Good interview, the question is when will it happen?





http://www.theaureport.com/pub/na/13278



"As long as the hedge fund traders and fast-money boys believe the Fed can keep everything pegged, we may limp along. The minute they lose confidence, they will unwind their trades.

On the margin, nobody owns the Treasury bond; you rent it. Trillions of treasury paper is funded on repo: You buy $100 million (M) in Treasuries and immediately put them up as collateral for overnight borrowings of $98M. Traders can capture the spread as long as the price of the bond is stable or rising, as it has been for the last year or two. If the bond drops 2%, the spread has been wiped out.

If that happens, the massive repo structures—that is, debt owned by still more debt—will start to unwind and create a panic in the Treasury market. People will realize the emperor is naked.

TGR: Is that what happened in 2008?

DS: In 2008 it was the repo market for mortgage-back securities, credit default obligations and such. In 2008 we had a dry run of what happens when a class of assets owned on overnight money goes into a tailspin. There is a thunderous collapse."

Under his scenario all those ABCDs are going to become a lot cheaper if you sit on cash.

Good read. Rd: Thanks for posting.

-Uwe-

Pretty much echos my thesis---and investment strategy.

If rates rise, expect tax on the interest to spike to 95 percent.

USA has a great many scams to pull before it gives up the ghost. I think the problem with bears is that they expect neat resolutions in a short period of time.

Could the Fed go to 4,5 or 6 Trillion? I guess we will find out by this summer.




"The question is: Will the central banks be able to do that now, given that they have already expanded their balance sheets? The Fed balance sheet was $900 billion (B) when Lehman crashed in September 2008. It took 93 years to build it to that level from when the Fed opened for business in November 1914. Bernanke then added another $900B in seven weeks and then he took it to $2.4 trillion in an orgy of money printing during the initial 13 weeks after Lehman. Today it is nearly $3 trillion. Can it triple again? I do not think so. Worldwide it's the same story: the top eight central banks had $5 trillion of footings shortly before the crisis; they have $15 trillion today. Overwhelmingly, this fantastic expansion of central bank footings has been used to buy or discount sovereign debt. This was the mother of all monetizations."

I think the only way the Fed expands in size is in an emergency. I could see them buying and expanding HEAVY into a bond market sell-off. At that point it will be obvious we have already defaulted and the Depression would ensue.

Hyperinflation is already off the table imo.

Mayorquimby,

Yesterdays drop in oil MAY have been a tell on Hyperinflation being off the table.

Hyperinflation requires perpetual printing. Inflation targeting would change my mind. They start that bs and we are in deep ****. There is talk that Japan is going to attempt it but I'm not sure they really are or not.

Hyperinflation isnt going to happen unless the fed just sends us all a million a piece. Not gonna happen.

I've long said that I'd worry about hyperinflation when they sent me a check for 50k+.

No. Hyperinflation is when they perpetually mail out checks. One shot is not going to create hyperinflation. It will create a bubble which will go up and then down.

I don't discount that happening.

Probability may be small ... but I don't discount it.

Really, exactly what is it when you are allowed to stay in a house that you quit paying on 3 years ago? That's effectively a check for several tens of thousands.

Quote:

"Really, exactly what is it when you are allowed to stay in a house that you quit paying on 3 years ago? That's effectively a check for several tens of thousands."

I call it the banks having someone maintain the property, pay the property taxes, keep squatters from setting up a crack factory, and not having the 'tenants' rip out the copper piping.

When they decide the house will now sell, those living their will be quickly removed with no chance to damage the house. After all, they defaulted years ago.

Ok, here's my newest prediction on the seminal event preceding the great collapse: one or more major hurricanes striking densly populated areas in Florida. Such an event (or events) will immediately create economic havoc in the state of Florida because the State is now insuring a majority of the structures there, and because the Federal government will try to spray a firehose of money on the problem.

The Fed under its current powers does not have the ability to hyper-inflate. It can simply lead a horse to water but it can't make it drink. Congress would have to change the way the Fed issues money and create laws that speed up the velocity of money. The problem with this is that once congress puts forward these plans, in our days mass communication society, the dollar would turn into instant confetti.

If Bernanke could actually control inflation, the housing market would not have dropped in the first place.

"ABCDs are going to become a lot cheaper if you sit on cash."

If the Financial System seizes, the gov't will need something to kick-start it with.

Your cash. Your 401k, Your IRA...

Yeah of course there is that problem

None of that helps the immediate situation of financial collapse, those things are really supposed to be distant-future claims on production.

Production that will not actually materialize if large-scale theft becomes the norm.

Just drives the collapse deeper, harder, faster.

The "ABCDs" are currently not that expensive, why wait to see if you can get it cheaper, it is just not worth the risk.

The real basics water, food and protection problems can be solved pretty easy

1) Big Berkey Water Filters
2) Food Kit By Shelf Reliance - Cans Freeze-dried & Dehydrated Food
3) Remington 20 gauge shotgun.

The question is for how long?

Also some good reading material and friends & family

Also if somehow you can grow or raise your food great otherwise it will be mostly out of a can.







Why wait?

Quote:

"As long as the hedge fund traders and fast-money boys believe the Fed can keep everything pegged, we may limp along. The minute they lose confidence, they will unwind their trades.

Yup. And if the above 'boys' get antsy, the Fed will announce QE3 and Happy Days will be here again.

When that wears off, QE4! Then 5! Then 6! Yea, gas will be $12/gal, but so what, I mean just LOOK AT THE STOCK MARKET at 20K!!!!

We are living in Bizzaro World.

SM volume is in the toilet. The whole thing is a game right now with the Professional traders shuffling money back and forth amongst themselves while skimming everyone's 401K (which is pretty much the only money they can get from the "retail investor" nowadays) The whole operation is beig held together with spit and rubberbands, but I can't help but be amazed at how the Fed and the rest of the Finance witches and warlocks have held it together as long as they have.

PJ--I don't consider 16-trillion dollars in debt and $4.00 gasoline/rising food prices as "holding it together," but thats just me...

Zara, that's why guys like you and me find places like this.

I mean, haven't you heard, deficits don;t matter and another round or two of Stimulus is all we need and we can DEFINITELY afford National Healthcare......

In case you haven't noticed, we're in the minority.

We're so small, we're not even a minority.