May 22, 2009

Scraps of paper.

“All currencies are being debased dramatically by their central banks at extraordinary speeds and so in relative terms it appears there is no currency problem. In reality, however, paper money is highly vulnerable to a public catalyst that serves to acknowledge it is all merely vapor money.”

Lee Quaintance and Paul Brodsky of QB Asset Management, May 2009


Mike Hunt said...

If that's all it is, surely you wouldn't mind sending some my way. Or electronically, those are just groups of pixels....


Anonymous said...

They CB's should have avoided creating this situation, but now that it exists this is better than deflationary systemic collapse if they can pull it off.


Anonymous said...

Highly recommend two books:
None Dare Call It Conspiracy, Gary Allen;
Creature From Jekyll Island:G Edward Griffin.
(Griffin explains the FEDERAL RESERVE - a total money scam. )

I_love_hyperinflation said...

"They CB's should have avoided creating this situation, but now that it exists this is better than deflationary systemic collapse if they can pull it off."

They won't pull it off, because you cannot print wealth, period.

The USA is heading towards losing it's AAA credit rating, get ready for hyperinflation.

Anonymous said...

Keith old boy,

How's that hope and change working out for you? 120 days and the deficit is up 400%, Gitmo will remain open, no sign of Iraq ending, unemployment steadily climbing, US on the verge of losing AAA rating.

Good think one of those eeeeeevil Republicans didn't get elected, or else we'd be in trouble.

borkafatty aka the pig said...

Moar Cheez!

This topic screams for an Andrew Hac post.

Anonymous said...


I attended the recent 'Money Show' in Las Vegas at Mandalay.

There were so many more groups this year as opposed to others selling GOLD and SILVER, actual coins and others with mining stocks.

They had a brisk business as well

Got Gold???


Randy said...



and that is why the Greenback is the safest of them all

Miss Goldbug said...

Its correct-paper money is nothing but vapor.

All countries including the US will return to some kind of gold standard. But not a one world currency.

Fiat money works fine until there's a crisis, are we there yet?

Anonymous said...

Off topic: Can somebody tell me how much moola the FDIC has left. I remember reports of $53bn when things started going south. Seems like they would have burnt thought this by now. Looked at the .gov web site. The last financial statement released was 2007.

Mammoth said...

However, the majority of the sheep still don't get it - just like when you are on an elevator that is heading down towards ground floor, you don't feel the sensation of falling.

However, when $1 = 1 renminbi, THEN people will finally understand what is now happening.



Devestment said...

How does a country retain any control, credibility or power with worthless paper currency? If you were managing a country would you give up this powerful tool at any cost or would you retain it at the cost of the public.

Look to history for the answer. 1980; historic high gold price followed by historic high interest rates.

Gold is currently in its last rally, at our shop we were getting premiums over spot price on the wholesale market. Those premiums are now gone, supply is meeting demand, in my opinion we are in the last rally.

We will soon see the pendulum swing on interest rates as our central bank gives strength to the trillions they just created.

My play… Selling 110oz today, buying a distressed asset for pennies on the dollar! US DOLLARS!

gutless and lazy said...

CA credit rating the worst in the USA.

The fiancial noose is tightening on the USA. State by state, they're becoming "sub prime", dead beat, entities.

Who defaults first???

gutless and lazy said...

November 2008 state credit ratings:

Do you think it's improved since then???

Many states are outside the top level credit level ratings.... yet the USA is rated AAA.

Does this make sense to you???

Does this mean the states can fall into a state of financial kaos but the federal govt will continue to pump money from states to a fat and dumb federal level???

Will major U.S. cities continue to fall into ruins while Washington D.C. makes itself into a Alice in Wonderland rabbit hole???

Lady Di said...

Gold becomes a currency when all trust in paper money is lost.

You are witnessing the transformation take place.

Gold will be the last man standing.

Always has. Always will.

gutless and lazy said...

Models are great because they work, ... until they don't work anymore.

And then they blow up in your face, in a spectacular fashion.

Anyone remember LTCM?
Monkeys love using models. It makes thinks so simple. It gives them a reason to not have to think hard. The LTCM monkeys thought they invented the perfect model. Silly monkeys!

Speaking of models, anyone still want to use the old 20th century cyclical economic model to time and plan their 21st century investments? Anyone? Anyone?

Bueller? Bueller?

JAWS said...

It will take a brute thump to the head to make most human beings believe that the dollar bills in their pockets aren't God given, powerful buckeroos. Try to explain to your gardener that their dollar bills are just paper with ink and only have value because we have agreement that they have value.

gutless and lazy said...

Monkey#1 spends like there's no tomorrow and mocks and laughs: "They'll never take my card card away!".

USA credit AAA ratings. USA credit lobbyists. USA govt's.

Something is very, very, VERY wrong.

Andrew from Russia said...

Green Shoots = Indian Summer.
I mean, all this "cash is trash" sentiment echoes 2007 nicely. Except that this time, it makes one believe in a V-shaped recovery at the wrong moment.

Anonymous said...

Just keep watching long term treasury rates. Nothing will kill real estate and corporate profits and the stock market quicker than ever increasing long term interest rates.

Inflating oneself out of a bubble only works if you have the surplus to inflate. Borrowing money to inflate does no good when interest rates adjust for the excess liquidity.

Next week, we will see long term rates go up and the dollar continue to go down as Uncle Ben keeps those printing presses working over Memorial Day weekend. Folks he is pimping over $100 billion in US Treasuries next week alone!

Of course if China is stupid enough to keep buying/losing money in treasuries that will never be paid back maybe we can soften the blow.

