You're Dreaming If You Think The Euro Crisis Is Resolved
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Regarding using past performance to chart, er, the uncharted waters of unfolding economic crisis, has anyone managed to compile a chart of incidence of civil unrest, such as going on in world wide cities now? (Madrid?) The true “stress test,” IMHO.
And if so, would we suppose past performance is indicative in the formation of future expectations? Just a thought.
Is it possible, some things are very difficult to quantify?
Could statistics really be misleading, 46% of the time?
Or, does human action ultimately trump, and confound them, in the random walk of things?
What did the chartists and technical analysts say back in the late 20’s?
“There may be a recession in stock prices, but not anything in the nature of a crash.”
– Irving Fisher, leading U.S. economist , New York Times, Sept. 5, 1929https://myinvestorsplace.com/2009/05/10/great-depression-1929-quotes-statements/
skipbreakfast post=5491 wrote:
Deflationists see a limit on the ability of a government to manipulate a market. Historically, manipulation has NEVER worked indefinitely.
No, nothing works indefinitely.
But, 22 years = 1 generation.
It could work for longer than your or my lifetimes.
Or your children’s or my children’s lifetimes.
As the famous saying goes:
“The markets can remain irrational,
much longer than you can remain solvent.”But, then again, we’re not supposed to talk about timing here, right?
You have a point Synchro. I think a fact to keep in mind, which actually agrees with your point, is that the governments of the world have been using growing credit to backstop a lack of real productive growth in the western world for longer than 25 years. We’ve used up our time and all the credit dollars already, if you believe, as I do, that eventually markets and politics reject unfounded credit creation by a government.
So the call right now is not so much about which month or even year such a credit expansion inevitably unwinds, but that there are terribly ominous signs that the expansion is on its last legs. This isn’t a vacuous timing call. This is an analysis of the facts as they currently stand. Things are unstable. Things have been unstable for a while now. Bernanke and others said such calls, like TAE’s, were unfounded…BEFORE 2008.
The fact that a “deflationary crisis” happened in 2008 was our wake up call. It was deflationary because money froze and became illiquid in the system. Something was and is now broken. It’s not been fixed. Quantitative easing does not FIX an economy that hasn’t been truthfully productive (i.e., earning its keep in terms of real wealth creation) for decades. QE is a desperate attempt to prepare the banks for a worsening deflation. But as far as fixing the economy goes, it won’t work. More and more QE has less and less impact on the economy. Because the markets HAVE woken up already and they’re telling us we’re living beyond our means. That’s what has given us the crisis. And it’s getting worse. This is deflationary.
The call is that credit creation will actually break down further long before it gets better.
Given how much credit has already been created to date, and yet we’re in even more trouble anyway, it is less than likely–more like impossible–for wanton credit creation by the Fed to last ANOTHER 22 years. They’re struggling to convince us that the past four years have been worth it. How much longer will we, the voters, not to mention the stock and bond markets, believe it? I don’t believe any economy can create unfounded credit for 100 years. We have pretty much used up our allotted 22 though (I’m using that number because you use it in your comment).
Philosophically speaking, nothing is certain. But risk is terribly pervasive right now, and it’s bigger than we’ve seen it in our lifetimes. Do with that what you will. Usually when you’re in mid-air over a 200 meter drop, you hit the ground and die.
The latest evidence that risk is pervasive? QE3. That wouldn’t have happened if Bernanke didn’t have a terrible feeling in his stomach about DEFLATION. By the way his terrible feeling is based on oodles of data you and I aren’t even privy to. He’s told us what he sees in the data. That’s why he gave us QE Infinity. That should be a sign to run and hide, not play the markets right now.
professor, skip –
Charts are really not about showing us the future (at least not to my mind anyway) they simply show us the range things have been in during the past, as well as the current trend.
“Well first things got THIS bad, and then something changed, and then they got THIS good…and now they’re ticking along in this particular direction, and have been for this amount of time…”
It is also interesting to me when the charts show us when things are worse now than they have been before – like right before Draghi’s “I’ll do anything” speech.
So how much higher could gold get, theoretically? Higher, I think, maybe by a factor of four or so, all else remaining generally equal.
And it could go a whole lot lower too, of course. But its the range that is interesting to me. Range, and the current trend.
Last point about charts. I’ve been thinking about how to come up with some sort of unrest indicator. Perhaps a news scanner, or something based on unemployment, social spending, and the level of support for the eurozone in country. I agree with the professor that civil unrest, increasing euroskepticism, the threat of civil war, and possible military coups are an increasing danger as time passes, and having a chart for the forces that act to bring such things about might prove interesting. It is foolish to imagine that any chart could actually predict such things of course, but seeing if things are getting better or worse and by how much might prove enlightening. But clearly I’m a chart guy, and so I’m predisposed to think that way.
