Evaporflation

Today I will argue that the standard measures by which we assess our economic health no longer apply to our current situation.  The most common terms “Inflation” & “Deflation” are based on the general price level of goods and services.  Inflation is the increase in price, thus limiting the purchase power of your money.  Deflation is the decrease in price, and increase in purchasing power.  My argument is that the general price level of goods and services is temporarily not price-able, and the purchasing power of all currencies is unknown due to due to the lack of transparency of overall credit and debt at all levels of the economy (from Countries and Governments through companies and households) due to known and unknown variables and their known and unknown ripple effects.  The broad systemic risk of commingled good/toxic assets in the globally interconnected financial world has now limited the ability to accurately measure factual and fictional wealth based on fusion of such infinite variables of destruction.  In addition, the unknown levels of wealth creation, extraction and destruction, coupled with actual consumption leave us with a decreasing denominator in relation to the increasing nominator of debt.

As we teeter on the edge of an economic abyss, pricing goods like an automobile becomes impossible. The factory says it cost $18,000 to produce.  The retailer said it costs $25,000 to move.  The buyer, based on the current status of the market, their employment, and the availability of credit will be willing to pay between $0 – $25,000 for the automobile.  This is obvious and has always been the case, but unlike past situations, when the person walked out without buying the car, there was the assumption that someone else will walk in and buy it.  That pricing mechanism is based on the fact that there will be a buyer to finance the cars production, and their purchase would fall somewhere between that $18,000 – $25,000 range.  Depending on the strength or severity of the economy, that price level (inflation/deflation) would be found.  That is not the case anymore!  In the current environment, there are many more cases where there is no bid at all.  The new price model needs to include $0 – $25,000

For that same reason, hedge commodities are sitting on a plateau where they could either fall off the cliff, or shoot to the sky.  Oil sits at $40-45 with the risk of dropping to the $20’s and the risk of rocketing to $200 a barrel.  Gold sits at $900, with a $2,000+ ceiling and a sub $500 basement. Milk and Orange Juice may be $4, or they may be $20?  At the same time, the purchasers of all goods and services are sitting on the brink of having an income, house and various other assets or having nothing at all except existing debt obligations.

With that said, how do you price a CDO?  How do you price GM?  How do you price the USD?  How do you price a house?  How do you price a car?  How do you price eggs?

At the moment, we have economic history pricing goods and services since there is no transparency, confidence or consistency to attain current supply/demand price.  Without these factors secured, all you have is a risky wager that borders on being an extremely explosive or implosive bet that could play itself out in a couple of days time.  That kind of volatility leaves us stabbing at prices that are nothing better then guesses based on dogmatic review rather then the actual consumer’s current reality.  Those kinds of shocks don’t bring about the price discovery that supply and demand in a capitalist market would accurately set.

Evaporflation, Vaporflation and Condenflation occur when natural economic factors like inflation and deflation meet with such an immense artificial force, that direction of price and purchase power become temporarily unattainable.  They can be immeasurable due to the ambiguity of the calculating factor of:  time of creation, synthetic composition, velocity and size.

Evaporflation – is the disappearance of debt, or increase of credit to bring about a net debt reduction.  (Disappearing debt also brings about the destruction of credit creation)  It occurs as there is an increase in the difference between overall credit/cash/liquidity in relation to the overall debt obligations at a rate where the difference grows at a perpetual rate of motion.  Through debt reductions and credit infusions, the pressure on the economic system can be vented in a manipulated fashion.  If obstructed or without a large enough release valve, Evaporflation will lead to Vaporflation.

Vaporflation – is the rapid disappearance of debt, or increase of credit to bring about a net debt reduction.  It is hyper inflationary and hyper deflationary.  It can easily lead to combustion during the venting process and if not contained would lead to a complete meltdown / collapse.

The difference between Evaporflation and Vaporflation is the level at which the debt outpaces the credit.  If debt outpaces credit beyond the sustainable levels of vaporflation, we will reach combustion (collapse).  We have seen some of the early bailout packages (venting) combust.  Bear Stearns, Lehman, and the first $350billion from Bush/Paulson bailout are samples of combustion during the venting process.  Recapitalization, cannibalism, and self preservation absorbed all available liquidity, thus vaporizing institutions or programs that had nowhere to sit when the music stopped.

Whenever there is a large decrease in overall wealth being met with less then needed reduction of overall debt obligations, no reduction of debt obligations, or an increase in debt obligations in relation to the overall credit/cash/liquidity it would lead to either evaporflation or vaporflation rather inflation or deflation.  This is why we have not seen any favorable direction in inflation or deflation.  The reason for this anomaly is due to the fact that the lead up to the crisis was also misdiagnosed.  What preceded this was a phenomenon called:  Condenflation.

Condenflation – Is the self propulsion or positive feedback loop of credit creation through debt, where un-vented credit does not accurately reflect the actual inflation/hyperinflation of the credit cycle, due to the offsetting (real) long term debt.  This can be and was attained through fractional reserve banking, leverage and unregulated markets meeting with the giant pools of liquidity and the circular loop of alchemy that led to more credit creation without yet another venting of inflation.  The recycling of fractional reserves and leverage went well beyond their intended safe levels as the ratio of risk became immeasurable, and small shocks could lead to systemic risk due to cross pollinating and counterparty risk.

Ill transparent markets acted like a pressure cooker.  Liquidity/credit became trapped (unable to inflate) in a system that was not letting the vapor escape.  The gradual release of this pressure would’ve deflated overheated markets (that were severely understating the short term credit/gain, and long term loss/debt) where an equilibrium of loss and gain could have been attained (and thus contained.) …but instead, a collusive cycle between Financial, Political, and Media outlets was born for short tem profit.  The short term upside became so easily attainable for the malfeasant, that the downside risks falsely appeared to be non existent. The trap itself, became self propelling through manipulation, greed, and misguided confidence.  The false sense of confidence permeated every country, market, and home where the expectation of gains bordered on entitlement, and created a temporary self fulfilling loop.

On the upswing, the liquidity in the markets pressure cooker had gone well beyond the boiling point.  Real inflation was being severely understated as it did not weigh the short term credit versus long term debt properly.  Redemptions, consumption, poor investment decisions, excess and larceny started to finally extract the credit (liquidity/liquid) from the pressure cooker.  (The release of pressure was never properly reflected in the inflationary upswing so disinflation did not occur in the release.)  When the markets pressure cooker reached what appeared to be a saturation point, (equilibrium) it was too late to realize that this was not the actual case.  The unrealized exit of liquidity, coupled with the growing wave of debt obligations led to the immediate downside pressure of evaporflation (which was happening on the surface) and vaporflation (which was occurred beneath the surface).  This pressure needed a release valve.  Subprime became that escape!