But I doubt it and so do the rest of the world. China has no more money to buy treasuries!

It will be interesting to see Uncle Ben's face and his fellow cronies when he has to start raising interest rates to stop the run on dollars and treasuries.

Now the depression starts! This will be a Memorial Day to remember because the next ones will not be so happy!

Good luck folks. I am long TBT and loving it! Thanks Uncle Ben for the nice gain!

I always thought Uncle Ben would support our country and the dollar but when I finally realized his interest is not in the dollar and our country I had to call his bet and I am winning!

All this pimping treasuries for 19 banks! I guess I'm not getting it!

Anonymous said...

Good reading! This is the reality! Helicopter needs a reality check!

Treasury Yields Will Continue to Rise
by: Calafia Beach Pundit May 22, 2009 | about stocks: BIV / GKD / TBT / TLT

The Fed is trying to fight a force of nature—the bond market—and they are bound to lose. Purchasing long-maturity Treasuries, mortgage-backed securities or corporate bonds in an atttempt to keep their yields low is a self-defeating strategy, since it at some point it will supply unwanted dollars to the world that will fuel inflation. Ultimately, inflation and inflation expectations are what drive bond yields. If the Fed buys too many bonds, rising inflation expectations will kill the world's demand to own bonds, and yields will rise. It's that simple.

Anonymous said...

One more thing!

Be careful of gold and commodities because as interest rates start climbing the dollar will strengthen and all commodities will come crashing down. Even Gold! And stocks! Stocks are going up because of expected inflation!

The only play right now is to short US Treasuries until Uncle Ben cries Uncle! Then he will support the dollar by raising rates because he has no other choice! The market rules not Uncle Ben!

For now TBT folks! Let's force uncle Ben to support the dollar!

Stay out of stocks, bonds and commodities until Uncle Ben stops the printing presses!

Rob said...

anon, May 22, 2009 4:02 PM

I understand Shiela Bair has asked for another $500 B for FDIC. So that should give you an idea of where that is.

Paul E. Math said...

"Stay out of stocks, bonds and commodities until Uncle Ben stops the printing presses!"

I think I agree with you about what will happen but would give the opposite advice.

I would stay in stocks, bonds and commodities until the moment just before Ben stops the printing presses.

I agree that you'll want/need to get out of stocks, bonds, commodities the moment central banks stop their quantitative easing.

And there is no sign central banks are done yet.

Check this. Rent and owner's equivalent rent is 39% of CPI and Goldman Sachs has just produced a report predicting continued declines in rents.

Falling rents and falling home prices (--> falling owner's equivalent rent) will counteract the rising price of everything else when calculating CPI.

As long as the CPI numbers remain low Bernanke will keep rates low, keep running the presses round the clock. And CPI numbers will remain low for at least the rest of this year.

Glad I bought GDX back in november - am up 95% now. Not feeling as smart about DAG which only recently has returned to positive territory but has had a very good run lately.

Notice that oil is over $60?

Anonymous said...

One thing I learned at the Vegas 'Money Show' from the so-called 'Experts'...

Everyone has an idea,

but not a clue on what to do!

Out of hundreds of voices, one or two may hit it right...but it was a guess at best.

Lots of suggestions but, with no guarantees to it's success (i.e. couldn't read the market)



Singular said...

Socialism is going to be trendy again. Socialism is human beings' collective response to the threat of being wiped out. Capitalism says the weak get weaker and the strong get stronger, take it lying down. The "poor" people, ie, those who are not getting richer, say, "To hell with that!" and they organize on the principle that there are more of them, the poor, than there are of the rich, and they use their advantage in being more numerous to eradicate the old social and economic order and replace it with something new, a blank score sheet, and start anew.

Singular said...

Yes, I did notice oil is creeping up. I did think this would happen regardless of the microtrends. Oil is a scarce resource (a limited one) so it was inevitable that no matter the short term market fluctuations, that oil would go up and up long term. Those who held steady and hung onto their oil stocks will be well-remunerated. You cannot go wrong hanging onto a scarce (and necessary) resource like oil and land too, BTW. Agricultural land will go up in coin as well. As starvation, food shortages and ecological disasters strike in the future, the person who has the most arable land, will come out the survivor. I am not talking about property as most people know it. A quarter-acre costs too much if it's located in a residential town, relative to the yield in food it would give up if it was farmed. So I am strictly talking about land for farming, even if it is not used for that purpose yet, and because this sort of land is usually in a rural location, it is much cheaper per acre than residential land or property. So once again the purpose of the property purchase will be different from recent times. It won't be bought with an eye for subdividing it in the future to build condos, but will be bought for the purpose of doing sustainable agriculture. Energy will always be needed, it is a given, so oil will always go up and up. So will land. You can live in a tent at a pinch, but if you have no land where you can pitch that tent then you are a hapless individual and your chances of surviving are minimal.

Mike Hunt said...

Oil is going up due the normal seasonal trade- usually peaks for the year as we go into the summer driving season.

If demand stays weak through the summer, there is a good chance oil falls from here. For it to go from 60 to 90 is a pretty low chance in my opinion.


I like your idea and play- maybe the dollar may fall further but it's probably a good buy. When do you think the interest rates will have to be forced up? One year from now or sooner?


Devestment said...

May 23, 2009 2:30 AM,
One thing I learned at the Vegas 'Money Show' from the so-called 'Experts'...
Going to the Vegas money show to ask financial advice is like asking a realtor if you should buy a haouse.

Mike, I do not know when interest rates will climb. My guess... 1-5 years. A lot of money will be flushed out of other investments before it happens.

Anonymous said...


That was my whole point to the Money show.... they don't know!!!!