by Islamic terrorism, and blindsided by Sept. 11. Washington was caught flat-footed with the housing crash, and the Wall Street meltdown in 2008 and 2009. The dotcom crash too. The government is unprepared for a deep-water well blowout. What's next? What ELSE doesn't the government plan for, what other big things? What if the euro fails? What if the dollar crashes?" Something to consider.

OK, now to the "meat and potatoes"
Power corrupts and attracts the already corrupted. The corrupt are in control of the public purse. The corrupt spend bucks to placate the populace. That's why no democracy with universal suffrage has ever survived.
BTW, JFK started the war in French Indo-China. THAT resulted in the breaking of the Bretton-Woods agreement and the loss of the gold standard by Nixon. That's when all fiat currencies went into orbit. Gold acted as an anchor,,, a reference point.

Historically, the producing economy produced and the banking industry was an adjunct.
"Permit me to issue and control the money of the nation and I care not who makes its laws." — Mayer Amsched Rothchild, a prominent European banker in the eighteenth century
Paraphrased; If I can just print the money, I WILL control everything else.
Through diligent use of power and bribes, the banks have grabbed control of GOV. As they have always done, they have over-reached and over-gambled. They are currently strangling the producing economy to save themselves. There is general agreement that they will destroy the dollar to save the banking system. Once again they have proved that they are very short-sighted.

They wrote millions of bad loans and securitized them believing that they would get paid off when the loans crashed. They were willfully blind to the fact that everyone else was securitizing loans too. The total body of loans could NEVER be covered.

Once again they are proving their stupidity by killing the dollar to save the banking system. There isn't going to be anything worth saving. GOV injected $ 12 trillion to prop them up. They have exposure to derivatives in the value of $ 500 trillion. They are busy gobbling up smaller banks. They expect to have quite a monopoly when the dust clears. The dust isn't going to clear.

Russia tried dictator-socialism and a command economy,,, didn't work.
America did OK with free-market capitalism, Keynesian style and democracy. It gradually morphed to fascism and a welfare state. It does NOT work.

China took a cue from all this and tried to create a "state" without the built-in weaknesses of U.S.-- U.S.S.R.
China won't have democracy because it always morphs into socialism.
China WILL control the banks instead of the other way around.
China will not try to create an expensive empire based on belligerency.

China is building a state that avoids our well-demonstrated weaknesses.
In the West, 50 % of the cost of anything is for finance. China doesn't have this because they control the banks.
China won't have democracy as an ever-increasing drain on the productive economy. The unfunded liabilities for retirement and social programs in the U.S. is over $ 100 trillion.
China will keep wages at an Eastern standard.

The trash-truck drivers in Seattle are going on strike.
"By the last year of the contract, the average driver's annual compensation will reach $109,553, Waste Management said earlier this month, and the company will contribute more than $15,000 per year to each employee's pension fund"

With our accustomed wage standards, you can forget about manufacturing jobs ever coming back. Any job that can be farmed out on the net will go to a lower wage economy.
Our actual unemployment is at 20 %. Another 7 million houses will go into foreclosure,,, statistically.
The states are soon to do massive layoffs. America was living on credit until she got priced out of the job market. Japan got priced out of the job market. They never recovered. Much of it has to do with the cost of social programs.
If China never institutes social programs, they can always undercut the West.

China is trying to build a state that is far more efficient than the Western states. They want a dictatorship without the command economy. They want free enterprise without social programs.
The advent of containerized shipping blindsided our manufacturing industries. There's no going back You can't undo efficiency. You can't put the genie back in the bottle. The high wages of the post-war years are gone. At one time, the U.S. accounted for 49% of world GDP. It's now 27 %. Do you see anything that will bring high wages and productivity back? Do you know what that means for the deficit??????????