Within the “pressure cooker” analogy, the size of the pressure cooker has grown (debt), and there is less liquid (credit) in the pot.  The pressure (the actual “pressure” is “the market” i.e.  supply/demand, inflation/deflation, etc…) continues to build at an accelerating rate as there was less “liquid” in the pressure cooker, and the pressure cooker’s surface area continued to grow (which lead to a point beyond boiling) The stimulus plans, rate cuts, TARP, etc have added little bits of liquid to the pot, keeping us from vaporflation, but leave us in the current unique phase of evaporflation.  The attempt to saturate the market, and reach equilibrium will be better achieved when a larger batch of liquid is poured in, and the size of the pot is reduced.

With that said, the size and scale of artificial economic forces that we have created, was overlooked and underestimated which has left the price discovery mechanism flawed.  …thus technically (and in reality), leaving the natural forces of inflation and deflation directionless as their driving forces (the price of goods and services, and purchase power) are inaccurate.

The rest is present history.

All the best, Miss America

p.s. Ironic…  in true scientific form, the “solid” that housing has always been through sub prime (sublimation) has vaporized that solid to a gas!

p.p.s.  Back when I started working on this theory in July and August, I had already concluded that bailouts would be a forgone conclusion.  In addition, I sighted the future FASB mark to market adjustments that would take place, along with netting CDS (pair offs) for debt write downs, the flight to USD (which was at 70% value against the base basket) and the principal reduction plan.  (which has been partly enacted)  Attached is the post:  By Miss America on 2008-08-08 16:26:31

“The whole debt forgiveness thing is part of my Evapor-flation theory.  (Sorry to keep beating people over the head with this)  Likewise, I threw this together rather quick, so it’s not my best work.  Today’s situation is unique. People try to draw historic parallels that don’t have true comparable variables.  You’ve got: ·        Inflation Camps ·        Deflation Camps ·        Stagflation Camps ·        Reflation Camps ·        Disinflation Camps ·        Hyperinflation Camps ·        Stagnation Camps

Within these camps, you have people that follow: ·        Keynesian ·        Austrian ·        NeoClassic ·        ACME theory.

None of it is invalid. …in fact, it’s all valid. .but no theory or camp, can account for the seen and unseen variable that now confront us. It will be a combination of many “flations” that we see, rooted from the base worldwide currency.

What we have today is unique for new reasons: ·        The base currency that rules the land is the USD (which is ground zero for the problem) ·        The debt ratio has gained a perpetual self fulfilling momentum ·        The flight to safety is also the USD (through the US Gov’t) ·        The flight to commodities is all priced in USD! ·        The US Markets (through Counterparty Risk) have created the ultimate safety net ·        The USD markets have become Globalized and so interwoven with every country ·        that their downward spiral affects EVERYONE! (this list goes on quite longer.)

..but yet, the population grows. ..and needs more food ..more shelter ..more jobs ..and more credit ..and more debt

..but what if the debt today is already too big???

Simple!

You eliminate it. Poof! You shall see. The FASB has already started working this magic. By allowing corporations to write down their debts on level 3 assets, you are seeing the back door to this “disappearing man in the box” routine. (The FASB has allowed this as the counterbalance to writing down their assets on level 3 assets. BUT IT’S NOT!!! .and that’s the beauty.) In much the same way, as these corporations take back auction rate bonds back onto their books, they will also mark up, their write down of overall debt.

Eventually, in round robin fashion, you will see the off balance sheet debt being paired off against other counterparty debt to eliminate overall debt.  Debt will evaporate. It has already started. It is the only answer for a debt that can’t be paid. Sorta like Chapter 11, it’s a restructuring that’s going on.

This, along with many other smaller factors are where I come to my Evapor-flation call!  (years from now, you can say you heard it here first)

Personally, instead of these stimulus plans that will help mask this evaporation (by adding money to replace evaporated money) I’d rather see some sort of public write down of debt. (Something like: an across the board 10% principal reduction of all home loans. This puts extra money in the consumer’s pockets on a monthly basis. This enables them to make more payment on mortgages, and pay more taxes, which trickles up to the government. .whom can then use that additional cash flow to keep bailing out the TPTB that made the bad loans in the first place. Where we’re at now, the Gov’t is going to keep bailing out the corporation regardless. so why not start at the bottom, and trickle up.)”

56 Responses to "Evaporflation"

  1. Guest   March 18, 2009 at 2:43 pm

    nice concepts and analogies! If the administration continues along it’s current path of bailouts and buying treasuries, what does your theory predict in the short and longterm for the economy, the dollar and of course the stock market?

    • MA   March 18, 2009 at 10:03 pm

      All hands will be forced. Economic forces are natural forces. The science behind the reality of these econimcs, plays out in a truly parallel form to their scientific twins.i.e. all economies will follow suit. the will add cash, and reduce debt. The maner in which they reduce existing debt is how you will make money. Through the FASB? Through pairoffs? through future debt?Whatever method takes hold will have the answer to where money will flow. (Piaroff = less CP risk to finance / Fin equity bounce. FASB = insurable bounce… etc…)My answer is not very well researched or constructed… it is just my initial reaction.As for the dollar… I don’t think it is done rallying.There is a new reality that the masters of the universe need to recognize. until everyone gets on board, I don’t really know for sure… but I do know we will keep on evaporflating.Miss America

      • George Harter   March 21, 2009 at 2:26 am

        Hello Miss America!!VERY impressed by the cogent Star Trek descriptions of the economy. However, there is still a medieval mindset that confuses scribbled numbers with FUTURE reality.In fact, much of the outstanding Corporate debt in the US has already been erased, eradicated, disregarded. The US government will cover some of the gaps ala the $12 Bn to Goldman etc. The major portion is and has been abrogated.The only parties who will still be liable are the pipsqueak consumers and their Flabby proxy the US government. Yes, many Corporations LLCs State Pension Funds will be falling into Bankruptcy at an accelerating rate-but what is bankruptcy??? Simply debt destruction. Auto-cannibalism.However, the sidelining of actual liabilities has a dark side also, many of the wellsprings of economic prosperity have been destroyed in this process. Yes, the net sum is zero. Simple, the economy of the US and the World have grown much smaller, in real terms. There will be no resetting of the clock (ie we are back in 2003 land). The reality is we well land back in 2003 and recapitulate in reverse.The economy is wounded but in the future there remains a huge unfunded and growing burden of SELF-CREATING DEBT which will drown us. No, we won’t drown,free-fall-chaos will be the result. And, considering that we STILL have to address GIGANTIC environmental deficits, all over the world-we need to re-evaluate our GLOBAL future not just economics issues.Sorry, but the quants have pulled off a coup. A major portion of our economy was, in fact, amputated. For those foolish enough not to have stolen sufficient assets here in America, the future looks REALLY bad. For those impoverished who will be dying in the WRONG parts of the globe, GOD BE WITH YOU.George HarterBaghdadontheHudson, USA

