yak butter.

Never steered me wrong yet, and for someone who is still not certain what to make of "Gold Bug" advisors, a much more straightforward point of entry into market dynamics.

that the entire 'financial services' industry, which is super-global, at this point, is pulling out all the stops to make sure the house of cards doesn't collapse. and so far, it's working.

if the US 'goes down,' so do a lot of other economies. china, europe, even some of the oil kingdoms, which rely on stupid americans in SUVs driving up and down and all over the place at 'cheap' prices. none of the elite leadership of any of those concerns really want a complete crash.

they're likely to get it anyway, because most of them are too stupid to understand the reality of economic laws of nature. but they're going to make sure we get the tap dance/show for as long as they can pull it off, the better to convince people that everything is under control, that it's only a 'recession,' and that the bubble (pick your fav) "can be reinflated again with simple stimulus spending.'

the funny part is that their own greed brough about their coming demise. don't get me wrong: people with 50m or more in the bank are going to come out of all of this "ok," by the standards of people like you and me. 50m buys a lot of space in a gate community, pays salaries for guards and house slaves, and lots of netflix dvds to watch when cnn becomes the 'all riots, all the time' channel. but this nice, fluffy New World Order fiction they've been mastubating to, for so long now? well, that's the problem with not taking care of billions of poor people while feeding them teevee. eventually, they all join "al qaeda."

anyway, i agree with the above: don't ever trust a GoldBug. stupidest people on the planet, after the fundies. trust me, i've wasted a lot of time on them, and the truth is they may smoke pot and be atheists, but when it comes to their ridiculous fantasies about economic theory, they are just as lunkheaded as the gawd whisperers.

A year ago I would have been right there along with CD and BIO, but we are living now in truely new economic times. Have a look at the blue bordered charts purportedly from the Fed reproduced in this article: http://www.marketoracle.co.uk/Article788... It seeems to me quite reasonable that with all the deficit spending that 1). Bush did for 8 years on his wars and such, then 2). the big bailout, then 3). the Fed's sneak even bigger bailout, then 4). the stimulus package about to be enacted and 5). even more deficits that are sure to follow, it seems reasonable that the supply of treasuries to be offered (to borrow money to cover deficits) will outstrip demand. Interest rates have to go up to try to attract bond buyers when demand flags. Those interest rates ripple through the rest of the economy.

Who is going to buy all those bonds? The Chinese are starting to pull back, I understand. The dollar has stayed strong because the bailout bucks to the banks have not gone out in loans. The Fed has taken most of it back and held it as "Excess Reserves of Depository Institutions" (6th blue bordered chart). As long as it is only dribbled out, the dollar stays strong, treasury interest rates stay low and demand stays strong for the bonds. How long can that go on? I don't think you can flood the economy with all the newly printed trillions and expect to keep the lid on inflation.

What happens if too much paper money chases too few goods? It starts with "I". With the printing presses running full steam, the full faith and credit of the goverment backing the paper money gets to looking pretty raggedy. People flee to gold and other precious metals as a a safe haven when their money looses value. As a former anthropologist, I think it is stupid that people have put such a value on gold and other precious metals, but indeed they have. Go to http://seekingalpha.com/?source=headtabs and then click on "The Macro View", and go to the gold section. This will lead you to pages and pages of articles on gold, both by GoldBugs and those with diametrically opposed views. A couple of articles I was especially impressed with are: http://seekingalpha.com/article/109210-t... and http://seekingalpha.com/article/93744-pr... . I'm leaning toward the GoldBugs view right now. I've just found an institution which will hold actual precious metals as an IRA investment; I may go that route. What little I have socked away for my decrepitude, I can't afford to be eaten away by run away inflation.

Figure out how to be happy.

.. in a book I highly recommend, subtitled The Narrative of Economic Expertise, he discusses what he calls "the American Question," which is:

If you're so smart, why aren't you rich?

Which isn't meant as snark, I hasten to add; it's really a subtle question that bears on agency theory. Here, if these gold bugs are so smart, then why haven't they made themselves rich by using the information they're touting on the market itself?

Jeebus, maybe I've got to add a disclaimer to the effect that Corrente is absolutely the last place one should go to seek, or to proffer, financial advice. If I were any good at money, I'd have some. What I'm trying to do is figure out how to lead a life that matters, which isn't the name as being rich.

It's the sovereign default or hyperinflation or both that I'm concerned with.

Guess I should have been more clear about what I was asking.

It's the social consequences, and the fact that I'm stuck in a small apartment with no way to get the money to prepare for a big fucking collapse of the system and what's going to happen to my sick wife and my nine month old grandson if the trucks stop running and the hospitals shut down and the neoconfederate survivalist fucks come pouring out of the hills. That's what makes it a desperate question.

http://seekingalpha.com/article/115677-d...
Certainly the hedge funds have (and are still?) de-leveraging. That's what took the stock market down to its current lows. Part of that was commodities which took the oil prices down. Certainly people have zipped up their pocketbooks and have reduced spending, but I don't see much deflation at the grocery store or other stores where I buy a few things. A little block of suet and seeds that I could buy to feed the birds last year for 89 cents is now $1.29. My loaf of cheap wheat bread has come down from $1.39 to $1.19, but that is still up from $.99 last year. At least, it would be nice if the lower transportation prices (from lower oil prices) and lower wheat prices found their way to the check-out counter. So where is the deflation? Except for the gas station it is business as usual.