GOV is adding debt at the rate of 18.2 %. Can you imagine where this leads? GOV pays $ 600 million in interest every day. Reportedly, debt service will take 100 % of GDP in 2 years. http://www.dailymail.co.uk/news/worldne ... e-GDP.html

GOV has made plans to take all the 401Ks and pensions. That may stall off the inevitable for a bit. When you lose your job, no amount of borrowing will save you long-term. WE have priced ourselves out of the world job-market. No amount of stimulus will fix it. It didn't fix Japan.
"And total non-financial debt (national, state, local, business and household debt) breached above the $35 trillion mark for the first time in history"
http://prudentbear.com/index.php/guestc ... t_id=10393

Paul Craig Roberts said that the U.S. is a failed state;
http://www.globalresearch.ca/index.php? ... &aid=19458

We have morphed into a bad business model. China can replace us if they maintain a good business model. The banks are not about to let lose their strangle hold here. We aren't going to abandon Keynesian economics and bank control. It's going to be a LONG slide down.

[can't sit still]

I'm reading interesting stuff about gold. Since the world went off the gold standard under Nixon. fiat money has grown six times faster than the GDP. The GB pound las lost more in 40 years than it had lost in the previous 7 centuries.
Total U.S. debt is 10 times higher now than in 1971,,, with the discipline of a gold standard.

The Bretton Woods agreement was hammered out as a admittance that GOV will always screw up a currency given the chance. Nothing has changed. GOV has screwed up the currency,,, again.
The producing economy must have a stable currency to survive. Once again, the world must work out a system that GOV can't easily screw up. No stability= no productivity.
FOFOA believes that the dollar will still fulfill 2 of the 3 functions of money. It will NOT be used as a store of value. It will simply be an instrument of exchange.
http://fofoa.blogspot.com/2010/06/equilibrium.html

Thousands of years of history prove that fiat money MUST be tied to something tangible. The overwhelming choice has always been gold. This familiarity is very important. Central banks are doing some serious stockpiling of gold right now. They were selling it but have come full circle. They realize that only a "gold reference" can bring some kind of stability to fiat money. They tried to deny this, calling gold a "barbaric relic" The innate corruption of GOV and banks has made a benchmark to a tangible reference necessary once again.
Since there is so much currency in circulation, it could never be used as currency backing at the present value. FOFOA gives a number of about $ 50,000 an ounce. This is just a reflection of the very low value of paper money.

There are others who now see a need for gold to return;
http://www.gata.org/node/8750
http://www.gata.org/node/8749

There is no denying that Europe is beyond saving. Socialism broke the bank. Global wage arbitrage sent away the jobs. There will be no saving of Latin countries without eventual default. The predations of the banks will have to end. The nanny state will have to end.
The solution proffered by the banks is austerity packages. That will ensure that the economy never recovers. Nothing short of default will get them out of the hole. The banks will fight this all they can.

GB can take a lesson from Japan.
The Japanese saved all their money in the Postal Savings Bank. When global wage arbitrage priced Japanese out of the world labor market, GOV took all their savings and spent on make-work projects. Japan was pouring more concrete than all the rest of the world combined at one point. Now, GOV has burned through all the money in the savings accounts,,, and still no recovery.
A six year old will tell you that he can't sell lemonade for a dollar a glass if other kids are selling it for a dime a glass. This simple fact has been completely lost on Japan and the West. We try to hold on to a wage structure that can't be saved. GOV spends $ 173,000 of borrowed money to create a job that pays $ 113,000.

The denial will go on for a while longer. The savers who invested in GOV bonds will get cleaned out as GOV tries to support un-needed workers with unrealistically high salaries. Eventually, the socialists run out of people to steal from.

The West is currently operating on Keynesian economics. The weaknesses have long been known. GOV loves Keynesianism because it invariably results in a gradual transfer of money and influence to GOV.

"
June 8 (Bloomberg) - Nations have reached a "Keynesian endpoint" as exhausted balance sheets leave policy makers with few options to bolster economic growth, according to Anthony Crescenzi, an investor at Pacific Investment Management Co., the world's largest bond-fund manager.

"Time, devaluations, and debt restructurings might be the only way out for many nations," Crescenzi wrote in an e-mailed note titled "Keynesian Endpoint" that referenced the Great Depression era economist John Maynard Keynes. Debt-fueled spending programs aimed at combating the global financial crisis of 2008 are among policy tools now "being seen as a magic elixir that has morphed into poison."

The Obama administration forecast a $1.6 trillion budget deficit, the most ever, in the current fiscal year that began Oct. 1."
Things will really have to fall apart before GOV abandons Keynes. GOV is in complete denial now. I expect them to continue that way. We're in deflation now. It will take a couple of years but, eventually, we'll get high inflation.
We can expect to get the same recover in the U.S. by spending bowwowed money that Japan got from spending savings. They got nothing.

