May 24, 2009

For over three years it's been "CASH IS KING". But now that governments are at 0% and the printing presses are running, WILL CASH BE TRASH?

We may have run the cycle:

· The upswing usually starts with an opportunity - new markets, new technologies or some dramatic political change - and investors looking for good returns.

· It proceeds through the euphoria of rising prices, particularly of assets, while an expansion of credit inflates the bubble.

· In the manic phase, investors scramble to get out of money and into illiquid things such as stocks, commodities, real estate or tulip bulbs: 'a larger and larger group of people seeks to become rich without a real understanding of the processes involved'.

· Ultimately, the markets stop rising and people who have borrowed heavily find themselves overstretched. This is 'distress', which generates unexpected failures, followed by 'revulsion' or 'discredit'.

· The final phase is a self-feeding panic, where the bubble bursts. People of wealth and credit scramble to unload whatever they have bought at greater and greater losses, and cash becomes king.

Based on how the dollar is melting down right now, even against weak and baseless currencies like the British Pound, it looks like the dollar is toast. People around the world who desperately rushed into dollars for 'safety' now evidently are rushing out as fast as they rushed in. And they're buying up stocks and commodities, and maybe even a little real estate here and there.

So w
hat's your next move?

And are all paper currencies toast?


Anonymous said...

Follow the money.

Watch the insurance companies.

Anonymous said...

No! The international bankers worked very hard to set-up the FED and central banks in other countries. They control all currencies and have real power due to that fact. They will not bring down this elaborated money/power machine. Creating bubbles and busts in different countries allow them now to control the world.

For those of you who expect a NWO government, open your eyes it has been here for sometime now.

The bust will continue , after many bear market rallies, and someday, I think around 2014, the cycle will start all over again. It will take another generation to reach new heights again. You see there is a need for a lot of uneducated suckers to pull of something of this magnitude.

Anonymous said...

Looks like Peter Schiff was right. Again.

Look at the pathetic fools on CNBS completely devastated by Schiff's analysis on his most recent appearance:

Schiff on CNBSThe bimbo cries "oh not decoupling again. I thought that theory had been completely discredited. ha ha ha ha ha" and on she laughs and bats her eyes like the pathetic media whore that she is.

No, decoupling is not an overnight event you CNBS prostitutes. It is a long term trend.


Duarte said...

This is why the recession isn't over. This is why there is still the possibility of Depression. If the US dollar collapsed while the DOW climbed to 15,000 this year, we'd still be in a recession.

bobby lensky said...

I don't think we hit bottom yet. People say that it's going to be "commercial real estate" or "consumer credit" but if GM goes into bankruptcy, I think the seismic plates are going to be shaking again.

Anonymous said...

M1, M2, M3 ... Look closely at them.

eric in vegas said...

The fed and central banks around the world will jack up interest rates to the moon at the last possible moment but will it be enough to save fiat?

Anonymous said...

It's over. If you haven't got gold by now, at least stock up on essentials like food and water. It's gonna be a long winter bears.

Anonymous said...

"One Happy Meal, please."

Paul E. Math said...

Gonzo, thanks for the Schiff vid - he schooled those morons once again.

I agree with eric in vegas: the fed may have to hike rates at some point but they will wait as long as they possibly can. It's not goin to be anytime soon.

I'll repeat what I said on another thread: inflation will appear deceptively low as measured by CPI because of falling owner's equivalent rent.

The low CPI will give the fed and other central banks the excuse to keep rates low even as most prices rise.

I'm not sure that deflation is completely over but I think it's on its way out the door.

Cash is now trash.

Bukko_in_Australia said...

It's time for the Amero!!!!

(Never thought I'd be writing that. I always reckoned that was the province of tin-foilers. But in light of recent events...)And for our preferred customers, the GOLD Amero! Three years later, the PLATINUM Amero!!! If you're REALLY on the inside, the Amero BLACK -- backed by a barrel of sweet, crude oil.

Of course, if you're poor, you can do your spending with Red Ameros. Guaranteed by units of your own blood...

But seriously, folks, who was it that said "All fiat currencies eventually become worthless. It's just that they become worthless at different speeds"? Bueller?

happy snapper said...

Here is something I do not understand.