  2. Danny   March 18, 2009 at 3:40 pm

    Rich,Great Post…What took so long? (kidding)As you stated above, the scariest thing (for me) is that its hard to predict the direction that prices will be going for anything from Gold to Oil to Dairy.Your posts are always a great read.I am going to go back and ready your 2nd Alt Energy post as I was away for a while and have been looking forward to wrapping my mind around that.Thanks,Dan

    • Danny   March 18, 2009 at 3:45 pm

      Rich,I thought I saw a comment from you on NR’s blog stating that you had a new post on Alt Energy.Guess not…I like the suspense. Do you have an ETA?

      • MA   March 18, 2009 at 10:09 pm

        ther have been 2 Danny#1http://www.rgemonitor.com/globalmacro-monitor/254284/alt_energy#2http://www.rgemonitor.com/globalmacro-monitor/255439/alt_energy_chapter_2__net_metering#3 is a ways away. Until I am either inspired, or I learn something new that I feel is underappreciated or lacks the propper push (vision) I will hold back.Hopefully something will come around.Miss America

      • MA   March 18, 2009 at 10:36 pm

        1 more thing Danny. If you have something that you are interested in, spit it out. I will do my best to spin it around and observe it.Miss America

  3. Pecos Banker   March 18, 2009 at 4:12 pm

    Rich,It strikes me that what you are talking about in terms of inability to price things is very much like the famous period doubling that eventually leads to chaos, where Feigenbaum’s constant plays a key role in determining where the transition from order to chaos occurs. When chaos finally kicks in, the chart is all over the place. You should really look into this if you don’t already know about dynamical systems and chaos. Perhaps all the correct points of view you mention above could be seen in terms of chaos theory.

    • MA   March 18, 2009 at 10:11 pm

      I am not familiar with any good points of reference. If you have any to share, I’d love to read up. Links? cut-n-paste.I’m up for a little chaos.Miss America

      • Pecos Banker   March 19, 2009 at 4:33 pm

        MA, I have a reference for you. To get acquainted with chaos theory, take a look at the idea of period doubling which eventually leads to chaos. This can be accomplished by a simple recursive routine as shown in the following:http://en.wikipedia.org/wiki/Logistic_mapThis jumping from the curve to the x=y line and back to the curve simply feeds and x-value to the recursion, gets a result and feeds that result to the recursion and on and on. The recursion parameter r is what causes the period doubling. As the curve gets higher by increasing r, there is more and more period doubling until you get chaos. You can see this with their dynamic “cobweb” diagram. What has this got to do with stock markets? Simple, what we are seeing is akin to resonance, such as the squeal you hear when a microphone is placed next to a speaker. Well, when participants in markets look at the price series itself to determine a bid or ask, that is equivalent to a feedback loop. As this process gets more intense, as when the r-value parameter increases, that’s when you get resonance, ie, chaos. This shows by analogy how price discovery can fail, if we think loosely of prices being the x-values each time the cobweb hits the curve. For low r-values, these eventually settle down to a finite number of values, but for high r-values, they are all over the place, like no price discovery possible!Now you can read about chaotic dynamics more generally in Wikipedia. I think this has huge applications to markets, although I have yet to read anything in that direction.There is also a very fruitful theory called “catastrophe theory” which actually has some nice connections to chaos theory via differential equations. Differential equations are like recursive equations except that they are continuous rather than discrete. Catastrophe theory is actually just about sudden changes in otherwise continuous processes, such as an avalanche. “The straw that broke the camel’s back.”

        • MA   March 20, 2009 at 12:35 pm

          That’s extrodinarily similar to my theory. Trust me (I hope you do), I did not cheat… or even borrow.There are differences. …mainly, intervention/manipulation/venting.In otherwords… Curable! (I use that word very loosly!)Thanks for the link, as I love chaotic theory. (I’m not oblivious to the theory, just rather, never seen what you pasted.)

        • London Banker   March 20, 2009 at 12:35 pm

          About fifteen years ago I was involved in trying to find applications for chaos/complexity theory evolved at the Santa Fe Institute to markets intermediated by market makers having a bid-ask spread (rather than the order driven markets where there is a single price). It seemed to me then that complexity theory offered the best hope of modelling markets where liquidity was a function of the ability to quote a spread differential which could vary according to the size of the deal and the perception of the counterparty/client’s informed status.I never really got very far, but I still think the effort headed in the right direction. Negotiated wholesale financial markets (such as those for OTC derivatives and CDOs, etc.) function very differently than exchange markets. It’s good to see someone here thinking along the same lines.

          • MA   March 20, 2009 at 1:03 pm

            :)Thanks, and nice to hear from you.LB, I really don’t think of this as theory any more.How is the transition? On a scale of satisfaction 0-100 (100 being awesome) How about the family (1-100)Answer here if you like, or shoot me an email (home address chainsawrh at aol)

          • Pecos Banker   March 20, 2009 at 11:09 pm

            LB,I’m sure as long as things are going well for you, you will be too busy to resume your blog. As I always enjoyed your posts, I hope you are back as a blogger soon! (Not to be construed as wishing you bad luck.)There is a relatively new field called “econophysics” which so far is not accepted by mainstream economists. However, I did got to a sight and discovered what appears to be an excellent book on the subject by Joseph L McCauly “Dynamics of Markets Econophysics and Finance” published by Cambridge. I will soon order the paperback version for myself.If you go to the following url and read the extract, I think you will be even more convinced of the value of this approach to economics:http://www.cambridge.org/catalogue/catalogue.asp?isbn=0521824478

  4. PeterJB   March 18, 2009 at 4:36 pm

    @ Rich:good analysis; a good workMay I add that what you describe is either one of two well know life processes; or both:)1. Where something big is broken into pieces; a well know Universal process of evolution (Osirian process)- so nothing new here in terms of physics and,2. A biological purge brought about by peristalsis which stimulates coagulation, pressure and the ensuing vacation (pun intended).I enjoyed your article.Ho hum

