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Economy
by
Chris Martenson
The title of this piece is The Price of Everything and the Value of Nothing. The subtitle is Why Your Bread Is Going to Cost More. I connect these two in reflecting on my recent podcast with David Collum, in which he stated that our money has no value and that this fact is distorting everything.
What he meant was, if you take your money to the bank to deposit it, the bank offers no interest on that money, implying that money has no value to them. If they valued it or had a legitimate use for it, they would offer you something for its use. Obviously, money doesn't have zero value to the banks; they can place it on deposit with the Fed for 0.25% yearly interest. But by any historical measure, money has no value right now.
That's just what happens when any commodity – which money happens to be – becomes too abundant. It drops in price. What 0% rates on money tell us is that there's just an enormous amount of it sloshing around – and that, my dear friends, distorts everything else.
As I have said many times, when you misprice money itself, everything else becomes mispriced, too.
The Price of Everything and the Value of Nothing
PREVIEW by Chris MartensonThe title of this piece is The Price of Everything and the Value of Nothing. The subtitle is Why Your Bread Is Going to Cost More. I connect these two in reflecting on my recent podcast with David Collum, in which he stated that our money has no value and that this fact is distorting everything.
What he meant was, if you take your money to the bank to deposit it, the bank offers no interest on that money, implying that money has no value to them. If they valued it or had a legitimate use for it, they would offer you something for its use. Obviously, money doesn't have zero value to the banks; they can place it on deposit with the Fed for 0.25% yearly interest. But by any historical measure, money has no value right now.
That's just what happens when any commodity – which money happens to be – becomes too abundant. It drops in price. What 0% rates on money tell us is that there's just an enormous amount of it sloshing around – and that, my dear friends, distorts everything else.
As I have said many times, when you misprice money itself, everything else becomes mispriced, too.
by
David Collum
In the Big Rock Candy Mountains,
The jails are made of tin.
And you can walk right out again,
As soon as you are in.— Harry McClintock, Big Rock Candy Mountain (1928)
Fresh from releasing his exhaustive and excellent Year In Review last week, Dave Collum sits down with Chris to discuss the key developments of 2012 in detail.
David Collum: We’re Headed for a Showdown
by David CollumIn the Big Rock Candy Mountains,
The jails are made of tin.
And you can walk right out again,
As soon as you are in.— Harry McClintock, Big Rock Candy Mountain (1928)
Fresh from releasing his exhaustive and excellent Year In Review last week, Dave Collum sits down with Chris to discuss the key developments of 2012 in detail.
by
JW
by
charleshughsmith
Executive Summary
- A rising dollar would negatively impact stock market profits and valuations
- Interest rates ultimately will rise, and that will be a game-changer
- Investors will eventually realize that "risk-free" assets (e.g., U.S. Treasurys) are NOT safe havens
- Why there will be few places for financial capital to find shelter in 2013
If you have not yet read Part I: The Structural Endgame of the Fiscal Cliff, available free to all readers, please click here to read it first.
In Part I, we covered the basics of wealth and political power in the U.S. and found that the Fiscal Cliff is only a symptom of a structural endgame in which the imbalance between what has been promised and what can be collected in taxes will continue growing until it triggers a financially driven political crisis that I believe will inevitably become a full-blown Constitutional crisis.
Though there are many facets of this long-term political crisis that are worthy of further exploration, we will to start with three financial aspects that could start impacting households in 2013: a rise in interest rates and a resultant destruction of bond valuations, a rise in the U.S. dollar that negatively impacts U.S. corporate profits and thus stock market valuations, and a reduction in upper-income households’ spending as a result of higher taxes that depress discretionary consumer spending.
A Rising Dollar Negatively Impacts Stock Market Profits and Valuations
Let’s start with a topic that I have covered in depth over the past year, the structural reasons behind the rise of the U.S. dollar (USD). The recurring fantasy that Europe’s fiscal and debt crises are “fixed” and the Federal Reserve’s money-printing/Treasury bond purchases have recently depressed the USD, but in the longer term, the USD has been tracing out an unmistakably bullish pattern of higher highs and higher lows since May 2011…
What Will Happen When We Hit the Cliff
PREVIEW by charleshughsmithExecutive Summary
- A rising dollar would negatively impact stock market profits and valuations
- Interest rates ultimately will rise, and that will be a game-changer
- Investors will eventually realize that "risk-free" assets (e.g., U.S. Treasurys) are NOT safe havens
- Why there will be few places for financial capital to find shelter in 2013
If you have not yet read Part I: The Structural Endgame of the Fiscal Cliff, available free to all readers, please click here to read it first.