Inflation happens when there are too many dollars in the system.

Our economy lost trillions and trillions of dollars in the past year or so.

So even with the fed printing all that money it is still not even close to the amount of money lost.

So is it possible that there are actually a lot less dollars in the system?

Plus banks have not been lending either.

So how inflation?

Please respond if you have any thoughts

Single said...

We're not there yet, but because of the policies of your buddy, the Obaminator - it's just a matter of time. It's the sequel, Jimmy Carter II, but this time it's a black man and things are going to be MUCH, MUCH worse.

For the record, while I did not vote for the child-who-would-be-president, I don't think McCain would have done much better. However, I also don't think that McCain would have printed money like there was no tomorrow and I don't think he would have continued to prop up businesses that fail. That in itself is a failed policy.

Obama is lame, a man without a clue, pure and simple. He doesn't know economics, he doesn't know terrorists, he doesn't know law, he doesn't know the constitution, he doesn't know how to deal with international leaders, he doesn't know squat.

Anonymous said...

What kind of fucked-up people are we?

I read about a "graduation party shooting", Googled the term, and was appalled yet somehow not surprised at the result.

Tucson, Tampa, Tallahassee, Detroit, Tupelo, Pensacola, Buffalo, Mesa, Manitowoc...

He wanted to go into the Marines...Bet they would've been glad to have him.

Jesus. Fucking. CHRIST people; if this is how these animals behave at a somewhat-happy point in their lives when someone merely displeases them, WHAT WILL IT BE LIKE a few years from now when real hardship descends on them???

Had to laugh at the Sponsored Links though...

Fun Graduation Party Shooting

Miss Goldbug said...

A very good friend of mine told me she just received a letter from her financial manager at Wetherbee Asset Management.

The letter said since the dollar is losing so much value they're asking all their clients (such as my friend) if she wants gold in her portfolio, calling gold an "inflation fighter". The letter lists the pros and cons to owning gold.

Very interesting WAM is just now thinking of gold, and asking all their clients if THEY want it in their portfolios...thats right, a financial management co asking their clients via letter if THEY want to add gold to their accounts.

All I can say is watch what happens next to gold.

2012 will be a scary year indeed. I wouldnt be surprised if we return to the gold standard that same year.

Eric said...

If inflation is here, for those of us who can afford it, it sounds like a good time to buy property. Not for profit, but to maintain value. I'm closing on 4.5 acres 45 mins out side of DC. free running water, barn, and relatively safe jobs. All of you gold bugs out there don't seem to understand that gold has no more intrinsic value than paper money. There is huge supply out there and its number one use right now is or hoarding. It can not provide food or shelter.

Anonymous said...

my "king" cash has earned less than inflation for years and cash at the stock market high never regained its purchace power from year 2000

Tyrone said...

Trust in Jim Sinclair...
Dear Friends,
Here is my New Years gift to you, my extended family.

There is no way that the CONSEQUENCES of the largest creation of paper money since it was invented can be avoided or even modified. Odds now favor Alf Field’s price objective (Elliott Wave Gold Update 23, bonus article Crisis Cogitations).

January 14th 2011 to June 21st, 2012:
The best part of this gift is not the one you already know, which is January 14th 2011, but rather the date that a new currency form will replace the form of the US dollar as you know it today which is the third week of June 2012.Don’t laugh! Write this down and do not forget about it!

Happy (sort of) New Year,

Stuck in So Pa said...

"The bust will continue, after many bear market rallies, and someday, I think around 2014, the cycle will start all over again. It will take another generation to reach new heights again. You see there is a need for a lot of uneducated suckers to pull of something of this magnitude."

That's why the dumbing down of Americans is essential. Thank you all-powerful, unionized school system!
bobby lensky said...
I don't think we hit bottom yet. People say that it's going to be "commercial real estate" or "consumer credit" but if GM goes into bankruptcy, I think the seismic plates are going to be shaking again.
Amen to that. Even though GM could emerge from bankruptcy leaner, meaner, and well equipped to continue in a new competitive auto environment (could, but I don't see it,) the mere shock of the bankruptcy announcement could be enough to shatter the footers of the foundation of this economy.
It's all a matter of faith, and what little is left would be gone. You won't be able to GIVE AWAY new GM products. Parts for them will dry up overnight as well!

casey said...