An interesting link on the gold price;
http://c1.libsyn.com/media/18706/newsle ... fd24b7c6cf

[geekster]

The thing is that fiat money CAN'T be linked to anything of tangible value because if it is, the economy can only grow at the rate that the supply of that tangible material increases or the currency must be constantly revalued which is no different than floating fiat money.

Example:

Bill puts a dollar in the bank. The bank lends a dollar to Sam. Sam buys a hammer with that dollar from Fred. Fred puts that dollar in his bank who lends it to Speedy Hammer so they can make more hammers.

So now you have Bill who thinks he has a dollar in the bank. Sam has a hammer worth a dollar. Fred also has a dollar in the bank and Speedy Hammer has a dollar. So now we have FOUR dollars in the economy.

With a gold economy, what is backing all of those dollars? Bill had some gold backing his dollar. So who is backing the dollar Fred has in the bank? You would only be able to lend money at the rate gold is discovered to back that activity. Gold is an industrial commodity. It is consumed. It is used in jewelry and various industrial processes. How can you be assured of a supply of gold increasing at a rate to not only satisfy industrial demand but also grow the economy?

So what you do is "revalue" the currency. Now once you start revaluing the currency every day, it is no different from floating fiat money.

The global economy can only grow at the rate at which new gold is added to reserves. That sucks. That is not sustainable. That is what economists learned back around the early 20th century.

This administration issued more debt in its first year than all other previous administrations added together in absolute dollars. Our ratio of debt to GDP is set to surpass that in WWII.

We are spending like banshees and telling the world that our kids will pay it back. That is soon to be in the realm of the impossible. We are getting into a situation where a 100% tax rate on our kids will not be enough to pay back that debt.

When government issues a 10 year bond, we are basically saying that the people who are now 8 years old will be paying that back. But it is actually much worse than that. The Social Security Trust Fund is currently cashing in their special bonds (it went cash-negative this year) and Congress now has to pay off one credit card by putting the balance on the other. Since Congress doesn't have the cash to redeem the Social Security bonds, they are forced to issue regular treasury debt to cover it. So we are paying out social security benefits by sticking our kids with an IOU that they will be expected to pay back ... or kick the can farther down the road by borrowing again when that bond matures.

Another problem is that interest rates are very low. What happens to all this Obama debt when interest rates go to something more historically normal? Rates for 10 year treasure bonds on 6/18 were 3.24%. What happens when that doubles? The interest on all that debt will EXPLODE.

We could run a big deficit when we were the primary economic engine on the planet. But we aren't anymore. China is set to surpass us in manufacturing next year:

The US remained the world’s biggest manufacturing nation by output last year, but is poised to relinquish this slot in 2011 to China – thus ending a 110-year run as the number one country in factory production.

The figures are revealed in a league table being published on Monday by IHS Global Insight, a US-based economics consultancy.

What happens when China has a recession and can't buy our debt? Our politicians have made promises that they keep only by having an unlimited credit card. We keep sticking our kids with more and more debt.

When the shit hits the fan and those kids are stuck with all that debt and Social Security is broke, do you think they will take kindly to paying a bunch of geezers thousands of dollars per month when they can't even afford a home?

But anyway, a "real" standard isn't worth anything unless the supply of it is constantly increasing. Also, what happens when the population begins to decline and the total economy drops in absolute value but continues to increase per-capita? You end up in a situation where you now have a surplus of whatever that tangible thing is and have to again revalue.

So if you are going to constant revalue the currency against some tangible asset, it is really no different than fiat money.

[ygmir]

does changing the value of that "tangible (gold)" change anything?

[can't sit still]

YGMIR,,, yes.
Geekster our kids don't have to worry. It's all going to blow long before that. Debt service will take 100 % of GDP in TWO years. The CBO says that debt service will take 200 % of the GDP a few years after that. So, there's no getting out of the mess. We will default before them. Yes, there are limitations to a gold standard.
It is envisioned that transactions would be conducted in dollars and gold would only be used for settlements of differences.
Historically, all settlements by the BIS were done in gold.

