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Thursday, March 31, 2016

The China train is NOT fine

David Stockman foresees some grim deflationary bubble-popping out of China:
The truth is, the 25 year growth boom in China is just a giant, credit-driven Ponzi.  Any fool can run a central bank printing press until it glows white hot.

At the end of the day, that’s all the Beijing suzerains of red capitalism have actually done. They have not created any of the rudiments of viable capitalism. There are no honest financial markets, no genuinely solvent banks, no market driven allocation of capital and no financial discipline which comes from the right to fail as well as succeed.

There are, for instance, 287 million equity trading accounts in China, most of them opened within the last year and overwhelmingly held by retail punters with sub-high school educations. In less than 12 months they took down upwards of $1 trillion of margin debt through official brokerage channels and a massive network of shadow banking sources including dodgy peer-to-peer lending arrangements.

So fortified, they clambered after a stock market bubble that expanded by $3 trillion in just 60 trading days ending on June 14, and then broke into a panicked selling stampede that liquidated that very same $3 trillion of bottled air in hardly 20 trading days thereafter.
The problem is that the impact of the Chinese deflationary collapse is not likely to be limited to China, and will likely render all of the Western central banks' efforts to keep the Western economies afloat through zero interest rate policy moot. The central bankers are counting on the Chinese to respond to a popped bubble like they do, with a flood of liquidity propping up the financial gangsters. But the Chinese government is much more likely to jail and shoot the lot of them.
The latter is the Achilles Heel of the whole Ponzi. To arrest capital flight they will have to do the opposite of what they have done for the last 20 years. That is, they will have to shrink the domestic money supply and banking system in order to sell dollars and euros rather expand domestic credit in order to sequester dollar liabilities (i.e. treasury bonds) in the PBOC.

In due course, China will be aflame with campaigns against corruption and enemies of the state as it seeks to cope with its collapsing financial bubbles and endless herds of economic white elephants. Chairman Mao’s axiom as to where state power really comes from——that is, the barrel of a gun—-will become the increasingly evident modus operandi of the communist party rulers.

The resulting deflationary spiral will suck the global economy into its vortex. And Wall Street will go down for the count because this time the Fed will be utterly powerless to reverse the tide.
Just remember, even when the paper money and the digital wealth evaporates, you're not actually any worse off materially than you were the day before.

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96 Comments:

Blogger Shimshon March 31, 2016 5:41 AM  

Didn't the near-collapse in the West in 2008 result in a flood of liquidity in China, that dwarfed any effort in the West? I don't see how they can possibly do it again.

Blogger Sillon Bono March 31, 2016 6:20 AM  

""The truth is, the 25 year growth boom in China is just a giant, credit-driven Ponzi.""

Fuelled by Western's corporations greed of paying slave-salaries, and built on the back of flooding the market with rubbish-quality products at full prices.

All not only with the blessing of our elites short-sightedness, but also with their careful nurture.

""evident modus operandi of the communist party rulers.""

Can we please stop calling them that?

Its not like we live in 1950 and the Chinese aren't made to starve any-more (at least not the majority)

Let's call them what they are: "Corrupt Despotic Communist in name only rulers", there fixed it for you. ;-)

Castro is a communist, the Chinese government is a corrupt money making entity.

Blogger peter blandings March 31, 2016 6:36 AM  

not actually any worse off? materially? you can't be serious. the day before you can withdraw money from your bank account. the next day you can't. the day before you have available credit. the next day you don't. the day before the stocks in your 401k can be sold to raise money to support you. the next day there is no bid. no, scratch that last one, i'm bullish on the dow. but if you're in bonds you're toast.

Anonymous Millenium March 31, 2016 6:41 AM  

Unfortunately China has used their funny money to buy lots of assets in America, Canada, Australia and Africa. Their credit may burst but they will still own lots of natural resources, farms and real estate in foreign countries. I believe they intend to enforce their ownership, at least in Australia and Africa, through their military if needs be.

Blogger Mr.MantraMan March 31, 2016 6:41 AM  

Thank you Jim Rogers and thousands of other carny barkers and enablers.

Anonymous Aachen March 31, 2016 6:48 AM  

The vast majority of Chinese don't play in the stock market and its importance on the economy is vastly overstated, just as the importance of Shanghai and Beijing are overstated. Also I think the government can afford to allow some to go under. Stockman is right about allocation of capital etc. but in this race they're the ones adding a new engine for every useless addition whilst the West has gutted the car and left in place a shiny exterior (brand). A generalisation but to put it in context the Chinese companies that deserve to survive will, and they will consolidate in their industries domestically and hit the global stage in a decade or so as the Chinese Samsungs.

Hence one of the reasons or affects of the government trying to transition to a more self sustaining consumer economy and to my surprise I see it working to a degree. A new generation here is coming through and memories of starvation and absolute poverty and misery of the old are diminishing.