If a complete collapse comes - and I think that's unlikely because the Chinese and Russians and everyone else has no place else to go but US T-bills, we're fucked, but not as fucked as the euros so they Chinese and other folks can complain, but they have no place else to go* - but if for some reason the entire thing comes apart, then you have to ask yourself where do you want to be. Personally, sitting with an assault rifle on a stack of gold bars trying to keep the hordes away sounds like an awful existence.

My people have been poor through war (the Civil War) and depression (the Great One), but we've never gone hungry. The reason is simple, we have a small patch of land. It's worth little, but it's got fresh water and you can grow food on it (and tobacco).

For folks who find themselves with a little money, I'd suggest you might be happier purchasing a couple of acres within a day's drive of your house. In some rural parts of the country, you can get land for $1,000 - $2,000 an acre. It doesn't matter if it's out in the middle of nowhere. In fact, it's better that way. Ground water so you could drill a well would be a plus. If you want a building, you can build yourself a cabin from a kit for about $10,000.

And here's the thing, it not only serves as a great backstop in times of trouble, but can also be a good thing in good times. You can take the kids there to camp out. You can see the stars once you're away from civilization. You can shoot guns or bows and arrows at targets or just run free in the great outdoors. You can grow things there in good times and in bad.

For less than $20,000 you have a safe haven and a vacation property!

Or, you know, you can buy a bunch of gold bars and an AK and wait to be robbed.

* Don't get me wrong, it's going to be bad, but I think more like Great Depression bad, than apocalyptic bad. And, yes, the Government seems to be doing all the wrong things and making it worse, but the Government did that under Hoover, too.

I have some reading to do, and I think that makes a hole lot more sense than advice like "For hell's sakes, stop reading the GoldBugs". Even when people are bat-shit goofy you learn by reading and listening. I was forced to take ROTC back in the Stone Age when I went to college. It was amazing and enlightening to hear how my instructor saw the world (kind of like the general in Dr. Strangelove). Thanks again for the links.

I appreciate all the comments. I found them very helpful as I looked into this further. You good folks helped me gain some clarity and offer some comments to others that they found useful. I feel a bit better about things now. I’ll offer a few opinions with the disclaimer that under no circumstances should you use anything I say as the basis for a financial decision. I am so behind the curve on this subject that I found the Macro 101 and the links helpful, and I am grateful that Bringiton took the time to post them.

1. The bond market. I committed a rather painful analytical error formulating the original question, and a n00b error at that. I was looking at some things that might be evidence that a bond-market crash is on the way. I conflated the possibility of a crash, which might occur as a result of a bubble bursting, with a collapse, which is a different matter entirely. These two concepts need to be kept separate in any economic discussion. To compound my error, I posted in haste on the basis of some second-hand information that I was never able to verify from a reliable source. Buyer beware, etc.

2. China – I think the argument that China has more to lose than to gain from a collapse of our bond market is a fair assessment. Most of their reserves seem to be in dollars and dollar-denominated assets, there’s no alternative to the dollar as reserve currency for now, and it would be better for everyone if we recover and resume purchasing imports from the rest of the world – even if our imports never regain the levels we’ve seen them over the last few years. Given the overall geostrategic situation for all the big actors, I think it’s reasonable in the short term to expect not only China, but also the U.K. and Japan, to support the treasury market by taking losses that wouldn’t make sense on purely economic grounds as long as they have the cash to do so, and absent a game-changing event. This is as much a political consideration for these countries as an economic one, and it’s the reason I’m comfortable discounting a bond market collapse at this time. However, I think it is foolish to count on being the one indispensible country for much longer. Obviously, we need to stop fucking around and get our house in order.

3. Deflation/Hyperinflation. After reading into this argument, I’m in the deflationist camp. I think the comment about standing inside the burning building and worrying about the cold outside has a lot of merit. The question will be resolved eventually not by arguments, but by events, and I don’t know enough about currency flows at the macro level to be comfortable offering further speculation.

4. On the other comments, which I enjoyed reading very much – Getting to know one’s neighbors and acquiring an acre or two of dirt are very good ideas. I would caution anyone purchasing land to look carefully and be sure you’re getting what you want before you buy, especially if you’re planning on using it for horticulture. Soil quality and groundwater will make or break you. I wholeheartedly endorse getting to know one’s neighbors. I am also in hunker-down mode, and have been for over a year now. I do have guns, but when it comes to politics, I advocate purely non-violent methods so long as you’re dealing with a functioning state. That’s not something I’m prepared to compromise on, and I think we need to get a lot better at non-violent resistance to authority in the U.S. My concern about the neconfederate survivalists is a serious one. Their numbers are growing. I live in the Deep South with no hope of getting out anytime soon. Last year I published a letter to the editor and encouraged people to protest on behalf of an activist who was arrested by the police. I made a simple, classic argument against police state powers on constitutional grounds. Two days after the letter was published, some of these people looked me up in the phone book and tried to recruit me. Armed white supremacy is real, at least in this part of the country. I am very angry at both the national government and my state for not doing more to contain it over the last few years.

I plan to do some occasional posting as soon as I can figure out what I would like to say here. I’m working on a series of posts that I may offer here in a couple of weeks if they turn out as well as I hope they do. I’ll try and make a habit of stopping in to comment from time to time. I’ll continue to do the bulk of my blogging elsewhere for now, for several reasons, not least of which is that it takes an assload of work to produce something that I feel is of sufficient quality to publish under the Corrente banner. Thanks to everyone here for setting such high standard for all these years.