Synchro –
I think the Fed does have political limits on money printing, in spite of what we hear now from their current policy. If commodity inflation picks up (housing certainly won’t) the Fed may well be thrown under the bus by politicians eager to blame some organization other than themselves for the consumer’s higher prices for stuff.
To me, the true test will occur when the eurozone gets resolved one way or the other. Then we will see how the US deficit and bond issues will get resolved – i.e. without the benefit of safe haven flows boosting treasury sales.
Dave, from a fundamentalist investor, to a chart guy, thanks for the clarification. I use charts, as well, to fix benchmarks, and spot trends, in more stable environments than this one. I just don’t go off into Elliot Wave type concepts and heads and shoulders and such. I am much more interested in the human action/reaction elements of economic processes. Greed, fear, confidence, complacency, apathy, that sort of thing. Hence my interest in some way to chart the sentiments of the players in the game, as well as crowd perceptions of, and reactions to, geopolitics among national populations. Demographics is also fascinating, and here, charting is very helpful.
professor –
The “resistance” and “support” levels in charts are all about fear and greed – in fact most of chart art (which I believe at varying degrees of enthusiasm) is basically all about people’s desire to either get in, or get out, at a given price point. Resistance points are generally about a bunch of people who have been holding on (at a loss) getting back to break-even, and feeling that desire to bail out without loss. Likewise support is about people who missed a good entry point before and are now seeing it come around again having vowed they’d buy “if that price ever got back to X again.” All these things are innately human reactions – fear of loss, or of missing out – and if you can read the charts, you can see them in action. They don’t always work, like anything I suppose, but it can tilt the odds a bit in your favor now and then. The tendency of things to move in cycles can also be seen on a chart too, sometimes at least.
If you have any suggestions on how to chart sentiment of the players in the game, crowd perceptions, etc, and you have sources for said data, just post your thoughts and I’ll run off and see what I can come up with. Even if I have to hand-enter the information, I’m game if the prize is potentially worthwhile. Although if its a time series already in FRED, that’s always nice. 🙂
Right now I’m musing on FPO’s “food price index” and how to merge that with household food expense percentages and unemployment rates to see where the touchpoints might be. Usually my problem is lack of meaningful data though, not lack of ideas to play with.
davefairtex post=5496 wrote: I agree with the professor that civil unrest, increasing euroskepticism, the threat of civil war, and possible military coups are an increasing danger as time passes, and having a chart for the forces that act to bring such things about might prove interesting.
What I’m interested in is why such behaviors arise and why we seem to know they will and still don’t know what to do about it.
For the first, is it because people see no viable alternative?
For the latter, is it because we limit our thinking?
Skip et al
I think we need to consider much, nay MUCH, more seriously that Bernanke is not trying to fix the economy. That that’s nothing but a very persuasive fairy tale. The QEs and other bailouts are ways to minimize losses for banks and their shareholders, at the expense of the man in the street. They are mass wealth transfers. And they have been very successful to date. What’s even more successful is the propaganda machine that ensures very few people to this day question the very fact that QEs are meant to strengthen the economy of the little man, whereas they do the exact opposite. We can’t continue to talk about failed bailouts, we must consider alternative viewpoints. From which they’re anything but failures.
As for graphs on civil unrest: don’t count on it. It must be a year or so since I first said the only thing that’s certain is chaos, and I think that still stands upright very much. And chaos in graphs doesn’t work very well. Unless your samples are huge, like in the Hadron Collider or something, but that doesn’t tell you anything about what will happen if and when the first Spanish demonstrator is killed by a police bullet.
Ilargi –
As for graphs on civil unrest: don’t count on it. It must be a year or so since I first said the only thing that’s certain is chaos, and I think that still stands upright very much. And chaos in graphs doesn’t work very well. Unless your samples are huge, like in the Hadron Collider or something, but that doesn’t tell you anything about what will happen if and when the first Spanish demonstrator is killed by a police bullet.
I found an intriguing study that suggested a linkage between high food prices and civil unrest in the MENA area. They had a chart I was particularly enamored of…naturally. Here is a link to the study, updated as of September 2012.
https://necsi.edu/research/social/foodprices/briefing/
Combining this concept and focusing on the nations whose populations spend a relatively larger proportion of their household budgets on food (i.e. the poor ones) and then sort by unemployment rate and it might actually end up being predictive.
I think its quite possible that “random” yet significant acts really aren’t random at all. People get shot all the time, apparently at random. But why is it sometimes the whole society decides to rise up in response to one particular guy being shot in one particular place?