    • MA   March 18, 2009 at 10:31 pm

      Pete… Likewise, good reply.I am 100% serious. I’m not just trying to coin a word. (I have done it because there are no existing words that I am familiar with that accurately describe our current situation) I truly believe that the foundation of economics has been shaken. I really believe that we need to open the book of economic theory, and write a new chapter.There is no parallel. The unique nature of today will see an abstract so powerful that it is illogical. It’s the “artificial forces”. I think they are so severely underestimated that it throws everything off going forward until its correction.Sorta like a division problem or Pi. Lets say you have a type-o on the 5th digit. You can accurately keep moving out to the 10,000th digit, but when you try to apply it, it will be wrong based on the earlier error. Then when you take that wrong answer, and divide it out by that same type-o’d rate, you compound the problem.That’s where we ARE!!! Compounding!People, economists, books will need a bit of revisionMiss America

      • George Harter   March 21, 2009 at 2:49 am

        Why do so many people keep avoiding the obvious analog to the economy?? Everyday of the year thousands of people “forecast” the weather. (Others, do economic equations.)What does that do to the weather??? Does the weather care?? Or, do meteorological events unfold,in their own manner,and time, governed by a “mathematics” we can’t pretend to be able to create?We understand general patterns of certain chaotic processes. Predicting specific prices?????? Market behaviour? Until some sorts of equilibria are reached,the whole system will remain “chaotic”,I wouldn’t actually feel competant to guess what sort of chaos either.Day follows night follows day. Now the only phrase I find believable is, “Keep your powder dry!” Wait and see, observe-perceive. Act accordingly, we will probably be wrong, but who will be keeping track?? Responding is the IMPORTANT thing.Captain AmericaInwood Caverns, USA

        • George Harter   March 21, 2009 at 2:57 am

          The above writer forgot to mention that human intervention is of course already in the equations. ECONOMICS is human behaviour of many sorts, including recursive-type human acts to “correct the ECONOMY”.In the US, 100 years ago, areas parched from drought would import rainmakers at great expense. We really haven’t learned very much, have we??Capt. AmericaHEARTofDarkness, USA

  5. PeterJB   March 18, 2009 at 5:06 pm

    May I add to the above, that such a process as you describe is classed catabolic and falls within Sympathetic activity found in biological life forms in parochial states throughout the Universe(s) as found on planets such as Earth – the catabolic processes break down substances to produce energy for activity.It is the anabolic process of the Parasympathetic activity that builds up and restores.Accordingly, the above processes are consistent with the nature and characteristics of cycles which you humans blatantly ignore for some reason – perhaps you think that you can, unlike the rest of the Universe, maintain a status quo ad infinitum? Unfortunately, that is not how the system words.Ho hum

    • MA   March 18, 2009 at 10:34 pm

      Exactly.I am talking revolution in economic theory, based on simple science.Spread the word.EvaporflationHo humMiss America

      • PeterJB   March 19, 2009 at 4:17 am

        You are not alone.Ho hum

  6. Stupid   March 18, 2009 at 7:08 pm

    No, no no! The anabolic process of the Parasympathetic activity, precisely at the points of inflection (Eigenbotham curve squared/pi) and Gautman Hyperbolic’s CHOIR/Paulson’s inflex ratio) will inevitablyreact with inflationary forces from the 1924 German/Italian event and produce maximum stasis.What an idiot!

    • MA   March 18, 2009 at 10:20 pm

      Hey there Stupid.I actually look back on my childhood and wish I paid more attention in school. I’m assuming you are joking around, and throwing around a little sarcasm… but if not, I’d love for you to eplain. (cause I think I missed that day at school)Either way, thanks for stopping by.I really do believe that this “theory” isn’t so much “Theory” but rather a reality that spits in the face of economic scripture. The “Box” thinking of the economics world needs to take a quantum leap out to get to where I believe we are.In all honesty, I believe from theory/reality we are on the edge of a flat world, and about to learn it is round.I believe this is groundbreaking stuff in terms of figuring out where we are, and where we need to go. (in order to cure something, you often need to find its origin or its mirror.)All the best,Miss America

  7. 2cents   March 19, 2009 at 1:26 am

    @ MA,I always enjoy your zeal and spin on things. In this article there is definitely major zeal and it appears that you have contemplated this ‘evaporflation’ situation for some time.My question comes from your statement ”Evaporflation – is the disappearance of debt, or increase of credit to bring about a net debt reduction. “. Debt and credit are two different words for the same thing. Credit is debt that you took on with an intention to pay back. Debt is credit that you give to someone else with the intention of having it returned at a later date. By definition credit cannot increase to bring about net debt reduction! It is a physical and mathematical impossibility.Debts also by definition cannot be paired off against each other. What happens in a bi-lateral situation is that if one has a credit from party A and also retains a debt payable by party A while party A holds a similar but opposing position to yours, then the credits/debts can be offset and balanced out. This could be extrapolated to multiparty arrangements also. This is the pairing off that you are seeing today. Unfortunately, this is nothing other than something known as deleveraging.The process you are seeing is the conflagration of the we’ll save the ship come hell and high water crowd vs. those who are salvaging the best components of the ship before she goes down so that they can live to sail a new ocean!Make no mistake, we will either have a difficult but cleansing deflationary period, or we will simply enter an unknown world of utter chaos. There is no way to inflate out of this mess. Yes, we can print money, yes it will devalue the current debts, but there is no way to do that AND also have workers receive increased wages. Oh sure, some will argue that the time lag between prices and wages will make everything o.k., but that time lag would have to expand over time and lo and behold, the workers are at bread and water wage levels.Debt is credit and it has already expanded beyond the mathematical construct of sustainable yield. This is why the leverage ratio has needed to increase. Decreasing financial debt via increasing government debt does nothing to the sustainable yield, all you’ve done is wrapped it in another package. All debts, public and private, are the ultimate responsibility of individuals. Credit can’t absolve debt. It is debt it can only transfer the debt to another holder or spread it amongst holders. Only via the value tied to labor or resources can debts be repaid.The simple path is to increase the value of labor and resources so that debt can be repaid, or realize that debt that is not tied to labor or collateralized against resources is debt that will not be repaid! Unfortunately, we’ve chosen the hard path. Our government will cover the debts today and undertake the responsibility of recovering it by sucking the fruits of our labor until the end of time!

