Hate To Say “I Told You So, But I Told You So”

UPDATE (Feb 21, 2015):  A lot of pundits with poor-analysis-egg-on-their-face are now predicting that the deal struck yesterday to bail out Greece will fall apart.  Well ya, I guess eventually Greece will blow up but it will blow up with the entire EU.  Does this statement from Greek  Tsipras sound make it sound like the deal will blow up?

Greek Prime Minister Alexis Tsipras declared victory on Saturday after agreeing a last-minute conditional financial rescue deal with Europe, despite making big concessions to avert financial collapse within days (LINK)

The real beneficiaries of this deal are the people running the big banks – U.S. and European – because a Grexit would have blown up them up and the upper management of these banks could no longer milk QE by paying themselves huge salaries/bonuses.   Hey Germany:  You just made sure that the CEO’s of Goldman, JP Morgan, Deutsche Bank, Citibank, Morgan Stanley, et al will get to reward themselves handsomely with YOUR tax money.  Now ya know how we feel…

Three weeks ago I wrote that the ECB and the Greeks would reach a “kick the can down the road” agreement – that everything in between would be staged grandstanding for the benefit of Germany’s restless anti-euro population (you know, the ones that want to hold the Bundesbank accountable for the gold that the Bundesbank has claims to have). Well, guess what? They kicked the can down the road: Bloomberg, Zerohedge.

It was simple to figure this:  follow the money.   The real money wasn’t in the exposure to the Greek sovereign debt that everyone was blathering about.  The real money is in the OTC derivatives connected to the Greek sovereign debt, the former to which big Too Big To Fail Banks have a huge exposure.   I can guarantee you that the U.S. Treasury and the Fed had played a huge role in engineering this latest maneuver to put off the day of reckoning.

“You can ignore reality, but you can’t ignore the consequences of ignoring reality.”  Ayn Rand

22 thoughts on “Hate To Say “I Told You So, But I Told You So”

  1. On the basis that you cannot fix a debt problem by adding more debt, we can expect even more can kicking in hopes that the market can wake up and come to the rescue. Why does the market have to come to the rescue ? I’ll explain but , in short, it has to do with the fact that we are dealing a real-time trading environment now. All must be done to avoid a crash of the legacy system.

    On the basis that more debt will not solve existing debt problems, the answer is to add assets, real assets, into circulation in order to enhance liquidity. Let’s call that L2, whereas existing debt based liquidity, we’ll refer to as L1. When adding L2 to the existing L1, the added liquidity allows for a draw down on debt where debt can actually be removed from circulation and retired. There’s a condition , however.

    Because of real-time trading and pricing, the addition of bullion based liquidity has to take into account a delicate rate of change. This is where the marketplace becomes a great “organic ally”. The process of adding bullion to the existing liquidity/currency supply for the sake of adding debt free liquidity (L2) cannot take place in an overly overt manner without a realistic expectation that there might be a “heading for the exit” of the debt based currencies of the fiat paradigm. For this reason, the bullion based supplementation must be bottom-up via the market and cannot be a top-down process from the apex of financial or political power.

    We must be as wise as serpents, yet as gentle as doves.

      1. Outlooking … I know Gresham’s Law …. very well, as a matter of fact. It’s required study in the house I grew up in. It’s a great argument against gold (as a currency) if gold has a fixed value, as it has in past gold based systems, such as what we saw with the classical gold standard and even the Bretton Woods era.

        Gresham’s Law as it has historically applied to bullion systems of the past is actually quite relevant, but depending on who’s interpretation you read and what wording they use, it can be misleading. I don’t like the terms “good money” or “bad money” as I find them too too subjective. It’s best to use “overvalued” and “undervalued”, instead. I’ll create some clarity.

        All official gold systems of the past had some hierarchical or centralized power setting the gold price (eg: $35USD/oz)

        The problem with a FIXED and pegged value between bullion and a national currency (such as dollars) is that in order to adhere to the “rules of the game” the FIXED peg will limit the amount of liquidity that can be utilized for the sake of the economy. This meant that your liquidity was limited to the amount of physical, above ground gold you had on reserve for monetary purposes.

        The problem was NOT the gold, however. The problem was the FIXED peg.