Someone needs to make a roll of toilet paper with dollars.Sell it on ebaay and craigslist and make a fortune.

Devestment said...

Don't bet against the house, or at least their motive.

preston said...

Cash is still king.

jp morgan had 77 trillion in credit default swaps. Just that one firm lost more then all the cental bankers in all the world have printed this year. The FEDs efforts are just pissing in an ocean of collapsing debts.

preston said...

If cash is trash - please send it to me.

Anonymous said...


BUKKO is the new BORKA!


West Coast Willie said...

Retail: Dead(David Rabinowitz)

Stock market heading back down(David Rosenberg)

Banks still zombies(Meredith Whitney)

Commercial Real Estate. Literally: Dead

Gold and silver,natch. GLD and SLV

And short Treasuries. TBT

Andrew from Russia said...

So what's your next move?Back into dollars if this craze persists.

image009 said...

Gonzo, thanks for the Schiff vid - he schooled those morons once again.

If anybody got schooled, it was Schiff by Mish.

Duarte said...

If someone owns a million shares of stock at one dollar a share and another person wants those shares but can't afford them, some kinetic energy builds up between them. It's energy that effects business and progress and effort. Now if the stock loses half of it's value in one night, the money did not just "disappear". The owner lost money, but now the second person can buy those shares for only 500,000 dollars. The money isn't gone, it was in the hands of the second person. The second person SAVED 500,000. They didn't have to spend that money to acquire all of the shares. They can use the extra money to do something else.

Now, if we just cover everyones losses by printing money to make up for the lost value, we have taken that away from the second person. Likewise, the fluid supply of money begins to shake the faith of the value of the money itself by not just the first person, but the second person, the lender, and everyone else who owns shares of that stock.

It may seems safe to us to print money to give to the banks, but remember that the money doesn't disappear in a world where everyone is betting against each other's fortunes. The value of fiat currency is tenuous at best. Obama, the Fed and Congress either believe they can control interest rates and inflation rates long term, or they don't care what happens long term. Unfortunately, I think Obama thought the "science of economics was settled" and he's learning on the job that he may be wrong. He realizes now that he just can't take money away from super rich people. They are more powerful than he is. They will take it back...from employees, from investments, from a thousand other sources. The free market works because man one and man two won't stop betting against each other just because someone printed more money.

JAWS said...

Las Vegas has so many entertainer-owned high end houses on the market that I think they are currently in the self-feeding panic stage - so many of them own multi-multi-million dollar mansions that can't possibly be sustained without a raging good economy.

Nothing in Vegas is raging good right now.

I'm sitting tight, cash in banks; flat money is just paper and ink but most folks don't think that way and I'm counting on that to continue. It's a huge group agreement that will take something biblical to change it.

If I handed $20 bills out all day, I'll bet they would be appreciated.

Randy said...

To all you Schiff fans out there:

He’s not totally wrong,
but wrong over all, because Schiff assumes that the US and its currency are worse off than the rest of the world.

I got bad news for ya, it aint..

As if other countries have superior financial knowledge and economic skills.

If they did they would have anticipated this collapse and would be richer then we are.

They are not!

Plus with the Internet we all have access to the same information.

Keefer is correct that one needs to adjust as the data changes,
Peter Schiffs rigidity on this matter is his blind spot

Garbanzo said...


Please share with us who ‘really controls the world’

Promise, we won’t laugh

Paul E. Math said...

happy snapper, I have a response for you, for what it's worth.

I see price inflation in some things, deflation in others. It is overly simplistic to think of inflation as being an 'all or nothing' prospect - it does not effect everything equally.

We had real estate inflation in the first half of this decade because massive amounts of money suddenly became available for the purchase of real estate (via current account deficit --> purchase of mbs --> 'exotic' mortgages).

So now that trillions of dollars are being destroyed and trillions are being printed, it is important to think about where these dollars are being lost and where they are being added. Because I don't think they are the same place.

While the current account was shrinking for awhile there, it is still pretty huge.

Now that the Chinese and Saudis no longer want our mbs but still have lots of dollars to spend, price inflation will occur wherever they decide to spend them.