In Part I, we covered the basics of wealth and political power in the U.S. and found that the Fiscal Cliff is only a symptom of a structural endgame in which the imbalance between what has been promised and what can be collected in taxes will continue growing until it triggers a financially driven political crisis that I believe will inevitably become a full-blown Constitutional crisis.
Though there are many facets of this long-term political crisis that are worthy of further exploration, we will to start with three financial aspects that could start impacting households in 2013: a rise in interest rates and a resultant destruction of bond valuations, a rise in the U.S. dollar that negatively impacts U.S. corporate profits and thus stock market valuations, and a reduction in upper-income households’ spending as a result of higher taxes that depress discretionary consumer spending.
A Rising Dollar Negatively Impacts Stock Market Profits and Valuations
Let’s start with a topic that I have covered in depth over the past year, the structural reasons behind the rise of the U.S. dollar (USD). The recurring fantasy that Europe’s fiscal and debt crises are “fixed” and the Federal Reserve’s money-printing/Treasury bond purchases have recently depressed the USD, but in the longer term, the USD has been tracing out an unmistakably bullish pattern of higher highs and higher lows since May 2011…
by
David Collum
Background
I was just trying to figure it all out.
~ Michael Burry, hedge fund manager
Every December, I write a Year in Review that has now found a home at Chris Martenson’s website PeakProsperity.com.1,2,3 What started as a simple summary intended for a couple dozen people morphed over time into a much more detailed account that accrued over 25,000 clicks last year.4 'Year in Review' is a bit of a misnomer in that it is both a collage of what happened, plus a smattering of issues that are on my radar right now. As to why people care what an organic chemist thinks about investing, economics, monetary policy, and societal moods I can only offer a few thoughts.
For starters, in 33 years of investing with a decidedly undiversified portfolio, I had only one year in which my total wealth decreased in nominal dollars. For the 13 years beginning 01/01/00—the 13 toughest investing years of the new millennium!—I have been able to compound my personal wealth at an 11% annualized rate. This holds up well against the pros. I am also fairly good at distilling complexity down to simplicity and seem to be a congenital contrarian. I also have been a devout follower of Austrian business cycle theory—i.e., free market economics—since the late 1990s.4
Each review begins with a highly personalized analysis of my efforts to get through another year of investing followed by a more holistic overview of what is now a 33-year quest for a ramen-soup-free retirement. These details may be instructive for those interested in my approach to investing. The bulk of the review, however, describes thoughts and observations—the year’s events told as a narrative. The links are copious, albeit not comprehensive. Some are flagged with enthusiasm. Everything can be found here.5
2012 Year in Review
by David CollumBackground
I was just trying to figure it all out.
~ Michael Burry, hedge fund manager
Every December, I write a Year in Review that has now found a home at Chris Martenson’s website PeakProsperity.com.1,2,3 What started as a simple summary intended for a couple dozen people morphed over time into a much more detailed account that accrued over 25,000 clicks last year.4 'Year in Review' is a bit of a misnomer in that it is both a collage of what happened, plus a smattering of issues that are on my radar right now. As to why people care what an organic chemist thinks about investing, economics, monetary policy, and societal moods I can only offer a few thoughts.
For starters, in 33 years of investing with a decidedly undiversified portfolio, I had only one year in which my total wealth decreased in nominal dollars. For the 13 years beginning 01/01/00—the 13 toughest investing years of the new millennium!—I have been able to compound my personal wealth at an 11% annualized rate. This holds up well against the pros. I am also fairly good at distilling complexity down to simplicity and seem to be a congenital contrarian. I also have been a devout follower of Austrian business cycle theory—i.e., free market economics—since the late 1990s.4
Each review begins with a highly personalized analysis of my efforts to get through another year of investing followed by a more holistic overview of what is now a 33-year quest for a ramen-soup-free retirement. These details may be instructive for those interested in my approach to investing. The bulk of the review, however, describes thoughts and observations—the year’s events told as a narrative. The links are copious, albeit not comprehensive. Some are flagged with enthusiasm. Everything can be found here.5
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