Deflation from China is real as there is alot of over-production and cost of living needs to drop here or wages need to rise (wont happen until companies become more Western in structure rather than modelled as if they are a production line).

The government is consolidating politically and in my opinion the black swan risk comes if this fails. However I still think Western economies, not to mention societies, are the real time-bombs waiting to explode. I get asked all they time in bars why Merkel is allowing all these rapists into Germany, they literally cannot understand why anyone would do what she has done it.

Blogger Lazarus March 31, 2016 6:52 AM  

They have not created any of the rudiments of viable capitalism. There are no honest financial markets, no genuinely solvent banks, no market driven allocation of capital and no financial discipline which comes from the right to fail as well as succeed.

This sounds familiar. Copy-cat crime?

Blogger Mr.MantraMan March 31, 2016 6:58 AM  

Zerohedge has S&P's fantasy account of China up now, sell.

Blogger endwatcher March 31, 2016 7:07 AM  

If you thought a 401k was your rock, especially after 2008, well lol.

The majority of those alive today will never retire.

Blogger Nate March 31, 2016 7:09 AM  

Mantraman... Jim Rogers is the subject of your ire? Really? Could you explain that?

OpenID anonymos-coward March 31, 2016 7:15 AM  

They have not created any of the rudiments of viable capitalism.

Yeah, well, neither has the USA after 200 years.

Blogger Mr.MantraMan March 31, 2016 7:17 AM  

It should be self explanatory. Anyone remember the mid 90s "Red Chips" scam emanating from China via the NYSE?

Back to Rogers, of course that guy hedged he moved in part to Singapore not the mainland. His books were helpful, but he was remiss to say that commodities are bubble sensitive and require discipline to sell, buy and hold is a round trip into your capital, don't go into your capital.

Blogger Xmas March 31, 2016 7:19 AM  

Did you see the video of the guys in the new apartment building in China? You can be worse off materially if you are relying on these sort of physical assets.
https://www.rt.com/viral/337501-china-new-apartment-crumbling/

OpenID basementhomebrewer March 31, 2016 7:27 AM  

not actually any worse off? materially? you can't be serious. the day before you can withdraw money from your bank account. the next day you can't. the day before you have available credit. the next day you don't. the day before the stocks in your 401k can be sold to raise money to support you. the next day there is no bid. no, scratch that last one, i'm bullish on the dow. but if you're in bonds you're toast.

Yes, materially in the sense of actual material you have on hand. That is Vox's point if you had thought about it for 10 seconds you would have realized he is trying to make you think about what you can do to protect yourself. I'll spoon feed you thought #2

All of the money in your account disappearing does not make everything in your house disappear. I am hoping you can figure out thoughts 3-5 on your own.

Blogger Elocutioner March 31, 2016 7:37 AM  

If the stories are true about China stockpiling quantities of gold then how does that play out? Do they peg the currency to a gold standard at some point? Maybe temporarily to stop a panic/spiral?

Blogger Mr.MantraMan March 31, 2016 7:53 AM  

Opportunity for the Alt-right for someone to be useful in how to advise on the attainment of real wealth. The establishment is stuck within the scams and has little wiggle room

Blogger Nate March 31, 2016 7:59 AM  

"It should be self explanatory. Anyone remember the mid 90s "Red Chips" scam emanating from China via the NYSE? "

Perhaps it should be self-explanatory but it doesn't appear to be... and not only that Bing an Google aren't providing any insight either.

Jim is a contrarian that is largely on our side when it comes to things like letting giant corporations and banks fail.

Blogger CM March 31, 2016 8:01 AM  

I am very uninformed in economic theory. I usually skip these posts, except it nags at me that this complaint basically boils down to China's currency isn't backed by anything with trade value.

I get rudimentary trading economy. Are there any books that trace the history of economic theory from direct trade to note trade to investment to whatever idiotic mess we have right now (prospective?)

Blogger Nate March 31, 2016 8:02 AM  

"Opportunity for the Alt-right for someone to be useful in how to advise on the attainment of real wealth"

Until we pull our heads out of our asses and accept that things will never improve until people are allowed to start saving again... we're screwed.

Blogger Nate March 31, 2016 8:03 AM  

"I usually skip these posts, except it nags at me that this complaint basically boils down to China's currency isn't backed by anything with trade value."

...

mate... no one's currency is based on anything of trade value anymore.

Blogger CM March 31, 2016 8:39 AM  

mate... no one's currency is based on anything of trade value anymore

I realize that. Which is why the argument about China is so odd to me.

Blogger Ron March 31, 2016 8:47 AM  

Reading the assessment above I was so struck by the utter cruelty and total lack of compassion that the Chinese have for their own people that I literally felt a wave of nausea and horror.