And what are the Chinese buying with our dollars? Commodities of all kinds.

Thing is, you can have real estate price inflation and it doesn't really effect the price of anything else.

But when you have price inflation of soybeans, corn, nickel, silver, gold, oil, uranium... well, that kinda affects the price of everything.

Anyway, that's the way I see it.

Parley Pratt said...


Please share with us who ‘really controls the world’


Scarlett Johansson

Nimesh said...

We talk a lot about bubbles on this blog. And one of the biggest bubbles that exists right now is the unbelievable faith investors around the world and Americans have on the U.S.A.

The fundamentals don't look good: 1. The massive amount of federal government debt plus the debt issued in the form of municipal bonds from states and local cities total out to about 18 trillion to 21 trillion dollars. 2. The massive amount of debt held by consumers and businesses. 3. The unfunded liabilities/entitlement programs like Social Security, Medicare, government employee pensions, etc...

The fundamentals for our country don't look good and any reasonable person when presented with the facts would conclude that too. Yet, investors and Americans place a tremendous amount of faith in our country.

Dear God, when this bubble bursts, it will be spectacular and it won't be pretty.

Anonymous said...

Where should you put that cash.

Rich default on luxury homes like subprime victims

"Some folks work hard to make payments. Others just can't pay. They offer a deed in lieu of foreclosure and off they go."

Values have taken longer to decline in more affluent areas, taking some homeowners by surprise, said Philip Tirone, president of Los Angeles-based Mortgage Equity Group Inc.

"People are coming to me to do a refinance or buy another property, and what they thought they had in the equity of the home they don't have and they don't know what to do," Tirone said.

happy snapper said...

Paul E. Math, thank you for your response not sure that I totally understand yet but I’ll re-read your comment again.

The piece that stands out is
‘Now that the Chinese and Saudis no longer want our mbs but still have lots of dollars to spend, price inflation will occur wherever they decide to spend them.’

With most of the world in a recession for about a year now there must have been a serious reduction in money flow to China as well, how much longer do you think they can have excess money to invest outside or on commodities they don’t utilize?

And for the Saudis at $50 - $60 a barrel on the high side me don’t think they have much excess money to invest either, my guess is they already blew most of what they gained during the over $100 a barrel period anyway, and with the continuous reduction in demand for Fossil fuel, Oil will probably continue going even lower.

What do you think?

Anonymous said...

Have you try asking the homeowners who just lost their jobs if cash is king

As long as jobs lost continue, more and more people will default on their mortgage. These are conventional 30 years fix rate loan with 20 percent down.

Why - is it because the banks who made these conventional loans last year fail to ask if the borrowers have a 8 to 12 months cash reserve in the event of a job lost.

Why did these banks take that risk.

Is it because these banks felt that homes in good location which have not fallen during the subprime mess so that mean these homes are safe.

But you know that is not the case now.

You know these home price will have allot more to fall because these prices where not realistic to housing affordability index based on median income.

In other words when home owners have to sell their home they began to realize that many buyers could not qualify based on their median income even at 45% loan to debt ratio.

The problem with the printing press theory is that the banks will have to go back to their crazy lending practice to stop the current housing downturn.

But with companies still laying off 600,000 people a month how long can those crazy lending practice last.

What about the next crisis. Remember the banks will be facing the reset Option Arm and Alt-A loans.

The Bay State's pricier suburbs, resorts, now seeing price declines

Anonymous said...

Just found out a friend has in-operable cancer and only a year to live.
Was asking myself, after all this time, why isn't there a cure?
What reason could there be to keep a cure for cancer from the public?

When cigarettes were found to cause cancer ,why didn't they immideately make them illegal?

Do hospitals and charities like the billions and billions of dollars for 'cancer research'

What would happen to the health-care system if there were a cure?
Would they lose billions and billions in revenue?

Why do they make anyone seeking alternative cures feel like a lunatic?

Do they want people to die to 'decrease the surplus population?'

If you answered yes to any of these questions, then why don't you join me in finding the cure for cancer.
Will be nice to tell your friends how you are spending the summer.

Why don't they have a TV show along the lines of 'Addiction' on A@E about people who sought alternative cures and they worked.
Why don't they do a TV series on it?

the list goes on and on.