The West was able to make war on credit. A return to a gold standard would pretty much deny us the ability to make war. The Viet-Nam war is what broke the dollar-gold linkage. How much worse would the world be if America never went to war to save South Viet -Nam?
The military-industrial-banking complex demands endless wars. How bad would the world be if war stopped?

[Sail Man]

I'm always suspicious, and, mostly against, anything "provided" by the gov.

if people didn't run to the E.R. because the sprained their ankles...........
if, we took care of ourselves

If people didnt call 911 for a cold
If people didnt call 911 for a 1/2" laceration "I'm scared of blood"
If people didnt call 911 because they want a ride to the pharmacy "but I haz me the meddicaid cawd!"


Oh goody, now I get to respond on knee pain

[can't sit still]

Sailman, I told a friend of mine that he was going to die of "terminal hypochondria" He didn't think that it was funny at all.

Well, Greenspan has come out and said that things are looking pretty shitty. Here's a newsletter from Weiss;

View This Issue On Our Website [»]
4 Urgent Warnings From
The Most Unlikely Source
by Martin D. Weiss, Ph.D.


A former emperor with no clothes is finally telling the naked truth.

His name: Alan Greenspan.

His primary role in history: Chief architect of the boom-and-bust cycle that caused the fiscal madness he now condemns.

His most recent act: To issue four warnings in Friday's Wall Street Journal that are precisely the same as those we issued here in Money and Markets months earlier ...

Greenspan Warning #1
Greece is a wake-up call for the U.S.
and most of the developed world.

Greenspan says that Greece should drive U.S. authorities to make "a tectonic shift in fiscal policy."

Agreed.

Starting 16 months ago, our editors not only saw the sovereign debt crisis coming, but explained precisely how it would unfold ...

In our Money and Markets of February 25, 2009, Sean Brodrick wrote:
Sean Brodrick

"Collapse of credit bubbles in Ireland, Spain, Greece, and Portugal could lead to those countries defaulting. ... So I expect at least one European country to go bankrupt in the next 12 months, and that will strike fear into the hearts of the central banks." Sure enough, Greece is bankrupt and others are now on the way, saved only by a bailout that could, in turn bankrupt Europe.

To follow up, on December 11, 2009 — also long before most others were concerned about the sovereign debt crisis — Mike Larson wrote:
Mike Larson

"Sovereign debt defaults are the next shoe to drop. ... Greece is rapidly sliding down the slope toward default. ... Spain is in trouble because it experienced its own gigantic housing bubble, one that has long-since popped. ... Then there's the U.K. Its budget deficit is running at 12 percent of GDP, the highest in the Group of 20 community of nations. ... And what about us? The fiscal 2009 budget deficit here soared to $1.4 trillion, the worst ever."

We further explained the implications in "The Next Contagion" (February 1, 2010), "Armageddon" (February 22), "Bernanke Running Amuck" (March 22), and many times since.

Our conclusion: The next big victim could be the one country for which no bailout is possible — the United States.

Greenspan Warning #2
The contagion is ALREADY
reaching the United States.

How do you know if the sovereign debt crisis has hit the United States, or not?

To the lay observer, it's often murky. But to an interest-rate analyst, the clues are straightforward: When the federal government has to pay a higher rate for its borrowings than a supposedly riskier private corporation, you know the sovereign debt crisis is here.

That's precisely the situation Greenspan describes for the U.S. credit markets today: Based on one key measure, the U.S. government was recently paying 0.13 percent MORE for 10-year loans than private borrowers!

And it's also what Mike Larson warned you about three months earlier in "Bond Market Verdict: Treasuries Riskier Than Toilet Paper" ...

"[The U.S. Treasury is paying more to borrow money than] Procter & Gamble, the company behind brands like Tide detergent and Charmin toilet paper; Lowe's, the home improvement retailer; and Johnson & Johnson, the firm that makes Band-Aids, medical devices, and baby shampoo.

"The message from the markets [to Washington] is loud and clear: Get your financial house in order ... or we'll FORCE you to do it!"

Greenspan Warning #3
Interest rates could skyrocket
like they did in the 1980s.