    • 2cents   March 19, 2009 at 2:13 am

      MA, I wanted to add a clarification. You talked of deflation as being falling prices. I do not see it that way. I see deflation as a decline in the money supply which includes credit. Once we left the gold standard, deflation can no longer be tied to falling prices.To translate my above argument into prices, one would expect prices to stay about the same or even increase, but the value of assets will definitely decrease. So in the end wealth will be destroyed (deflation) via loss in value of existing assets and via loss of purchasing power via symbolic money. This is the chaos path and will ultimately drown the rich and poor alike.The government’s current path is to increase prices while backstopping assets. This makes the recovery to be borne by the non asset bearing class disproportionately. The poor pay more while the rich carry on.The only realistic solution is to devalue assets and increase the value of the symbolic money. For this to work, debts have to be written off. The rich get squeezed pretty good, the poor get hurt via layoffs, but this resets the game, and the future is now bright. Money should be focused on support for those who need help. The downside of this is that an increased value of money would require us to produce for our own consumption as exports would suffer. That’s actually an upside until you consider that we don’t produce much of the day to day stuff we need anymore!

      • Guest   March 19, 2009 at 9:01 am

        Thanks 2cents; your comments account for the same data and facts that MA sees yet describe outcomes in fewer, more concrete terms; which, by the law of parsimony, is appealing.MA is too close to the wheeling and dealing going on the banking industry. What MA sees as “evaporflation” is a small cabal of big banks (90% of the finance industry) that agreed upon a scheme of unregulated credit creation. They traded the un-collateralized debt among themselves and spread it around the world loaning money to anyone and everyone until the poorest of the poor could no longer continue monthly payments.The jig is up, and things *are* chaotic while the house-of-debt and cabal-of-banks crumble. What MA sees as a new era in macroeconomics is really the creation of a new type (or a return to the old type) of banking and bank regulation. At present it is obvious that the banking cabal has control of governments. True to their past, the banking cabal is playing a high-stakes poker game praying that they can squeeze the tax payer just enough to maintain the status quo. And right now it’s anybody’s guess if they will succeed or fail. Failure means civil unrest and tax revolts.

        • MA   March 19, 2009 at 9:38 am

          @ Guest.Well stated. You need a name! “guest” does not serve you well. Be creative, as your insight is desrving of street cred. people will remember you and your well thought out posts.MA

    • MA   March 19, 2009 at 9:18 am

      @ $0.02Always good to hear from you! You always offer and argue, some of the best insight/rebuttles.When I get some more time, I write you back more. ….but a forgivable loan (one that does not need to be paid back) or printing cash, or M3 cash infusions, are all samples of credit with no debt ofset. If these are large enough they expand at a rate where there is an “increase of credit to bring about a net debt reduction”….when you think of account T charts, there are always offsetting entries. What I’m saying is, we’ve got a new style of accounting where those charts look like an upside down “L”. or accounting with an eraser. “artificailly flavored, with a net for a balance that is based on a fictional future date of non-repayment.What I am saying is, …throw out the book you learned from. Literally, create your own model. …and then simulate the actions, the crimes, the overstaement, etc… It’s no longer meant to add up. It’s compounded far beyond what’s been stated.For example… Just try to rationalize a pension fund that is guaranteeing 6-10% returns. Don’t think its possible. Think it’s Madoff-ish. Your right! The money aint there! It’s fiction. …but the contributers don’t realize this. …and they all think “but it won’t happen to me. Not my pension”There just isn’t enough cash in the system to cover what’s thought to be there.MAMiss America

      • MA   March 19, 2009 at 9:36 am

        p.s. I’m not letting on about something that better answers this question. (It’s because I have a piece I’m working on for production a few weeks from now. If I spill the beans then it takes away the punch of that piece. The title is “The Trouble with Troubled Assets” – (…and it delves into how they are not “troubled” when they have unlimited backing (i.e. A new credit loop ala Merrill selling to “Loan Star” and Merrill lending them tha money. In the current case, the US Gov is the new looper.))Trust me. THROW OUT YOUR OLD ECO101 BOOK!Miss America

      • 2cents   March 19, 2009 at 11:31 am

        @ MA,I agree wholeheartedly with your statement ”There just isn’t enough cash in the system to cover what’s thought to be there” . Change the word cash to the more general term wealth, and there is no cleaner truth out there. The gov. is replacing lost wealth with everything in it’s arsenal. The truth is that it cannot possibly cover the losses and that is why we WILL have deflation (lower money supply/ lower wealth).As to your statement ”but a forgivable loan (one that does not need to be paid back) or printing cash, or M3 cash infusions, are all samples of credit with no debt offset. If these are large enough they expand at a rate where there is an “increase of credit to bring about a net debt reduction” you need to tell me how debt and credit are not one in the same. True, a gov. forgivable loan is an infusion to someone without a concaminant debt. The debt is however on the backs of the taxpayer. It was just transferred from the recipient of the free funds to the taxpayer! There is nowhere a mathematical construct that allows credit to increase while debt decreases. If you believe such a construct exists, I challenge you to examine your boundary conditions because I think you will find that either you have assumed the currency of the transaction has no intrinsic value or more likely that you’ve confined the boundary to look at the limit from one side of the function, namely the recipient of the free money. Yes, it is free money to him, but the taxpayer has to eventually be responsible for that debt or the value of the currency must approach zero!I always enjoy your thoughts!

    • George Harter   March 21, 2009 at 3:06 am

      Yours is the first explanation of Deflation I have actually BOUGHT! This is NOT 1929 and we don’t have monetary standards anymore. Deflation defined historically, is GONE.We DO need a monetary standard but as much as I love GOLD, our global economy HAS outgrown it. I wish I had a solution even to propose.Capt. A.4th Circle,USA

  8. London Banker   March 19, 2009 at 2:56 am

    @ MAThanks for this. I was contemplating your evaporflation theory yesterday morning while sitting the sun with the FT. I even tried to explain it to a colleague, and the posted about it on Roubini’s blog.What I think is critical about your writing today is the point that neither inflation nor deflation can be determined in conditions of ill-transparent price discovery. When assets cannot be accurately valued with reference to market conditions for supply and demand, then no price can be know with sufficient certainty to know whether the price should be up or down.The flip side of this is that no investor with savings will invest in such conditions of uncertain price discovery. An investor will only invest if convinced that the price discovery mechanism will support his discovering a price and a market for disposing of his investment in future. As a result, the only ones laughing in the current meltdown should be the Chinese, who have sewn up huge, long-term resource development deals with most of the developing world. They can ignore price discovery as a factor in their continued development plans while the rest of us all freeze in our tracks and our economies, jobs and political systems progressively freeze and fail.Price discovery is one of the fundamental missions of a market. Too bad that the demutualisation of markets led to them becoming oriented to greater and greater profits for shareholders and private equity owners, and their mission of price discovery got eroded. We are all going to pay the price now.