I’m asserting that the whole society doesn’t suddenly become unhappy just because something bad happens to one guy – the one guy provides a catalyst for an already-unhappy society to decide they’ve had enough.
Detecting that high level of latent societal unhappiness should be visible in charts. It may be that some societies avoided revolution because no catalyst occurred, but I think it would be interesting to check back through recent history and see if we can plot revolutions vs food difficulties.
It is said that every society is nine missed meals away from complete chaos. I can relate to that. After missing 9 straight meals during my desert survival class, I was plenty cranky…and I still had a surprising amount of energy to do something about it, too.
ilargi post=5502 wrote: Skip et al
I think we need to consider much, nay MUCH, more seriously that Bernanke is not trying to fix the economy. That that’s nothing but a very persuasive fairy tale. The QEs and other bailouts are ways to minimize losses for banks and their shareholders, at the expense of the man in the street. They are mass wealth transfers.
You are 100% absolutely correct.
It’s a fact I’ve come to realize but the QE propaganda machine is so effective, I atually find myself slipping into discussions about how QE “won’t fix the economy”. Of course it won’t! It’s not even designed to!
I agree: Bernanke can’t publicly tell us he is delivering more QE because of the specter of deflation–even though that is the real reason for it! Instead, he has to give us a smoke-and-mirrors excuse for QE3 implying that it has something to do with creating more jobs.
Quite a subtle and devious tactic. You say you’ll buy mortgage backed securities through QE3 until job numbers reach some magic level. It implies that there is some obvious, causal connection between mortgage backed security purchases and job creation. He could just as easily have said, “We will buy mortgage backed securities until the polar ice cap increases 15%.” Not related. And probably not going to happen in any event.
Buying MBS is designed to backstop the banks because Bernanke sees an imminent deflation. He knows something the public doesn’t realize, and he will not say it for fear of making it worse (and he’s undoubtedly afraid it makes the Fed look like a fool, since the Fed has been so cavalier about its omnipotent powers to stop deflation).
The bull about job creation is just obfuscation. Its a way to sell more bank bailouts to the people. It’s very effective propaganda. Terribly ineffective job creation.
I also like charts. Excellent chart. Notice that the fluctuation from 1990 to 2007 is pretty small; now we have some huge fluxes.
Dave… said
“I found an intriguing study that suggested a linkage between high food prices and civil unrest in the MENA area. They had a chart I was particularly enamored of…naturally. Here is a link to the study, updated as of September 2012.necsi.edu/research/social/foodprices/briefing/ “
I think Spain is our next ‘fire in globe”. Volatile there.
I’ve recently found an interesting site that carries news on Occupy in different countries.
I may post something from an article from that site as time permits.
Dave, some good points there. Hunger can be a strong motivator, of both hostility toward those who brought it on, as well as submission to those who promise to relieve it. (One in the same, sometimes?)
Ilargi, that all authority has first and foremost it’s own best interests at heart is a given. Petitioning the beast, which has now escaped it’s cage, to do more, is not prudent. And trying to enlighten the believers in the Cargo Cult of entitlements to eternity at the expense of others, can be a fools errand, as the messenger is usually dissed. As I may have mentioned in the past, maybe not here, when an entity reaches critical mass and controls the money, courts, jails, media and military, it trades consent for corruption (absolute power). The governed take second fiddle.
Believing we can, at this point, given the momentum of tyrannical trajectory, turn this thing around, is probably futile. The ballot box won’t work because the array of candidates is stacked. The Legislative “Community” has established safeguards for itself through NDAA, DHS and such. Guns could stir it up, but would also put Leviathan on the defensive even more.
Who would have stood in front of Mao’s long march? The Mechanized US military column into Baghdad? Or even the storming of the Bastille, as a reach? OK, for the fringe, who wants to be Randy Weaver?
My attraction to this site is the “Live to fight another day” aspect. Though, I don’t think the guy who builds a bunker and fills it full of preps is going to make it through this unless he first gets a firm grip on his ability to keep his head in alignment with the what is, not the what if. Hell, the time may arrive when he must abandon all he has built and stored, and leave Dodge…with nothing but the space between his ears to rely on.
Fear is the antithesis of productive thought process. It distorts perception as central banking distorts markets. It should be countered with thoughts like “got lemons, get out the juicer” not “woe is me, head for the bunker.”
Is community organization really an answer? My experience with HOA’s, PTA’s, Business Associations, City Councils, is all tend to become many wolves and a few sheep voting on what’s for dinner. Not to mention those glorious “communes” of the 60’s, not a one of which is around today.
Now, I’m a “political atheist,” so don’t take this out of context, but the Dear Leader of the most powerful government on earth is a “Community Organizer” empowered with an arsenal of DEA agents and Drones, directed at those who are not team players.