Greenspan's exact words: "Long-term rate increases can emerge with unexpected suddenness. Between early October 1979 and late February 1980, for example, the yield on the 10-year note rose almost four percentage points."

Yes. Plus, in the same year, 30-year Treasury bond yields rose five percentage points; Treasury bill rates catapulted from 6 percent to 16 percent in six months; and the prime rate hit 21.5 percent.

We don't expect to see interest-rate surges of that magnitude and speed, but even if rates rise by only a small fraction of their 1980s explosion, the consequences can be catastrophic.

And here again, Money and Markets editors have been ahead of the curve. (See Mike Larson's "Surging Interest Rates Ahead" and "Why I Worry So Much about Bonds.")

Greenspan Warning #4
Surging gold prices are the harbinger
of future fiat money collapses.

Greenspan writes: "It is little comfort that the dollar is still the least worst of the major fiat currencies. But the inexorable rise in the price of gold indicates a large number of investors are seeking a safe haven beyond fiat currencies."

Yes, of course. This is why Larry Edelson, Sean Brodrick, Claus Vogt and others on our team have long made it clear that what was truly going to drive gold higher was not merely the sinking dollar. It was the decline in nearly all major fiat currencies, especially the euro.
Bryan Rich

And few in the world of currencies have been more vocal about the euro's coming demise than Weiss Research's Bryan Rich.

It was 15 months ago that he posted his landmark column "Why It Could Be Curtains for the Euro" (March 7, 2009) ... 14 months ago that he wrote "More Pain Ahead, Especially for Europe" (April 25, 2009) ... and five months ago that he asked, presciently, "Will the Euro Become the Most Hated Currency for 2010?" (January 2, 2010).
Claus Vogt

Plus, it was Claus Vogt's "The Euro Is Washed Up — But the Dollar Is No Better" that recently brought the point home for some of the most die-hard optimists: If you include each government's future obligations, he argued, Germany and France now have total debts of 255 percent of GDP ... the U.K. has 530 percent ... and the U.S. is up to 580 percent!

Day of Reckoning Near

Thank you, Mr. Greenspan, for making very much the same arguments as our team. But alas, there is one argument you make that we feel is unrealistic in the extreme — that budget contraction will not induce renewed economic decline.

The reality: The economy is addicted to stimulus. And as I explained here one week ago in "Glimpses of the End Game,"

"This isn't rocket science. The U.S., Europe and Japan are addicted to stimulus. But instead of more injections, governments are now prescribing cold turkey. Even if they don't cut very much, instead of more economic recovery, we will inevitably see severe withdrawal pains and another major slump."

Now here's the clincher for investors: As long as the Obama administration and Congress had the political capital — and the sheer gall — to spend and stimulate endlessly, they were able to persuade the world that the crisis was over and the recovery was for real.

They not only manipulated the economy but also investor psychology.

But now, proponents of more stimulus and bailouts are discredited. Apologists for massive deficits have been silenced. And even establishment economists like Greenspan are writing about the same dire consequences we've been warning you about here in Money and Markets.

This about-face in perception and policy could be constructive in the long term. But right now, it's likely to be the straw that breaks the back of the Washington-engineered recovery. Without more stimulus, subsidies and bailouts, the modest improvements we've seen in housing, jobs, and corporate earnings will soon come to an abrupt end ... the stock market rally that began in March of last year is in its final stages ... and the widely feared double-dip recession is on its way.

Still not convinced? Then seriously consider ...

* "Economy Stalling as Easy Money Effect Wears Off!"

* "The Biggest Shock of All"

* "The 'Snowball' Scenario Sinks Sovereigns"

* "Two Consequences of the Stimulus Programs Washington Wants You to Ignore"

* "Debt Façade Cracking in U.K. as Sovereign Contagion Spreads"

Next, take action, following the instructions in "Our SIXTH Warning: Dow in Danger!"

When the chief architect of the prior boom himself sees dire consequences dead ahead, it's time to stand up and listen.

Good luck and God bless!