I cannot comprehend the total insanity and utter disconnect of these people. This is there own countrymen! What are they doing? How can they do this to their own people?!

Blogger James Dixon March 31, 2016 8:52 AM  

While I have no doubt that Stockman's analysis is correct, no one outside of China actually has any idea of just how bad things may be or how long their government can kick the can down the road. We've certainly been able to do so far longer than many people thought possible.

> If you thought a 401k was your rock, especially after 2008, well lol.

From http://optionalpha.com/show-015-how-often-does-the-stock-market-crash-2-17203.html

Since 1928:

90 times stocks fell at least 10% which is once every 11 months.
41 times stocks fell at least 15% which is once every 2 years.
21 times stocks fell at least 20% which is once every 4 years.
9 times stocks fell at least 30% which is once every 10 years.
3 times stocks fell at least 50% which is only a handful of time in a life.

The market goes down all the time. And then it comes back. Maybe because most of the companies actually make things or provide services people want.

> Until we pull our heads out of our asses and accept that things will never improve until people are allowed to start saving again...

Which will require that we not have any significant inflation. Which will mean shutting down the Fed.

Blogger YIH March 31, 2016 8:54 AM  

Aachen:
I got the impression from reading Zero Hedge what's happened in China is the classic 'top' of a stock market bubble - where a lot of 'dumb money' was being plowed into it.
I saw that in the US in '86-'87 and '98-99 where people were plowing money (both money they had and money they borrowed) into stocks. Then those bubbles burst, and they got thwacked - HARD.
In '99 I had friends bragging ''my 401k grew 10%-20% last year!'' then a year later, ''my 401k lost half it's value!''.
When all those amateur Chinese stock tycoons that (sometimes literally) bet the farm on Chinese stocks get thwacked, there will indeed be hell to pay.
As more Chinese discover they've been screwed they're going to want to take it out of someone's hide. How will the Chinese government deal with that? Think Tinanmen Square. More savvy Chinese realize that, that's why they are trying to get money out of China any way they can, legit or not. They want to get out of Dodge before the next ''cultural revolution'' starts.

Blogger Cataline Sergius March 31, 2016 9:12 AM  

@20 Nate

mate... no one's currency is based on anything of trade value anymore.

Not true. The ISIS Dinar is indeed gold backed.

Blogger Nate March 31, 2016 9:16 AM  

'Not true. The ISIS Dinar is indeed gold backed.'

***chuckle***

Touche'

Anonymous Rolf March 31, 2016 9:20 AM  

@19 - that ain't happening any times soon, Nate, because there are darn few pols that have any chance in hell of being elected if they tell the truth.

Pol A: "Yeah, sorry son, YOU are boned. Your kids are boned. But if you vote for me, and I get my program passed, your as-yet-unborn grandkids have a bright future, assuming some other chump doesn't steal it all to party with."

Pol B: "I'll tax the hell out of the rich, who only got rich by stealing from you, so you can live comfortably today. Gotta get it while we can! Party on, dude!"

Who's going to get more votes?

Anonymous Rolf March 31, 2016 9:23 AM  

@22 - Such as it has ever been there. But do you think it's really a lot different here? I think we just have better actors for pols.

Blogger Doom March 31, 2016 9:25 AM  

Laughing until I shake my boots. I remember when people where sure China was the new international boogie man, a return of the dark empire, the new and long term threat to the West. I only wish. A real threat might actually do some good. Then again, Russia, even as the USSR, was never a real threat. It was as manufactured as Paul Bunion and Babe. They played their part, got their scraps, and were helped to maintain their power and abuse their people as sadists are wont, so the West could control it's population and plunder the world.

China was being allowed to do so, right until they though their scraps meant they were actually winning. The fools blew it and will be punished to the stone age.

Not sure it matters. One lacky of one empire, or another, makes little difference. As an American, who knows Americans are also being thrown to the wolves, I really don't see a difference, save that Americans are actually productive, when given half a chance. Yeah, that's different from China and most of the world.

Blogger Cecil Henry March 31, 2016 9:26 AM  


@27: And remember: Your the 'rich'

If you saved, accomplished of do anything beyond minimal, then you're prey for parasites.

Let someone else do it, right???

Blogger Nate March 31, 2016 9:32 AM  

Rolf wrote:@19 - that ain't happening any times soon, Nate, because there are darn few pols that have any chance in hell of being elected if they tell the truth.



I think you're over-estimating how long it would take to get things back on track if they would just let the car fall now. It wouldn't take generations to fix it. It would be a bad 5 years or so.

Anonymous Ominous Cowherd March 31, 2016 9:43 AM  

@3: there is a pdf somewhere on line called The Alpha Strategy. Search that out, and read it.

Remember that until you take delivery of something, you don't own it.