        The formula for gold based liquidity where gold is acting as a currency is based on the product of (weight x trade value/unit weight) —>( wt. x USD/oz)

        In order to increase the liquidity of bullion, you can increase the amount of weight and/or you can increase the trade value for the weight. When the FIXED price peg was severed in 1971, this set gold free. (Most people were fixated on the USD …. ha, ha) At some point in gold’s future, gold could then be re-monetized with weight (and its floating value) as the unit of account and the dollar could be the unit of measure to measure the relative purchasing power (USD/oz) in real-time. This would eventually lead to a market value that would suit the monetization of market gold once gold had “found its price”, which , IMO, has not taken place yet.

        Historical gold standards promoted hoarding of gold simply because the people who had the gold felt that the trade value was set too low …… so they hung on.

        When “gold finds its price”, the market will monetize gold in market driven trades, whether those trades be for real economic widgets or fiat currency.

        Yes, 1971 was a watershed year in the development of gold as a real-time (floating) currency and for the fiat currencies of the world to start to take on measurement roles for to determine bullion weight for the sake of debt-free trade, where bullion weight can act as a settlement.

        When today’s bullion is added (L2) to existing liquidity (debt) (L1), the added liquidity serves to allow the debt based fiat (L1) to be serviced and withdrawn from circulation, so what we actually see with real-time gold is a reversal of what we saw with bullion that had FIXED values.

        What we end up with is a system of liquidity that is shared by debt based currency (Yin) and asset based currency (debt-free) (Yang) in what can only be described as being a symbiotic Yin-Yang of debts and assets.

        You cannot pour new wine into old wineskins. The information age is like a new wineskin.

          1. No time for it , really. I bring a great deal of attention to others, however …. and charge nothing … so far, anyway.

          2. You’re assuming your commentary is worth something. That’s debatable. YOu have time to post several magazine articles worth of writing here everyday but no time to do your own blog? I’d say it’s more like you don’t have the balls to do it.

            You’re a passive/aggressive. It’s easier to hide behind an anonymous identity and squawk away in the comment section of someone else’s blog than it is go public and open your views to the inspection of the general internet.

    1. Sorry Rooster – read your post several times and I have come to the conclusion that it makes no sense at all. I am sure in your own head it makes sence though.

      Good luck with that .

      A good friend once told me “you know you are in trouble when you start believing you own propaganda”. I think you are believing yours.

      1. Unless it has suddenly become illegal for me to trade a gold ingot or gold coin for another widget, then it makes perfect sense. Don’t get confused by the facts for goodness sake.

        I think you may have a common habit of defaulting to the notion that a currency system has to be governed from a power apex …. which is true if its debt based.

  2. Great call Dave…….nothing is going to change. Syriza sells out the Greek people….more debt…etc. Gold and silver are fixed so nobody will ever preserve their wealth in those either. Why do I even bother anymore? Anything within the elites power structure will fail…

    1. Good observation Chad … the one about the power structure. This is a root cause of almost all troublesome issues that confront the world today. We have been supply driven (in hierarchy) since the “apple was shoved in our faces”. Was there really any other way that was practical ? I don’t think so. We can blame the axiom of intention, but even if the power elite had good intentions, the axiom of capability/incapability was bound to thwart any realistic attempts to create a more equitable structure for the sharing of power …. yes power, because structure is the guiding principle by which power flows. I see no practical way that a “rounder world” that has the apex of hierarchy weaned out of it could have evolved short of the information age and the digital tools that we now have at our disposal. The includes the concept of decentralized currency systems that operate with debt-free assets such as bullion weight. Everything has its time.

      The ability to decentralize, aside from any intention at all, has always been a requirement to work our way back to providence. You cannot pour new wine into old wineskins.

  3. My guess is; Greece needs some time, just a little, like four months maybe? To finish printing and minting the “New” Drachma. Getting their house in order to go it alone outside the European Monetary Union. With a little help from their “new” found friends. Russia and China.
    Look to mid-June for the ‘G.D. Day’ to arrive. (Greek Departure Day) Mind you, among the central bankers the G.D. maybe used for something entirely different! lol

    1. Greece can attempt to go it alone, but they would have to be prepared for a very low valued currency in the wake of their fiscal history and assumed default. Their cost of living would become quite expensive , but their tourism and exports would do quite well.

Leave a Reply

Your email address will not be published. Required fields are marked *

Time limit is exhausted. Please reload CAPTCHA.