Martin

[Rabbi Dali Rick]

So much for "to big to fail"....







the rebbi

[can't sit still]

Rabbi, if you read Tainter,,, The Collapse of Complex Societies",,, you will see that big is good to a point and bad past a certain point. After a certain point, it take a huge amount of work and energy just to maintain a construct, a business, a state. It has to do with the laws of scaling.
Years ago, Roberto Vaca wrote a book, "The Coming Dark Ages". This too was based on the collapse of super-systems. One of the main problems that has collapsed previous societies was degradation of the local environment / biosphere. The oil leak isn't helping things. Too big to survive

[can't sit still]

It looks like Eastern Europe will crash worse than any other place. That will take down Western Europe.
"So we watch and wait as the lethal brush fires move closer.

If one spark jumps across the eurozone line, we will have global systemic crisis within days. Are the firemen ready? "
If you look at the graphs on this page, you can see that the property bubble in the U.S. were very mild compared to other countries;
http://housingstory.net/2010/06/20/a-bl ... atrick.net
No one can save the European banks.

http://www.telegraph.co.uk/finance/comm ... tdown.html
Historically, wars were started after a collapse to take people's attention off the bad economy. Doesn't look good.
A collapse in the West will bring starvation to most of the African continent. Not good at all.

[geekster]

" The Viet-Nam war is what broke the dollar-gold linkage. "

Well, sort of but not exactly. The US went on the gold standard in 1900. By the end of WWI, we were the only major country still on it. Several countries went back to it in various forms but began to abandon it during the Depression. The last straw came in 1933 when we were forced to raise interest rates in a depression to protect the gold standard. So in 1933:

in order to fight severe deflation Congress and President Roosevelt implemented a series of Acts of Congress and Executive Orders which suspended the gold standard except for foreign exchange, revoked gold as universal legal tender for debts, and banned private ownership of significant amounts of gold coin.

The reason why gold coin was banned from ownership was that people began to horde it.

But the gold standard we were on after 1933 was way different that that before then.

What we have to worry about is a deflationary economy. In deflationary times you DO NOT WANT to own gold because it will be losing value. It is counterintuitive but you do not want a dollar that gets too strong. If that is the case, every investment you hold loses value. The longer you hold gold or real estate or any other tangible asset, the more money you lose. That is when people start stuffing cash under the mattress ... which just makes things worse.

Fiat money is not a bad thing as long as it is managed responsibly. What we have now is an administration that has broken into the world's largest candy store and they have completely raided it. Obama has robbed this country blind. The Democrats have completely raided the treasury, it is gone, there is no more. There is no use protesting to save this or save that because the money to save anything is just plain gone.

Just wait until January 2011 if you think things are bad now, they are set to get one whole hell of a lot worse. The Bush tax cuts expire and that will practically shut off a lot of business investment. Taxes will rise but revenues will collapse.

I will let Professor Laffer explain:

http://online.wsj.com/article/SB1000142 ... 86610.html

We have had one President in modern times with a college degree in economics. That President inherited an economy that was in bad shape. He left with one going gangbusters. During that administration, he reduced taxes and the size of government by the largest amount in any administration.

Government isn't the answer. Government is the problem. Government does not create wealth, it consumes it.

[can't sit still]

Geekster, as they say "this time it IS different". The world has never had a monetary system like the present. The world has never had unlimited credit creation by banks. Never had unlimited electronic money. Never had a global currency that covered the West as well as the East.
Everyone tends to generalize about inflation / deflation. Can't do it. The U.S. money supply is contracting at 9.6 % annualized. So, we have severe deflation in the money supply. That doesn't necessarily translate to price deflation. We also have price inflation in some areas and price deflation in others.
I posted a link to a chart of prices in Wiemar Germany. Some inflated,,, some deflated. There is no doubt that the money supply severely inflated.
Inflation / deflation is good / bad depending on whether you're a debtor,,, lender,,, saver.

I disagree on the idea of NOT holding gold in a deflationary environment. Gold always eventually casts off it's commodity function to return to it's monetary function. Gold is money,,, plain and simple... To quote Greenspan. Central banks are buying gold, not platinum, not Rhodium,, it recently reached $ 10,000 and ounce.

You mention a strong dollar. It's a different world today. A strong dollar means fewer exports. That's why many countries are practicing 'competitive devaluation" . They don't seem to focus on what the end result will be. Everyone wants to kill their currency to hold on to market share. It does not work in the long run.