What if an arrogant egotistical unelected anointed bureaucrat decides to trash the medium of exchange in an attempt to concentrate all markers of wealth into the hands of his “community.”
What if a Spaniard is killed by a “Police Community” bullet?
What if an American Ambassador is killed by a “Religious Community” in Libya?
These are significant events,maybe life changing, but we can’t know in what way.
Not enough space here for all the possibilities, so I’ll just sit tight and wait and watch until they hit the county line, to formulate a near term plan. Might obtain a sloop and head west, or stay around and buy C-Rats from the troops and sell them to the citizens, when the public trough runs dry. Must be a reason huge alternative markets develop around military installations. Got to be a pony in here somewhere.
https://mattmclean.blogspot.com/2008/04/there-must-be-pony-in-here-somewhere.html
Next? Hopefully, as Ilargi says, some ideas we can use.
US brands Assange an ‘enemy of the state’ – just like al-Quaeda
Even paranoids have enemies – and it seems that Julian Assange may have strong grounds after all for believing he’ll be mistreated or even killed if he’s extradited to the US.
Declassified Air Force documents show that the US military has designated him as an enemy of the state, putting him in the same legal category as members of al-Qaeda and the Taliban.
The documents even suggest that military staff who contact Wikileaks could also face the death penalty.
They relate to an investigation of a US Air Force analyst, who was based in the UK at the time, and who attended Assange’s court hearings. They describe her meetings with pro-WikiLeaks activists in London as ‘communicating with the enemy’, an offense which can carry the death penalty.
“The term ‘Communicating with the Enemy’ would appear to show that the US government term Mr Assange and WikiLeaks the ‘enemy’. By deeming them the ‘enemy’, they can be treated under the laws of war which could include killing, capturing, detaining without trial etc,” says Wikileaks.
There’s some ambiguity, in that it’s possible that the military doesn’t in fact regard Assange and Wikileaks as the enemy, but merely as a conduit.
But, says Wikileaks, “This too opens up an array of possible attacks on WikiLeaks by the US government and means that all media organizations now risk having suspected sources being executed because communicating with media would mean communicating with the public, which is communicating with the enemy in this interpretation.”
Yesterday, Assange spoke to the UN via a satellite link from the Ecuadorian embassy in London where he’s currently holed up. He called on the US to call a halt to its ‘persecution’ of WikiLeaks and its sources.
shhhh!
It’s siesta time in Spain.Lots of headlines but little action. Germany will not be pleased:
SAENZ SAYS SPAIN PLANS 43 NEW LAWS TO BOLSTER ECONOMY
SAENZ SAYS REFORM PLAN IS TO MEET PLEDGES TO EU PARTNERS
SPAIN APPROVES DECREE ON WAGE BARGAINING
SPAIN APPROVES INCENTIVES FOR ENERGY EFFICIENT VEHICLES: The SEAT VOLT is coming to Ibiza!
SAENZ SAYS SPAIN TO PAY EU1,000 SUBSIDY PER EFFICIENT VEHICLE
The kickers:
SPANISH BUDGET BASED ON UNCHANGED ECONOMIC FORECASTS, SEES GDP DOWN 0.5%
In other words everything will be massively wrong for the country with the epic bank run. And the one the people have been waiting for:
SPAIN TO TAP €3 BILLION FROM SOCIAL SECURITY RESERVES IN ORDER TO FUND LIQUIDITY NEEDS.
Incidentally this is the same fund which has 9 months of pension reserves and is invested in… drumroll… Spanish Bonds!
And cue to the riotcam.An enemy of the state, eh? Ha! ANYONE or ANY organization that disagrees with authority is, by default, it’s enemy. Maybe good to “Keep your friends close, and your enemies closer,” about now?
“To learn who rules over you, simply find out who you are not allowed to criticize.”- Voltaire
The Rain in Spain. The pensions that never were, never will be. Before 3 billion in reserves are tapped, they must first be created in an accounting trick. Unfunded liabilities are assets too?
Cute, they use “borrow” (from the future) as a way of pushing this bait and switch out into the ether. Condensed, all they are saying is, “We are now going to cancel your pensions,” same result, different sales pitch. “Now”, begets despair, “Future” buys time to hope, pacifying.
The end game? My “guess” is, power wins, until it becomes so mindless it steps in front of a cross town bus, along with the hollow promises it rode in on. I hope I’m sitting in the front row on that ride!
Again; “Sooner” is gone. “Later,” it is.
“There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.” Mises
Such a simple concept. Maybe if it could be jazzed up some way by an intricately complex set of chemical and algebraic formulas, more would pay attention to it?
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