Blogger August March 31, 2016 9:49 AM  

Alasdair MacLeod put up https://www.goldmoney.com/shorting-the-yuan-is-dangerous,
which led me to Chinascope's PLA Strategist: The U.S. Uses Its Dollar to Dominate the World.
It seems the Chinese have noticed a pattern of American investment in various countries followed by American profit taking. Which leads me to believe they are
fighting the last war rather than considering what the current conditions actually are.

It will be interesting to see if they hold to their strategy.

Anonymous The other robot March 31, 2016 10:00 AM  

There are no honest financial markets, no genuinely solvent banks, no market driven allocation of capital and no financial discipline which comes from the right to fail as well as succeed.

I thought he was talking about America there for a second.

Blogger Ahazuerus March 31, 2016 10:17 AM  

Worse off materially? If you're living hand to mouth from the circulation of paper then when paper stops circulating you starve. Your house belongs to a bank (paper shuffler) and your job has disappeared over the horizon.

People who hold large proportions of their wealth in paper assets i.e. rich people, will have their wealth reduced suddenly to near-parity with their physical assets.

But these people also own the majority of physical assets so that won't help the average Joe.

Anonymous RedJack March 31, 2016 10:18 AM  

China has been shipping whole ammonia plants, bolt by bolt, from the US and Europe to mainland China. They may not have a financial market that is worth much, but they bought the stuff to make stuff. Ten years from now, we will be buying fertilizer from them.

Remember, they have the physical stuff, we have electronic stocks.

Blogger Mr.MantraMan March 31, 2016 10:24 AM  

Nate the savings thing 100%. As for Rogers huge China is the future pimp

Blogger Nate March 31, 2016 10:29 AM  

"As for Rogers huge China is the future pimp"

He says from Singapore. and note... He was saying that 25 years ago. It was the future then. he was correct.

Its falling apart now and if you look at what he's saying now... he's talking about Turkey now... and for good reason.

Blogger LP9 Forever Solidified in Gold! Rin Integra S.I.G. March 31, 2016 10:33 AM  

The China Train is not fine at all.

ZeroHedge has covered the M&A aspect of what China is buying stateside. Globally fewer people want their goods, is this the case?

Blogger Nate March 31, 2016 10:33 AM  

Jim is a good guy MantraMan. He's not a nationalist.. but then no ultra-billionaire on that scale is. They are not members of any nation. They are virtually a different species from the rest of us, but I bet if you sat him down and asked him what America's government should do... he would tell you america's government should do what is best for america.

Blogger Cataline Sergius March 31, 2016 10:34 AM  

China has concerned me for sometime. I'm hardly an expert on the subject but the Ghost Cities seemed to me to be a case of throwing money at the wall to see what sticks. I am required to invest in something; here is something; therefore I must invest in it.

I was actually in Asia during the Asian Economic Meltdown in the 1990s.

Great times for me, you can live like a king if your currency is good and everyone elses is going to hell all around you. I owned a sports car for the first time in my life and only paid a few hundred dollars to get it. Tailor made shirts. My laundry was done by the house maid. I don't know who was spit shining my boots for me. I just put them outside my room with fifty cents in the heel and in the morning, gorgeous, blindingly shined boots.

And all around me their world was crumbling. People who were as good off as we are now were suddenly hurting. Really hurting. Not I can't find a job hurting but what am going to eat? Hurting. All because China had ordered it's economy to be great.

And I was telling myself the stupidest of lies. "This can't happen in America."

Anonymous Roundtine March 31, 2016 10:38 AM  

China should have floated their currency in the mid-2000s when the economy boomed. Instead they still haven't floated it and waited so long that now the currency is depreciating. They printed so much money in 2008 that the ratio of reserves to M2 are now worse than the Asian Tigers of 1997, who saw their currencies collapse. Chinese Yuan Could Devalue 50% Or More

The key issue right now are the currency outflows. Chinese real estate, equities, bonds, etc. are overvalued. The currency needs to adjust to make prices competitive globally, but if they don't, Chinese sell their yuan assets and buy foreign currency assets. The race to get out of yuan sure looks like insiders are realizing a big devaluation is coming.

If you want to think ahead check out The Logic of Strategy: Yuan Devaluation and the Road to Trade War. The shift in U.S. economic policy away from finance and back to manufactuing is very close to becoming reality with the Trump campaign. If he wins, an entire new suite of policy options open up for containing China.

Anonymous Broken Arrow March 31, 2016 10:38 AM  

The biggest problem China now faces is that the autocratic crony capitalist development model is dead. It served them well from 1989 until now, but China has to make a choice of becoming a democracy like Taiwan or South Korea or becoming a dictatorship under Xi. Xi is cracking down and it looks like a dictatorship is forming around him.

Elites of China prospered under the post-Tianamen system, and Xi has broken up the system trying deal with "corruption". Certainly China is corrupt, but it appears all he managed to do is take away incentives from the elites.