    • MA   March 19, 2009 at 9:26 am

      Hey there LB.I met with an amazing guy the other night. Patrick Byrne! I wish you could’ve sat in. I will be doing a write up on him and his cause. We spoke about price discovery for a bit.I told him my theory (or what I call a new reality) and he seemed interested. He’s seen the artificial forces at work. He’s done some great research (him and others) on the artificial forces. (He RIGHTLY points out the unsettled trades issue at DTC being one of the MASSIVE artificial things)Great to hear from you, hope all is well.Drop me a line sometime.RH

      • subgenius   March 19, 2009 at 12:33 pm

        Rich, is this the Patrick Byrne of overstock.com? He seems to have interesting stuff to say for sure….If anybody cares, take a look at Deep Capture

        • MA   March 19, 2009 at 1:17 pm

          Yes -geniusThe one and only.I will be collaborating with him on an article for the RGE.His is a worthy cause!I spent an hour with him. (wished it was more. He is a busy man)My gut… He seems genuine!

  9. atomic   March 19, 2009 at 12:09 pm

    An excellent post. I will probably need to grab another coffee and read through again to help absorb all the implications!I don’t claim to understand all the intricacies of the micro and macro economics discussed here, but what I think is happening, at a higher level, is that the US-led international system is imploding due to the imprudence of the central pillar of it.After the Cold War and the disappearance of any real adversaries to US power, whatever checks and balances that kept the national interest first and foremost seem to have eroded through regulatory capture, and the stability the US generally provided is now leading to instability instead. The fact that the price (in USD of course) of milk, frozen orange juice, or oil seems so erratic is a reflection of this.We’re living through a financial and geopolitical earthquake, not a mere storm.The real issue is that the rest of the world won’t step up and provide solutions to this problem (regional trading blocs and reserve currencies) if there is fear of US military action. This is why China has been so happy to buy potentially worthless treasuries — in the process they’ve been industrialising rapidly, learning from the west and sending all their best and brightest to our engineering and science programs. Our best and brightest go to MBA school to learn how best to enrich themselves from this process.

    • MA   March 20, 2009 at 10:33 am

      Bingo Atomic!I am suprised that the ring fence was not built higher! London Banker did a piece on it some time ago that deserve reading.I don’t know what to think of China.There size is just too damn big. leading to too many variables….and there freedom of speech restrictions lead to “capture” that is unkown. For that I I dob them: CH-ENRON.Since we don’t know what is behind the curtain…a dn will never know.Hope you enjoyed your coffee.Miss America

  10. Jason B   March 19, 2009 at 4:49 pm

    Nice.Two unrelated thoughts.1. When bad debts are so thoroughly comingled with good debts in a security, price discovery becomes prohibitively time consuming and expensive. Its like trying to find the pork in sausage, among the ears and salivary glands. You cant make a pig out of sausage. The whole security is rendered worthless by its homogenization with bad debts. (ie: it is estimated that for 30% of mortgages, the servicer can’t produce the note. That means the property can’t be foreclosed on. What does that do to the MBS?)2. When consumer spending drops to a point, many things no longer are viable – like billboards, superbowl ads and goodyear blimps. They no longer have the ROI. If the new price model includes 0-25000, is hard to spend millions for a 30 second advert.

    • MA   March 20, 2009 at 10:27 am

      Advertising seems F’d to me!!!I love the “make a pig from pork” analogy.The comingling of MBS is exacly why I have proposed an accross the board Pricipal Reduction. The leg work of 1 by 1 workouts is impossibly!!! Plus, the CDO’s would likely experience a “less is more” phenomemnon in pricing as, when they lower the owed principal, the likelyhood of being paid on the good portion increases. Leading to less defaults and a positive loop.As it stands, a 10% across the board reduction will cost $3T!!! That $3T of reduced principal should not be destroyed, but rather held as an open receivcable in the event of a recovery. That could actuall be packaged as a worthless security that has great potential. (and could be viewed as a reinvestment in our own economy)Miss America

  11. Free Tibet   March 19, 2009 at 5:49 pm

    A day late & dollar short – again.Sorry I missed this party. Wonderful dialog. MA I know you’ve been on this a long time and I think I still don’t understand. Actually, I’m more in the 2cents camp.I can see that in any market there is a place where I’m a buyer, a place I’m a holder, and a place where I’m a seller. There’s also a place where I’m out of the market. When volitility is high I’m more likely to be out. There’s the problem with valuing toxics. No market.There is also a hold to maturity. If I had oil in the ground, and I knew it had been there for several hundred million years, what’s the sell by date on that asset? Why should I convert that asset to an asset that can be manufactured at will instantaneously? Only if some regulator is breathing down my neck telling me that I have to mark it his way or it’s the end of the world. And even then…