Anonymous said...

"Every discoverer of a cancer remedy has encountered a Chinese wall of resistance," which has been the same in every page of recorded cancer history, and that the myth that the discoverer of a cancer cure would be "honored, acclaimed, and practically deified as a saviour of the human race," should be changed to "dishonored, denounced and crucified, unless he is a fair haired boy of the dominating oligarchy."

They want YOU to get cancer.

Just seems to me this the biggest conspiracy going right now.

Just google:
conspiracy to keep cancer cures from public.

My heart is beating so hard.
I am so mad.

Lost Cause said...

I don't see inflation coming. That is the opposite of recession -- in The Business Cycle(tm). Europe will bring us down again. It is time for a double-dip. At least the stock market is due for another fall. Failing to push higher than 8200 is going to be a shock that it can't handle. It will be a long, hot summer in the silent, empty, air-conditioned cubicles of Wall Street.

Anonymous said...

I am starting to think twice about the Cave Men Gieco Commericals. Soon we will all be cave people. I am a bit offended by the commercials now.

Shakster - Bad Man From Boron said...

Kieth , did Greg Shitbird croak?
Been outta the loop for quite awhile.How the fuck is everyone doing??
Any of you lip service lot lizards ever go to jail fighting for freedom?

les said...

Response to Randy:

Fortunately, we sold those mortgage backed securities to overseas investors. They are taking a bigger hit than we are.

What get's me is that after being conned into buying AAA mortgage backed secdurities, the world is still investing in dollars and AAA Treasuries.

Things can change very fast if the world decides they have had enough of our shenaningans.

k.w. - Southern Ca. said...

We're now in a false recovery stage, but that will be end very soon.

Here's a good video, to shine some truth on what's really happening as opposed to what our public service liars are spewing out:

bobby lensky said...

"No, decoupling is not an overnight event you CNBS prostitutes. It is a long term trend."

didn't Krugman show that wealth shifts to where production is? The bigger question is "why would American managers want to give Americans a cut?" Hence, Schiff should of asked the question and noted that Americans would only get a cut if those managers were altruistic, etc...

Bukko_in_Australia said...

BUKKO is the new BORKA!

BORKA? What is that supposed to mean? Borkfatty? Someone from HousingPanic?

If you're going to sling an insult, or make a joke, you should first ask yourself: "Is this reference so obscure that no one will understand it?" Because if you're being clever based on something that exists only in your own mind, it comes across as daft.

bobby lensky said...

"Inflation happens when there are too many dollars in the system.

So is it possible that there are actually a lot less dollars in the system?

I'd suggest that you think about distribution of dollars as well as the number of dollars in the system.

Inflation allows wealth transfer without having to point a gun to someones head.

The problem with inflation is that it doesn't necessarily redistribute money fairly since the government can't give everyone $10 billion since Bill Gates has $10 billion; hence, using inflation to redistribute wealth has its limits.

What I foresee is that-- because of globalization, America will become more like India or Africa, for example, since the educated elite will want a bigger chunk at the expense of the working class in America.

The bottom line is that consumption is limited (some people have to go hungry) and the CNBC commentators won't talk about that since they have to sell the American dream....

Paul E. Math said...

Happy snapper, what you're saying makes sense, if I understand you correctly: a us economy in recession should reduce the current account deficit and thereby reduce the US dollars that are buying commodities.

I guess it all depends on how it balances out.

Because the current account deficit was still like $130B in Q4 2008 so if the Chinese want only commodities and no us treasuries then with the big us budgetary deficit, the us will have to print more money and bid against china's us dollars when trying to buy needed commodities.

On your side, however, China is still buying us treasuries, and lots of them.

China is exchanging its mbs for short-term treasuries so now instead of money flooding into real estate, pushing those prices up, we have money flooding to the US government.

And the US government is not growing more wheat or mining more nickel.

The US government is expanding the bureaucracy, extending unemployment benefits, doling out dollars for various enterprises that support consumption but do very little to increase production, especially of commodities.

Meanwhile, China increased its crude imports by 13.6 percent year over year in April, guzzling 3.9 million barrels a day. China is busy building a strategic oil supply while oil prices are low.