When China's economy collapses the CPC will likely be brought down as well and what comes after it may be worse, but sometimes something better can emerge. Right now though Xi is increasing repression and nationalism.

Anonymous BGKB March 31, 2016 10:49 AM  

The (((elites))) would love to sell us out in a "dragon day" scenario if they could.http://www.imdb.com/title/tt1772262/

Its not like we live in 1950 and the Chinese aren't made to starve any-more (at least not the majority)

If they lose a limb in a factory they are pretty much out of luck, no workers comp or anything like that.

Anonymous Jack Amok March 31, 2016 10:51 AM  

Yes, materially in the sense of actual material you have on hand.

Some people still think money is a material thing, I guess.

Reading the assessment above I was so struck by the utter cruelty and total lack of compassion that the Chinese have for their own people that I literally felt a wave of nausea and horror.

Spend a week (two, if you have a strong constitution) in Beijing some time. See which puts you over the edge first, the nausea from the smell of the place, or the nausea from how callous the people are.

Anonymous Brick Hardslab March 31, 2016 10:52 AM  

Does Zerohedge crash anyone else's browser? Every darn time I go there. Boom, frozen like a store bought turkey.

Anonymous Brick Hardslab March 31, 2016 10:54 AM  

Ok, what is with the parenthesis?

Anonymous Jack Amok March 31, 2016 10:55 AM  

I think you're over-estimating how long it would take to get things back on track if they would just let the car fall now. It wouldn't take generations to fix it. It would be a bad 5 years or so.

I'm not quite as optimistic. Structurally I agree, five years would be enough to clear a lot of issues out of the way, but I think we have a longer-term problem - lack of skills. Too many people without basic productive skills. We're not going to turn things around until we have fewer people getting paid for paperwork and more people paid for doing something useful. But first, a whole bunch of people who don't know anything useful need to learn.

Anonymous BGKB March 31, 2016 10:58 AM  

Ok, what is with the parenthesis?

Make sure you get enough fruit and nut trees , preferably with swales, planted along with a (((greenhouse))) before the collapse.

Anonymous Jack Amok March 31, 2016 11:04 AM  

China has to make a choice of becoming a democracy like Taiwan or South Korea or becoming a dictatorship under Xi. Xi is cracking down and it looks like a dictatorship is forming around him.

Nothing new, this is an old cycle repeating itself. The Chinese government (whatever form it happens to be in at the moment) relaxes controls and the coastal cities prosper. This goes on for a generation of two, but the vast disparity between the coast and the inland peasantry eventually leads to either the government cracking down on the wealthy coastal elites (thereby destroying the economy), or the have-nots rebel and overthrow the government in a bloody civil war (thereby destroying the economy).

The timing is good for us - we need to start making our own stuff again. Regarding:

ZeroHedge has covered the M&A aspect of what China is buying stateside. Globally fewer people want their goods, is this the case?

Almost nobody wants their crap any more - too much experience with the poor quality. Do you want to cook with stuff made with God-knows-what contaminants in it? The problem is finding stuff not made there - idiot regulations in the US hamper our own manufacturing output.

Blogger Nate March 31, 2016 11:09 AM  

"Ok, what is with the parenthesis? "

its what the idiot alt-righters do to connote something as jewish. The fact that is started showing up here is evidence of the decline... though it is often used here to poke fun at them as well.

Blogger Nate March 31, 2016 11:12 AM  

" Structurally I agree, five years would be enough to clear a lot of issues out of the way, but I think we have a longer-term problem - lack of skills"

education as mal-investment is a hard concept for most people.

Blogger Nate March 31, 2016 11:13 AM  

that said... its already starting to change. I saw GE hire an engineer for 25k a year. New grad. how does that work?

Eventually people look around and say, "screw this... I'm gonna be a pipe fitter".

Anonymous RedJack March 31, 2016 11:13 AM  

Jack Amok

I work with a lot of young engineers. I know where I stand compared to some of the old timers who trained me, and the gap between myself and the new grads is even greater.
They can make some great power points, but don't know how to troubleshoot. And they don't want to learn (honestly, the incentives are to make PPT and move up, not make the plant run).

Once the older generation retires or dies off, and we GenX guys go fishing full time, the skill gap is such we will see a larger drop in the standard of living than many can imagine. I am talking the end of functioning sewage systems and power distribution.

Blogger Christopher March 31, 2016 11:15 AM  

So they're gonna let their stock market pop (and drop), putting our banksters in the position of either letting ours pop and drop too, or doubling down? And if our banker guys double-down then it's lights out for our worker guys because things from China will just be even way more cheaper?

So it will be (has been for years?) pensions vs. labor?

Anonymous RedJack March 31, 2016 11:18 AM  

Nate,
I haven't met a young pipe fitter that spoke English in over 10 years. I haven't seen an English speaking pipe fitter under 45 in a long time either. I know a few guys who wanted to get into that line of work and found themselves bounced out pretty quick. One did manage to become a plumber, but being laid off every six months got old. Now he is selling insurance (and making less).