    • MA   March 20, 2009 at 10:01 am

      You’re not late…The obligations are due. That’s the force. That oil sitting in the ground, that asset you hold, that widget…You don’t need to sell them… unless “you need to sell them”!What I am saying is, the extraction of liquid (credit), has been huge. (redemption, crime, overconsumption, etc…) and as a whole, what’s left in the system, doesn’t meet the needs of the current and upcoming obligations of payment.tic tock tic tock, every day that passes where we are not experiancing growth, there is a exponantial growth in the difference between what is needed to meet that obligation and what we have to pay for it. (this debt was created in a mindset of perma growth, is never took into account such a MASSIVE dislocation.)Using an oversimplified version, I will sample below how quickly this goes south using just a $1 compond. “1” little measly dollar of compounding in a downward spiral erupts quickly. Take a look at the ratio of the curve. (this is kinda obvious, but you need to really look at it sometimes to grasp it.)Day 1. your economy has $100. You owe $10. Now you have $90. Your $90 gains $9. Now you have $99.Day 2. your economy has $99. You owe $11. Now you have $88. Your $88 gains $8. Now you have $96.Day 3. your economy has $96. You owe $12. Now you have $84. Your $84 gains $7. Now you have $91.Day 4. your economy has $91. You owe $13. Now you have $78. Your $78 gains $6. Now you have $84.Day 5. your economy has $84. You owe $14. Now you have $70. Your $70 gains $5. Now you have $75.Day 6. your economy has $75. You owe $15. Now you have $60. Your $60 gains $4. Now you have $64.Day 7. your economy has $64. You owe $16. Now you have $48. Your $48 gains $3. Now you have $51.Day 8. your economy has $51. You owe $17. Now you have $34. Your $34 gains $2. Now you have $36.Day 9. your economy has $36. You owe $18. Now you have $. Your $18 gains $1. Now you have $19.Day 10. your economy has $19. You owe $19. Now you have $0. Your $0 gains $0. Now you have $0.Simple stuff, but here’s where it gets scary!!!Day 11. your economy has $0. You owe $20. You don’t have $20, so you print $10, and finance the other $10 with an IOU (T-bill), you now have $0.Day 12. your economy has $0. You owe $21 & and $10 from yesterday. You don’t have $31, so you print $10, and finance the other $21 with an IOU (T-bill), you now have $0.Day 13. your economy has $0. You owe $22 & and $21 from yesterday. You don’t have $43, so you print $10, and finance the other $33 with an IOU (T-bill), you now have $0.Day 14 your economy has $0. You owe $23 & and $33 from yesterday. You don’t have $56, so you print $10, and finance the other $46 with an IOU (T-bill), you now have $0.Day 15. your economy has $0. You owe $24 & and $46 from yesterday. You don’t have $70, so you print $10, and finance the other $60 with an IOU (T-bill), you now have $0.Day 16 your economy has $0. You owe $25 & and $70 from yesterday. You don’t have $95, so you print $10, and finance the other $85 with an IOU (T-bill), you now have $0.Day 17. your economy has $0. You owe $24 & and $46 from yesterday. You don’t have $70, so you print $10, and finance the other $60 with an IOU (T-bill), you now have $0.Day 18 your economy has $0. You owe $25 & and $70 from yesterday. You don’t have $95, so you print $10, and finance the other $85 with an IOU (T-bill), you now have $0.Day 19. your economy has $0. You owe $26 & and $95 from yesterday. You don’t have $121, so you print $10, and finance the other $111 with an IOU (T-bill), you now have $0.Day 20 your economy has $0. You owe $27 & and $111 from yesterday. You don’t have $138, so you print $10, and finance the other $128 with an IOU (T-bill), you now have $0.Using the credit card to pay off a current debt is just compounding the debt. Treasuries are that credit card!!! The government, through bailouts keeps infusing (“printing”) cash.…but the obligations that are coming due are still growing from the financing we did yesterday. The new financing on top of the growing debt turns this equation ugly!!! …and that’s even with a preposterous level of “printing” (For this scenario, I was “printing” 10% of the original money supply daily!!!).So let’s say they add even more money, and wipe out a chunk of the debt from a random date… Let’s say Day 5, they added $50, and took the $14 owed off the table. This quickly gets offset, when you find out that your economy never had $100 to begin with!!! That $100 was the wealth based on growth. Where assets that didn’t depreciate, but now are (like investments/pension funds/houses/etc…) that were supposed to be worth XXX but are now only worth YYY. The extraction, which always existed (which was never quite so large) has proportionately grown too, to the point where there just wasn’t enough money to cover that… let alone the obligations coming due….and every day we go back and account for that, it makes day 20 look ridiculous!All the best,Miss America

      • Free Tibet   March 21, 2009 at 5:49 am

        I get the idea of compound debt. i.e. borrowing to finance the cost of previous borrowing. And you don’t have to know too much math to know where that leads. But it doesn’t lead to 0.An economy has some intrinsic value, some productive capacity. Something left in the ground. We might measure that in tonnes or widgets. Only by convention and IRS mandate do we ascribe a basis or substitute value for that in $ – a way in which we can compare apples to oranges.So, how much debt is too much? It’s too much when you can’t service what you’ve got. When you have to borrow to finance previous borrowing. Otherwise all is fine. Trouble is that it’s pro-cyclical. In good times you can carry more debt than in bad times. All that is really simple.Question is, when you find yourself in bad times with too much debt how do you get rid of it?a) Generally, we would expect it to come out of retained earnings. Difficult in hard times. AND CONTRACTIONARY, but not necessarily DEFLATIONARY.b) We might borrow more expecting good times to return – assumes someone is willing to lend.c) We might spread the debt over a broader resource (taxpayer) making it easier to service.d) Creative minds on wall street can make SIV’s to hide it in the margarita islands.e) We can abrogate our responsibility by repudiating our debt – pro-cyclical too. As 2cents said one man’s debit is another man’s credit.f) We can manipulate that substitute value (inflation).The one thing BB is right about is that in a fiat monetary system there is always and everywhere the ability to create inflation. And our perma-growth model does not allow for economic contraction. So… create money, debase the currency, dilute both the asset and the liability (debt). Establish a new basis. Problem here is that the savers (those holding $ as assets) might see this coming and run into other assets. (There be monsters here!) So, better to do it suddenly and unexpectedly. Watch for this. Still, it changes only the substitute value.Nothing here makes “evaporflation” (whatever that is) necessary. I suspect some confusion between contraction (economic) and deflation (monetary).

        • MA   March 22, 2009 at 10:42 am

          One mans debt is another mans credit.That’s precisely what does not exist. There was a “trap” (pressure cooker) and there was “extraction”, which at it’s VERY VERY VERY LEAST is called “interest”.Extraction was no longer just consumption. (man-A pays man-B$1 for a bottle water, then drinks it)Man-A now has water, but it has been consumedMan-B now has dollarThe next stage was the debting one…Man-A borrows from Man-C to pay Man-B $1 for a bottle of water, then drinks itMan-A now had water, consumed it, and owes $1+Man-B now has dollarMan-C has the expectation of receiving a dollar, plus interest.Man-C in order to finance his loan, sold the expectation. That expectation was being sold back and forth at variables larger then $1Men-X, Y and Z bought and sold that expectation amongst themselves, and each time they did, they were booking a profit on their books. That profit they booked was fiction, but they made it look real. After Man X,Y,and Z made $10 worth o profits, they each took out $2 in fees. (extracted/consumed). In addition, Man-X, Man-Y and Man-Z The rest of that fake profit was their collateral to take out more loans.)…and then it happened!Man-A couldn’t pay for his bottle of water.The debts and credits don’t equal anymore. That’s to idealistic.Miss AmericaOne more thing…when I throw out a sample like the compounding one, or this one above, it is for the general audience. It’s not meant to insult any knowledge of the system workings that many of the visitors here seem to have. I don’t think you were offended… but I just like to let you know anyway.

          • Free Tibet   March 22, 2009 at 7:50 pm

            not offended at all. trying to understand how you see it.i do see some argument in the case where we are simply “creating” new money. that is imbalanced.

