Monday, December 5, 2016

When Timing & Price are Right

When derivatives begin to fail, many dollar denominated contracts will be examined.

Will valuable things like heavy equipment, factories, steel, propane gas and oil, land and farms trade at par with these vast sums of dollar denominated debt?

Yet our CBs have gold ... that useless relic with no modern value or utility ... if it's priced high enough, it can clear these absurd paper claims without anything of "real value" being "surrendered".


  1. today, Bill Gross writes:

    How policymakers plan to solve a long-term global debt crisis:

    As in Japan, the Eurozone, the U.S., and the UK, central banks bought/buy increasing amounts of government debt (QE), then rebate all interest to their Treasuries and eventually extend bond maturities. Someday they might even “forgive” the debt. Poof! It’s gone.
    Keep interest rates artificially low to raise asset prices and bail out over-indebted zombie corporations and individuals. Extend and pretend.
    Talk about “normalization” to maintain as steep a yield curve as possible to help financial institutions with long-term liabilities, but normalize very, very slowly using financial repression.
    Liberalize accounting rules to make some potentially “bankrupt” insurance companies and pension funds appear solvent. Puerto Rico, anyone?
    Downgrade or never mention the low interest rate burden on household savers. Suggest it is a problem that eventually will be resolved by the “market”.
    Begin to emphasize “fiscal” as opposed to “monetary” policy, but never mention Keynes or significant increases in government deficit spending. Use the buzzwords of “infrastructure” spending and “lower taxes”. Everyone wants those potholes fixed, don’t they? Everyone wants lower taxes too!
    Promote capitalism – even though government controlled, near zero percent interest rates distort markets and ultimately corrupt capitalism as we once understood it. Reintroduce Laffer Curve logic to significantly lower corporate taxes. Foster hope. Discourage acknowledgement of abysmal productivity trends which are a critical test of an economic system’s effectiveness.
    If you are a policymaker or politician, plan to eventually retire from the Fed/Congress/ Executive Wing and claim it’ll be up to the Millennials now. If you are an active as opposed to passive investment manager, fight the developing trend of low fee ETFs and index funds. But expect to retire with a nest egg.

    if they succeed, what will be the need for their gold? It would not be needed to offset all those liabilities?

    1. "If you are a policymaker or politician, plan to eventually retire from the Fed/Congress/ Executive Wing and claim it’ll be up to the Millennials now."

      ... but not before swinging through the revolving door back to Wall Street where you can help grease the wheels for more "liberalization of financialization".

      That's the systemic playbook in a nutshell, with a little "wash, rinse, repeat" added in.

      Gold? When you consider what was paid for it in dollars, vs. how much dollar debt it will extinguish at a free market dollar price, it will seem a "good deal" to re-balance the books with.

  2. This article explains why the current system will not go on forever.

  3. thank you for the response. I hope you are correct. I don't mean to press, but what if the CB's can just extinguish the derivatives and debt with "control P" ? Make it go poof" as Gross writes. I'm sure that sounds like a "good deal" to the TPTB as well. In that case there would be no need to rebalance the books with gold? To wash, rinse, repeat in perpetuity.... I really hope they wont be able to get away with that...thank you for your time...cheers !!

  4. Well, I hope they will be able to get away with it but I don't think they have a rug big enough to contain all the derivatives and debt which will need to be sweep under. I simply don't think they have enough gold to balance S.S. MediCare, MediCaid, Puerto Rico, Dallas and who knows how many more will be next in line.
    I really hope Trump can turn this around. I just saw him on TV with a Japanese banker who will invest $50B in America.