We also have declining wages tossed into the mix. You can bet the farm on deflation for a while longer. I expect GOV to collapse long before inflation kicks in. Debt service is going to kill both GOV and the economy.
Gotts run.

[geekster]

Well, we can agree to disagree on the gold thing. Simply because if it was viable, SOMEONE on the planet would be using it. Nobody is. Wonder why.

Also, having a gold standard makes sense only when either the supply of gold is controllable or you are the world's major producer of it. We are currently neither. What would happen to our dollar if some foreign country dumped a huge amount of gold into the market?

The dollar could then be manipulated by outside actors manipulating the gold market. China, India, and Saudi Arabia have huge amounts of gold in reserve. All Saudi Arabia would have to do to manipulate the price of oil is to buy and sell gold ... if dollars are valued against gold. We would again be in a position where we would have to constantly revalue the dollar against gold and at some point would end up floating again. It just doesn't work.

The current system is just fine provided you have a government that doesn't get stupid with the country's money. As for money supply, have you looked at M0?

Now where is all that money? It is sitting in bank vaults doing nothing. Government dumped, what, a trillion dollars into the system that just went right to reserves to cover mortgage loans. It is just sitting there. When mortgages settle down, that cash is going to give us a burst of inflation like you have never seen.

Also, you should read a book called "This time is different" which basically says that in every case people said "this time is different" and in every case, it wasn't.



I highly recommend it.

Reinhart and Rogoff present a sobering reminder that financial crises are a serial phenomenon--caused in no small part by the seductive 'this-time-is-different syndrome,' the prevalent belief that to us, here and now, old economic laws of motion no longer apply. Their ambitious quantitative history of financial crises draws out sweeping parallels between financial crises, across times and continents; and between inflating away domestic debt, currency debasements, and defaults on external debt.
(Finance & Development )

[Token]

Doom, gloom, end of the world as we know it!

It is bound to happen at some point. I hope I'm here to see it.

For an alternative perspective, consider that most of the population on this earth already lives in the conditions of this upcoming Armageddon. For them it will be a non-event.

I think their sentiment might be summed up with "welcome to my world".

I'm not pulling this outta my ass either. I come from a third world country shattered by decades of wars. My family lives there and despite not having all the luxuries of an American glutanous existance, they are very happy with living simpler lives.

All the US invented economic clusterfucks will eventually work themselves out. If by chance that means we start living a bit more sustainably, fuck it, I'm ready to give up strawberries in November.

[FIGJAM]

I think I read somewhere that 50% of the worlds pop. Doesnt have indoor plumbing, electricity, and have never made a phone call.

[can't sit still]

Token, you have to take modern demographics into the picture. Venezuela imports 70 % of it's food. Most other countries have let their population far outrun their food production capacity. There just isn't enough food production if there is a big upset in the West;
http://www.homelessnation.org/en/node/7412

Geekster, ALL of the central banks use it. It has been deionized to the public.
Your M0 chart is useless. You need to look at M3 from Shadow Stats. The money supply includes credit. THAT has been contracting drastically. NOT shown in your M0 chart.
Saudi just restated their gold reserve from about 127 tons to 352 tons. They just restated it?? The price of gold has been tied to oil for decades. The Saudis aren't worried.
When mortgages settle down, they're going to be WAY down. Look at the 110 year baseline chart. They have to drop at least another 20 %. Also, the price of a house must be related to the wages in the same area. Global wage arbitration insures that high wages will never return. House prices will never return.
Yes, there are sweeping parallels. There are differences also. In previous run-ups to high inflation, GOV was able to inject large amounts of money into the economy. It isn't happening this time. GOV salaries are double private sector in an attempt to accomplish this.
The destruction of credit far outpaces the creation of new money. That money siting in banks as excess reserves will NEVER cover the coming losses from crashed mortgages. There's still about $ 500 trillion in derivatives that haven't been settled. Strategic walk-aways are climbing fast. The housing market isn't even halfway to the bottom.

[Trishntek]

The simple thing about gold is pretty much what you hear on commercials: "an ounce of gold bought a nice men's suite 100 years ago and today it does too!" or something to that affect. The point is, the tangible worth of gold does not change relative to other tangibles. In other words, it does not so much change value, or become worth more or less,,,,, it is the constant in relation to other tangibles.