I recently interviewed a PhD engineer for a less than $60K a year job. He took an offer for less than $50. What is worse (for me) is that I am looking to make a job move, and finding a job that will pay me what it would take to move my family is much more difficult than I expected for my field. Buy when they can hire three new grads for $25K or one experienced guy for $85, they will go the new hire route.

Blogger Snidely Whiplash March 31, 2016 11:19 AM  

RedJack wrote:Remember, they have the physical stuff, we have electronic stocks.
We have borders, natural gas and tariffs. They have an obsolete manufacturing facility.

Blogger Nate March 31, 2016 11:22 AM  

"I haven't met a young pipe fitter that spoke English in over 10 years. I haven't seen an English speaking pipe fitter under 45 in a long time either. I know a few guys who wanted to get into that line of work and found themselves bounced out pretty quick"

come on down to south alabama mate. Austel is hiring every day. you would not believe the money.

Blogger dc.sunsets March 31, 2016 11:24 AM  

Chinese buyers of US properties used T-bills (US treasury debt) to buy stuff. When was the last time you accepted remnimbi for what you were selling?

Blogger dc.sunsets March 31, 2016 11:26 AM  

"The majority of those alive today will never retire."

And what, pray tell, will they be doing? The demand for old people doing menial work is quite limited.

Anonymous RedJack March 31, 2016 11:27 AM  

Nate,
I will tell him that.

Blogger dc.sunsets March 31, 2016 11:30 AM  

@James Dixon, as you know there has not been a period of noticeable deflation since 1932.

That's a long time, more than necessary to inculcate a belief in permanent inflation.

Blogger dc.sunsets March 31, 2016 11:34 AM  

@ Nate, reality IS, and illusion is but a facade. You are correct, all that is required is to reconcile accounts. It would not take long...but those who discovered their cupboards were full of nothing would March to Washington DC and insist that reality be repealed by force of law.

Just like every other time.

Blogger dc.sunsets March 31, 2016 11:36 AM  

Keep in mind at whose leg Jim Rogers cut his teeth.

Soros.

Anonymous Gen. Kong March 31, 2016 11:37 AM  

Obviously, such a bogus system cannot literally continue forever. The striking thing about this one - and all the similar rackets which continue to spin away endlessly - have been was is evidently a massive underestimation of two factors on the folks who actually see what is going on (VD, Barnhardt, Stockman in the example, and others going back decades).

1. The ability of the banksters who run the counterfeiting racket to invent ever-more opaque methods in which to hide their counterfeiting (derivatives and credit default swaps, for example)

2. The willingness of the idiocracy to swallow the lies directly in the face of evidence to the contrary. As long as they can borrow fake money to buy cheap crap, reality doesn't exist.

Anonymous devin March 31, 2016 11:55 AM  

@VD The future seems bleak for the market and banks. Do you have any suggestions? Do you invest at all in the stock market? Where do you save money? Gold, silver, other resources?

Blogger YIH March 31, 2016 12:09 PM  

Cataline Sergius:
I'm hardly an expert on the subject but the Ghost Cities seemed to me to be a case of throwing money at the wall to see what sticks.
And when that new apartment Ching Chong slaved away making iCrap for turns out to be a sand castle, you know Ching Chong is going to be mighty pissed.

Blogger Nate March 31, 2016 12:10 PM  

"Keep in mind at whose leg Jim Rogers cut his teeth.

Soros."

Jim and George hate each other. They aren't even on speaking terms.

Blogger Nate March 31, 2016 12:11 PM  

"And what, pray tell, will they be doing? The demand for old people doing menial work is quite limited."

correct. its not that they won't retire. its that they will go back to the ways of the Depression. Families will live together 3 and 4 generations deep.

Blogger Snidely Whiplash March 31, 2016 12:13 PM  

devin wrote:@VD The future seems bleak for the market and banks. Do you have any suggestions? Do you invest at all in the stock market? Where do you save money? Gold, silver, other resources?
Invets, in this order, in
1) skills
2) family
3) soil
4) community
5) brass and lead

Anonymous patrick kelly March 31, 2016 12:16 PM  

"Until we pull our heads out of our asses and accept that things will never improve until people are allowed to start saving again... we're screwed."

Who is not allowing people to save? Seriously, if you have something, and you don't spend or use it, aren't you saving?

What is this barely mid-wit missing?

Anonymous Jack Amok March 31, 2016 12:16 PM  

Once the older generation retires or dies off, and we GenX guys go fishing full time, the skill gap is such we will see a larger drop in the standard of living than many can imagine. I am talking the end of functioning sewage systems and power distribution.