It's doing the same thing with other commodities.

And it's not just to stockpile: auto sales are on fire in China, having risen 25% from April of last year.

That's right, as Schiff has long argued, China does not need our consumption. They are perfectly capable of consuming their production themselves and they are now doing just that.

The following is a great article about this, I've tried to summarize but I can't do it justice.

Sorry if I haven't answered you very well. As I'm sure you can relate, this is a complex subject and defies summary.

Anonymous said...



A little touchy aren't ya?

Ya wanker!


Anonymous said...

"And what are the Chinese buying with our dollars? Commodities of all kinds."

What a great statement!

Keith apply this to your position on American autos. SUre we as individuals can choose to buy a foriegn car hoping to gain some tiny advantage over a US built car. We are sending our dollars out of the country to be used basically against us, or in competition with us.

We enrich others while we get poorer and less able to compete.

There are reasons to choose a CHevy above and beyond the horrible thought that you may have to visit the dealer for repair 2 times more than you would with a Toyota (again perceved).

Why doesn't any one understand that supporting US companies and jobs and keeping your dollars circulating in the US instead of Japan, Korea or china is a very good thing?

You can say US cars are shitty but in reality you must know that you can go buy any car from any manufacturer and drive it for 100k miles fairly trouble free. The qulaity issues that US haters always try to magnify are actually quite tiny.

How much are you really giving up by choosing to support US built cars? Be honest. How much does the country stabd to gain if people shift their purchases over to US cars?

GT Charlie

Anonymous said...

It has now come down to this. And yes cash will eventually be trash.

Anonymous said...

Hey Qweefie,

How do you praise the MESSIAH spending trillions of borrowed dollars in one post and then scream about the dollar's devaluation in the next?

Surely even a committed kool-aid drinking Obamabot such as yourself can see the folly.

Anonymous said...

GT Charlie

May 25, 2009 7:02 PM


Excellent point. In the last 10 years I or my wife have owned wwned BMW(2), Mazda, Saab(3), GMC, Jeep, Audi, Ford and Honda.

In general the Honda and Mazda were most reliable, the GMC and Jeep were next and BMWs and Saabs were least.

But that equated to as you say and extra trip or two to the mechanic a year on average for the Saabs/BMWs compared to the Hondas/Mazdas.

All the cars started 99.8% of the time, they all drove me from point A to point B 99.8% of the time without any issues. The Saabs/BMWs had annoying little issues, mostly electrical, shit like the CD players breaking. No car I've owned ever left me stranded, American, Japanese or European.

Maybe in the 80s or 70s American cars were that bad. Today, all cars are very good. The difference between the "bad" and "good" cars is the difference between getting an A and an A+. Sure an A+ is better, but I'm not going to lose sleep over an A.

yoski said...

Paul E. Math, nice analysis. That's about the way I see things happening.
Decoupling of China & India doesn't happen over night. It will take a decade or two but we are now entering a new stage. China is now aggressively buying up commondities instead of US IOUs. Soon only the printing press will be left to fund our spending orgie.
There are not enough resources on this planet to allow the kind of living standard the US is currently experiencing. That means our consumption of commodities will decline while the consumption in other places will rise. Our real income adjust for inflation will probably decline somewhere around 50% over the next decade.

Bukko_in_Australia said...

Anonymous said...


A little touchy aren't ya?

Ya wanker!

I'm stroppy when it comes to you, you troppo bogan! You're madder than a sackful of snakes! And if you're going to be slanging Strine, galah some new yabber besides "wanker" mate.

Devestment said...

OK lets say we have inflation. Inflation will not happen in all asset classes. The highest likelihood is that we will have inflation in energy and food while we have high unemployment and equity loss from forced real estate and luxury asset sales. High interest rates to stave off the inflation will exacerbate the situation.

Anonymous said...

Who's this Bukko in Austrlia dude??

Isn't he an American?

Why does he try so hard to "sound" Australian with so many bits and pieces of their jargon thrown into his posts?

OK OK OK. So he's a nurse and all our "arses" all stink. I got that.

Still, it's pretty silly if you think about it.

keith said...

We have a lot of people on this board who are stuck in 2008.

Things have changed. Look around.

And invest wisely.