Monetary funds ebb and flow, begin and end. Their value changes in relation to tangibles, gold does not.

Gold is precious because it is pure and it is rare. It is self-moderating, self-regulating and has historically been the one constant basis in trade for thousands of years in all cultures. Just because the IMF tries to poo on gold being the standard does not make it true.

I'll take gold over the Fed's empty promises on pretty paper any day!

[ygmir]

The simple thing about gold is pretty much what you hear on commercials: "an ounce of gold bought a nice men's suite 100 years ago and today it does too!" or something to that affect. The point is, the tangible worth of gold does not change relative to other tangibles. In other words, it does not so much change value, or become worth more or less,,,,, it is the constant in relation to other tangibles.

Monetary funds ebb and flow, begin and end. Their value changes in relation to tangibles, gold does not.

Gold is precious because it is pure and it is rare. It is self-moderating, self-regulating and has historically been the one constant basis in trade for thousands of years in all cultures. Just because the IMF tries to poo on gold being the standard does not make it true.

I'll take gold over the Fed's empty promises on pretty paper any day!

I might add to that, that, it doesn't tarnish and is immune to most acids, or, combining with other elements, and, is therefore, easy to assay for purity. It is easily worked, so, can be cut/melted and poured, into increments with ordinary tools.
(the above based on pure gold)

[can't sit still]

Gold, of itself, isn't anything special. It's one historical attribute is the one reason that it is hated by GOV and central banks. IT BRINGS DISCIPLINE. GOV hates discipline. GOV being a parasite hates limitations. The producing economy has to have some limitation on the parasitic blood-letting. It can't function without blood. Gold has such a long track record that, the producing economy readily accepts it as the first and best method for limiting the bloodsucking GOV.

[geekster]

Your M0 chart is useless. You need to look at M3 from Shadow Stats. The money supply includes credit. THAT has been contracting drastically. NOT shown in your M0 chart.

I suppose you missed the point. It is M3 that does not include what is in M0, M3 does not include money in bank vaults held as reserves.

What the graph shows is that the supply of money isn't low, it is the VELOCITY of money that is low. The fed dumped a trillion dollars into the banks and it landed with a resounding thud into the vaults and never moved from there. The banks have more money than they have ever had but they aren't lending it (which shrinks the other money supply metrics). They are holding onto it as reserves to cover loans that they know are going to default.

TARP was originally billed as a program to buy toxic assets from the lenders and have the government hold them. That would free the assets of the bank up to be lent and to stimulate the economy. Instead, our fucking wunderkind Timmy "Turbo Tax" Geithner decided to simply dump the cash into the banks' reserves. This was supposed to cover potential defaults and allow the banks to lend to keep business going. Instead, the mortgage market got worse and there the money sits. It might as well be granite for all it has helped the economy.

So now we have a situation where the government has shit a trillion dollars into the banks, the banks are still holding all the toxic assets, and the market still hasn't improved. Housing values are not recovering and those mortgages are not coming out from under water. Meanwhile, the banks have stopped foreclosing on mortgages even after people have stopped paying on there. There are people who are living in houses they haven't made a payment on in over a year and the banks still have not foreclosed. The banks are trying to slow down the rate of foreclosures by ignoring them which means that there is a huge "shadow" inventory of defaulted loans out there that isn't on the books.

So we have a situation where the government didn't buy the toxic assets but simply left the banks holding the bag, cranked up reserve requirements on them, then dumped a metric fuckton of money into SOME of them so they might meet those requirements all the while the economy is set to go into a spectacular tailspin when tax rates go up AND they have managed to maintain the idiotic lending requirements from Freddie Mac and Fannie Mae. I couldn't engineer a better intentional financial collapse than this. The banking system currently has less than one year of life left in it barring any significant change. Obama has put it on a path of assured destruction.

And this WILL ripple through the other economies of the world. I wouldn't buy gold. I am thinking more along the lines of plane ticket. Belize is looking pretty good about now.

NOTE:

http://en.wikipedia.org/wiki/Money_supply

Note that M0 and MB contain money in bank vaults. None of the other indexes do. Note the huge spike in M0 not reflected in M1, M2, or M3. The money is sitting in bank vaults, doing absolutely nothing.