I agree, though you'd think with as much BS as our college students are exposed to on campuses these days, they'd be naturals at running a sewage treatment plant.

I had a new furnace put in a while back. Serves me right for not sticking around to supervise the work.

But Nate's right the change is starting. I'm part of a group running a maker-space. We hold classes twice a month for kids, teaching them basic manufacturing skills while they're having fun building stuff. It's extremely popular - we could easily double or triple our number of classes if we had enough instructors. We're looking at some sort of franchising to expand it.

We are quite consciously (thought not saying this to the parents, some of whom get it, others are still blind) trying to provide these kids with a foundation for something other than college, since we assume almost no one will be able to afford college in the near future, and even if they could, they'll need something besides a sheepskin to get a paying job.

Anonymous devin March 31, 2016 12:24 PM  

@Snidely Whiplash but I mean financially... I suppose land, guns and ammunition is as good a suggestion as any.

Anonymous Sam the Man March 31, 2016 12:25 PM  

25 K for an engineer...was that civil by chance?

a lot of the municipals put out job requirement for very low salaries, as when they cannot find a US citizen to do it for that much they can go get a foreign worker.

If not civil what was his degree?

Blogger Snidely Whiplash March 31, 2016 12:49 PM  

devin wrote:@Snidely Whiplash but I mean financially... I suppose land, guns and ammunition is as good a suggestion as any.
I meant financially as well.

Jack Amok wrote:But Nate's right the change is starting. I'm part of a group running a maker-space. We hold classes twice a month for kids, teaching them basic manufacturing skills while they're having fun building stuff.
I'd be very interested in hearing more about this.

Anonymous civilServant March 31, 2016 12:50 PM  

The future seems bleak for the market and banks. Do you have any suggestions? Do you invest at all in the stock market? Where do you save money? Gold, silver, other resources?

http://www.shtfplan.com/emergency-preparedness/a-survival-q-a-living-through-shtf-in-the-middle-of-a-war-zone_10252011

http://www.survivalblog.com

Anonymous HoosierHillbilly March 31, 2016 1:10 PM  

Pipefitting is a pretty damned good choice. If you have any sort of work ethic and want to be able to stand up straight with functioning back and knees when your 50, have a look into NDE Inspections. That is something that no one hears about, but is everywhere in the production world. Decent gig to get into if you know somebody without the skill or health to be a fitter. Not nearly as much money, don't get me wrong. But it is not hard to rise above the common slugs and get yourself a steady stream of work.

Anonymous Ominous Cowherd March 31, 2016 1:27 PM  

@73: "I suppose land, guns and ammunition is as good a suggestion as any."

I would avoid financial assets almost entirely. Land is good. Get one gun and loads of ammunition, not the other way around.

Anonymous Ominous Cowherd March 31, 2016 1:35 PM  

@77: "... have a look into NDE Inspections."

If you are really college material and go into the trades, you shouldn't be working your tools more than a decade after you turn out. You'll be a super, or doing QC or QA.

If you aren't really college material and you go into the trades, you'll be working your tools as long as you're physically capable, and longer. But at least you won't start out with college debt, and you won't be asking "Want fries with that? "

Anonymous Roundtine March 31, 2016 1:50 PM  

I suppose land, guns and ammunition is as good a suggestion as any

Any opinions on the Ruger AR-556? It seems to good to be true for its price.

Blogger James Dixon March 31, 2016 1:59 PM  

> What is worse (for me) is that I am looking to make a job move, and finding a job that will pay me what it would take to move my family is much more difficult than I expected for my field.

Tell me about it. :(

> What is this barely mid-wit missing?

Deliberate inflation. Even at 3% your savings are cut in half every 24 years.

> ...but I mean financially.

If you have to buy stocks (most of our money is in stocks, so I can't throw stones), then get dividend paying stocks in companies where you understand how they work. Say regional grocery chains or bowling alleys, just to give two examples.

Blogger James Dixon March 31, 2016 3:36 PM  

I should add, or go with a broad based US index fund, like VSTMX. But in either case recognize that with stocks you can easily lose 50% or more of your investment in a matter of months, and that it can take years to come back. If you have a steady stream of dividends coming in, it makes the waiting a lot easier.

Blogger dc.sunsets March 31, 2016 4:14 PM  

All quality ar's seem about the same. It's not rocket science to build them. Lots of knowledgeable people get great use out of pretty budget builds.

My preference is for nitrided barrels and err on light weight. YMMV.

Blogger praetorian March 31, 2016 7:44 PM  

C'mon, now, (((Nate))), let us have our Parens of Critique.

Rodgers is the ultimate aw-shucks sandbagging dixie genius. I laugh ever time I hear him giving an interview, huffing along on his workout bike.

Blogger Salt March 31, 2016 8:07 PM  

Walmart’s first-ever revenue drop: end of an era?