          • Free Tibet   March 22, 2009 at 8:01 pm

            no, i’m sorry. They are equal.A has his water which he drank up.B has his $C, X, Y & Z have future expectations of cash flows (credits) which are now worthless. That which was booked as profit is indeed now gone. And to use B’s money to prop that us is to lose B’s money too.

  12. Andrew Held   March 19, 2009 at 5:56 pm

    Price instability might be worked in to another analogy, namely phase transition. This quote from Hussman, who uses it to explain stock market internal dispersion(July 30, 2007)has the same flavor.”Leadership has also reversed decisively. I’ve noted over the years that substantial market declines are often preceded by a combination of internal dispersion, where the market simultaneously registers a relatively large number of new highs and new lows among individual stocks, and a leadership reversal, where the statistics shift from a majority of new highs to a majority of new lows within a small number of trading sessions.This is much like what happens when a substance goes through a “phase transition,” for example, from a gas to a liquid or vice versa. Portions of the material begin to act distinctly, as if the particles are choosing between the two phases, and as the transition approaches its “critical point,” you start to observe larger clusters as one phase takes precedence and the particles that have “made a choice” affect their neighbors. You also observe fast oscillations between order and disorder in the remaining particles. So a phase transition features internal dispersion followed by leadership reversal. My impression is that this analogy also extends to the market’s tendency to experience increasing volatility at 5-10 minute intervals prior to major declines.”

    • Andrew Held   March 19, 2009 at 9:05 pm

      I might add that from my own experience in phase transitions the particles choose not only between the two phases, but also other possibilities, which eventually do not win out.In socio-economic situations the number of attempts to initiate new patterns is somewhat restricted, leading less chance of a true equilibrium or optimal situation developing. I’m sure some historian or sociologist could expound much further, e.g. on the many deviant possibilities for WWI and II, such as in alternative reality SciFi novels.

    • PeterJB   March 20, 2009 at 9:00 pm

      IMO totally valid however there is 1. usually an initial resistance to the processes and 2. the process is differentiated which means it can never be repeated exactly in the details and,will probably run in rhythms starting a new /unique sequence after a set number of beats.Your example tends to go against ruling theory that sub-atomic entities are point zero, or, they have no structure – but I disagree, everything has structure and as such I proposed the sub-infinite theory – rejected of course.Everything has structure and that which you are describing is structure as we live is a dynamic Universe(s) and NOT a static Universe as most will have you believe.Good comments and appreciated.

  13. MA   March 20, 2009 at 10:19 am

    Andrew, Thank you for that Hussman piece. It kinda mirrors what I said.I am simply trying to coin my terms since there are not existing termes that accurately describe where we are what went on and what will occur.As long as we continue to use incorrect terms to diagnose the problem, we will not find a cure since those incorrect terms have “cures”. but those cures are incorrectly being placed into our current situiation.Until we get full recognition of our problem, (diagnosis) we can not properly cure it.Thanks again.Miss America

  14. Pecos Banker   March 20, 2009 at 11:58 am

    MA,Did you have a chance to look at my response above? 3/19 at 16:33

    • MA   March 20, 2009 at 12:30 pm

      I missed it. I’ll answer up there in a bit.

  15. George Harter   March 21, 2009 at 3:25 am

    The reason the Obama clique (RUBIN,CITI,GOLDMAN,WALLSTREET)went with a non-entity like Geithner is that there are still potential trouble makers like YOU around. Someone who is not cuffed by idiotic conventional thinking could cause real problems for many powerful people.Lando’Goshen,there are still some people around that can THINK! Not just regurgitate Ivy League pap. Even in America!!Obama was NOT elevated to introduce new terms into the economic equations!!Capt. A.3rd Boro,USA

    • Free Tibet   March 21, 2009 at 6:44 am

      as one who never went to school I keep asking myself how these people leading us ever got in school. You wait. We’ll be building abu-gulag on the hudson for people who can think. and the fed will write notes to pay for it.

  16. Kerit Stik   March 22, 2009 at 4:08 pm

    Price discovery is being made murky by international economic warfare with every sovereign nation engaging by manipulations in their own and opponents markets. Competetive currency debasement, quantative easing, deficit based stimulus plans, carry trade activity, central bank interest rate sets make forex a whipsaw. Bond markets game CBs with short term profit seeking on artificially suppressed yields just as they see money supply printing invoking some form of inflation. Interventions in currencies, bonds, equities distorts all value determinations day-to-day. Commodities respond to all the private speculation and public manipulation proportionally within a long-term decline occasioned by demand slump and production pullback. Precious metal commodities are twitchy with the general market anxiety, substitution for currencies losing confidence and battles with CBs which seek to undermine its purity as substitute.Additionally, the trading community in each of these markets have created derivative products stripped from the reality of the underlying entity. It introduced high volatility which would be damped were the speculator a true consumer of commodity, bond, real asset. Derivative and paper trade of a proxy IOU effectively has counterfeited and overstated supply. If physical delivery were an absolute essential of the contract buying and selling, prices might better approach a market clear. Price stability has become a casualty of the rampant speculation characteristic of a system in turmoil, and a goal of ecowarriors. Using paper trade to speculate irrespective of delivery or use and utility of underlying product or service effectively makes the market a turbulent casino with every entity just a different parlour game or betting device. The problem is that the market is now only a diluted device for distributing value added products to consumers; much of it is a circular betting machine.Deliberate chaos forces players to seek level playing field and systemized, absolute rules to bring again order. It would be an effective means of compelling some globally unified system requiring a single universal and global currency, a global central banker, and a globally binding and impartial approach to individual trade policy. Uniform currency, monetary policy, trade behavior supposes a singular and all-powerful government with absolute control over its federated and subordinated states.I hope I’m wrong.

  17. London Banker   March 29, 2009 at 6:08 am

    Intrigued by the quality of the above comment, I googled your handle. It’s a GoogleWhack! For those unfamiliar, a GoogleWhack is a unique instance of two or more words in the Google database. Kudos for coming up with such a unique moniker and for bringing your thinking here to Rich’s blog.

  18. Anonymous   March 30, 2009 at 11:35 am

    Nice post. On foreclosure: I like the produce-the-note strategy. I live in Tampa and know one person he helped, and it actually worked. They did not get the entire home paid for, but they got terms adjusted to be favorable and they were able to avoid foreclosure. It really varries by situation and probably the laws of your state on how far this goes. This site has all the videos they have done. Watch all the videos here:http://www.tinyurl.com/producenotevideo