The Fed: This will end poorly

What makes us rich is an abundance of goods, and what limits that abundance is a scarcity of resources: namely land, labor and capital. Multiplying coin will not whisk these resources into being. We may feel twice as rich for the moment, but clearly all we are doing is diluting the money supply.
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- Murray Rothbard
 
What makes us rich is an abundance of goods, and what limits that abundance is a scarcity of resources: namely land, labor and capital. Multiplying coin will not whisk these resources into being. We may feel twice as rich for the moment, but clearly all we are doing is diluting the money supply.
Click to expand...

- Murray Rothbard
Click to expand...

fuck. thanks for this. it's almost Friday and I was almost slightly less depressed. now I'm full on thinking about dooms day when the US dollar officially becomes the French whore of the world's currency.
 
What makes us rich is an abundance of goods, and what limits that abundance is a scarcity of resources: namely land, labor and capital. Multiplying coin will not whisk these resources into being. We may feel twice as rich for the moment, but clearly all we are doing is diluting the money supply.
Click to expand...

- Murray Rothbard
Click to expand...

fuck. thanks for this. it's almost Friday and I was almost slightly less depressed. now I'm full on thinking about dooms day when the US dollar officially becomes the French whore of the world's currency.
Click to expand...

Right now there is no other currency challenging the dollar as the worlds reserve currency. For now. And we still control the oceans and all shipping lanes. That's a big deal. No other nation even comes close to matching our Navy. Most people don't realize how big a deal that is.
 
This is the solution for when they stop the QE.
http://finance.yahoo.com/q?s=DGLD
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QE will never end. Now that they've lost control of the bond market, they'll have to ramp up QE to keep interest rates from rising too much. With rates going up 1% or 2% the debt burden will get exponentially worse. Current interest expense for FY 13 is about 15% of national income. If rates went up another 1% from here then in two years you could see the interest expense close to 25%. Remember, we've accumulated loads of debt over the past 5 years while rates were low and declining. We also financed at extremely short durations though its getting better. So a lot of debt will have to be rolled over and now at higher rates.

In the 40s, the Fed was on steroids to keep rates fixed. Real rates went extremely negative. They will do again soon including the BOJ. Until debt/gdp has peaked and is on the decline, we'll have QE.
 
This is the solution for when they stop the QE.
http://finance.yahoo.com/q?s=DGLD
Click to expand...

QE will never end. Now that they've lost control of the bond market, they'll have to ramp up QE to keep interest rates from rising too much. With rates going up 1% or 2% the debt burden will get exponentially worse. Current interest expense for FY 13 is about 15% of national income. If rates went up another 1% from here then in two years you could see the interest expense close to 25%. Remember, we've accumulated loads of debt over the past 5 years while rates were low and declining. We also financed at extremely short durations though its getting better. So a lot of debt will have to be rolled over and now at higher rates.

In the 40s, the Fed was on steroids to keep rates fixed. Real rates went extremely negative. They will do again soon including the BOJ. Until debt/gdp has peaked and is on the decline, we'll have QE.
Click to expand...

Disagree. U.S. will simply borrow more to pay off these debt interest payments. U.S. bonds won't get downgraded until there's $22-24 trillion of national debt built up...so that's where it's headed - with the help of the banking lobby. QE will end in 2-4 months as the 7 years of housing surplus dries up and the government's unemployment #s amaze the unemployed. Gold is headed back to $600-650 over the next few years as QE fades.
 
What makes us rich is an abundance of goods, and what limits that abundance is a scarcity of resources: namely land, labor and capital. Multiplying coin will not whisk these resources into being. We may feel twice as rich for the moment, but clearly all we are doing is diluting the money supply.
Click to expand...

- Murray Rothbard
Click to expand...

fuck. thanks for this. it's almost Friday and I was almost slightly less depressed. now I'm full on thinking about dooms day when the US dollar officially becomes the French whore of the world's currency.
Click to expand...

Right now there is no other currency challenging the dollar as the worlds reserve currency. For now. And we still control the oceans and all shipping lanes. That's a big deal. No other nation even comes close to matching our Navy. Most people don't realize how big a deal that is.
Click to expand...

The more debt we owe to China, the smaller our navy can be.
 
This is the solution for when they stop the QE.
http://finance.yahoo.com/q?s=DGLD
Click to expand...

QE will never end. Now that they've lost control of the bond market, they'll have to ramp up QE to keep interest rates from rising too much. With rates going up 1% or 2% the debt burden will get exponentially worse. Current interest expense for FY 13 is about 15% of national income. If rates went up another 1% from here then in two years you could see the interest expense close to 25%. Remember, we've accumulated loads of debt over the past 5 years while rates were low and declining. We also financed at extremely short durations though its getting better. So a lot of debt will have to be rolled over and now at higher rates.

In the 40s, the Fed was on steroids to keep rates fixed. Real rates went extremely negative. They will do again soon including the BOJ. Until debt/gdp has peaked and is on the decline, we'll have QE.
Click to expand...

Disagree. U.S. will simply borrow more to pay off these debt interest payments. U.S. bonds won't get downgraded until there's $22-24 trillion of national debt built up...so that's where it's headed - with the help of the banking lobby. QE will end in 2-4 months as the 7 years of housing surplus dries up and the government's unemployment #s amaze the unemployed. Gold is headed back to $600-650 over the next few years as QE fades.
Click to expand...

If banks buy all the bonds then there is no money to lend commercially. Although I do think the government will find a way to force people to buy bonds.

QE is not ending anytime soon. It will be increased next year & the year after as the debt burden gets worse and to ensure the bond market stays under control.

This is why Janet Yellen will be the new chair. Someone who has said she'd vote for negative interest rates if she could and who wants to get the QE money "in the hands of the middle class."

Inflation is going to explode over the next several years. Gold has just had a warm up. Less than 1% of global assets are invested in Gold. It was 20% at the 1980 bubble peak.
 
Less than 1% of global assets are invested in Gold.

Is this just physical gold? What's hard to believe is how the paper gold market is such a factor now.
 
Less than 1% of global assets are invested in Gold.

Is this just physical gold? What's hard to believe is how the paper gold market is such a factor now.
Click to expand...

Its everything. Global financial assets are in the Trillions. GLD ETF is $38B now I think. I don't expect Gold assets will reach 20% again. It reached 33% in the 30s. Back then Gold was legal money. In 1980 there weren't as many options. This time around I bet it peaks at 7% or so. No way it goes much higher than that given the alternatives.
 
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