Anonymous Jack Amok March 31, 2016 9:03 PM  

I'd be very interested in hearing more about this.

Not much to say yet, it's still pretty new and we're working through growing pains. We started out as just a bunch of guys looking to pool resources and skills on a Maker space (e.g. hipster lingo for "shared machine shop"), and one guy had an idea to start teaching workshops for kids. It's a way to help get kids some skills, plus it's a recruiting opportunity for our club (we've already signed up three dads after their kids came to workshops, and one of them is a positive EE genius).

Simple electrical circuits with LEDs or buzzers are pretty fun and easy for kids to get started - teaches them soldering (yes, they'll burn themselves. No, it doesn't scare them off. Also helps weed out the parents we don't want to deal with) and electrical basics.

We also have a couple of 3D printers, and we're starting to teach kids about additive manufacturing. If we get enough members to support it, we're going to move to a permanent space and get CNC gear, MIG welders, laser cutters, etc. Ideally a small metal foundry. One project on the drawing board is 3D printing some intricate components and then using "lost-plastic" casting to cast them as aluminum.

501(c)3 so we don't have to worry much about taxes (they're easy to set up if you don't have one. Yes, lots of people abuse them, but it's not actually an IRS requirement to steal the money and overpay your board of directors). We're running it as a program through a local non-profit private art school. It's not a money-maker for us (we're all volunteers), but it's a good community service/meet like-minded folks thing.

You can find simple electrical kits (Kipkay, or Amazon) to get started. You'll need patient instructors willing to work with kids (or adults, your choice who you are teaching).

Blogger James Dixon March 31, 2016 10:01 PM  

> like VSTMX.

Sigh. VTSMX. Vanguard Total Stock Market. Good thing I thought to double check.

Anonymous Cheddarman March 31, 2016 11:42 PM  

Jack amok that is great. I am working on 3 projects right now. 1 is at the machine shop waiting for them to put make the parts. The other 2 are in pieces right now in my kitchen/living room. May I ask in what part of the USA do you live

Anonymous Jack Amok April 01, 2016 12:24 AM  

May I ask in what part of the USA do you live

Cascade foothills, not quite an hour east of Seattle.

Blogger Bosefus April 01, 2016 1:07 AM  

When in the Greatest Depression... Don't get depressed:
https://www.youtube.com/watch?v=g4Ppc3jz3GE

And listen to Mama...
https://www.youtube.com/watch?v=jxQbvSjQy9A
Unlike bankers.

Irony eh:
https://www.youtube.com/watch?v=8-cFtSPIF4Q

Blogger CarpeOro April 01, 2016 10:34 AM  

Mr.MantraMan wrote:It should be self explanatory. Anyone remember the mid 90s "Red Chips" scam emanating from China via the NYSE?

Back to Rogers, of course that guy hedged he moved in part to Singapore not the mainland. His books were helpful, but he was remiss to say that commodities are bubble sensitive and require discipline to sell, buy and hold is a round trip into your capital, don't go into your capital.


"Back to Rogers, of course that guy hedged he moved in part to Singapore not the mainland."

OK, you got me there. No idea what you meant to say. Hong Kong? Macau? Those are physically part of China mainland but also separate after a fashion. Tokyo is closer to mainland China than Singapore. Singapore has economic ties to all of the Far East. Not following this train of thought.

Blogger Cogitans Iuvenis April 01, 2016 10:57 AM  

@80

I own one, good for the price.

Blogger CarpeOro April 01, 2016 10:59 AM  

Personally, I've always viewed the communist government in China as untrustworthy (yes @2, I vaguely understand the desire to say "no true communist" but I'll pass. "True believers" are always used as tools in communism. In the end they go the same way as the useful idiots). My investment philosophy has been invest in things you understand (mostly) and avoid companies that deal with China for their manufacturing. It is like dealing with a shell game. Some people get win, most get fleeced.

Blogger Cogitans Iuvenis April 01, 2016 11:00 AM  

@89

Jack, is your maker space in the SODO area?

Anonymous Jack Amok April 02, 2016 12:37 AM  

Jack, is your maker space in the SODO area?

Nope. Farther east - rural KC. I don't make it into Seattle very often these days.

But so far, we're itinerant makers, sharing space with another organization. We have our eyes on a couple of good properties, but we haven't asked for the monetary commitment to get them yet.

Anonymous Discard April 02, 2016 6:09 AM  

48. Jack Amok: Five years is plenty of time to learn basic productive skills, if you already understand that you have to work to earn your keep. After all, how long did it take Ford to start building B-24 bombers with sharecroppers and women during WW2?
There might be a great die-off in the event of a currency collapse, but that will only make life easier for the useful.

It is also my belief that a lot of men sitting at desks would more happily spend their time at carpentry or machining if they thought they could make a living at it. And in a near absence of office make-work, a trade might be the only way to make a living.

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