WTF? (**NSFW**)

[Lord Ratner]

8 hours ago, HuggyU2 said:

I have no idea how this works... but my friends that seem savvy like you say just the opposite about newest rates. 
FWIW, I hope you are right and they are wrong. 

https://fred.stlouisfed.org/series/GFDEBTN

Sadly, the true best-case scenario would be for rates to stay just high enough to exert such extreme pressure on the global financial system that the world is forced into a very painful, but survivable, bad-debt detox. Laughably, that rate would probably only be about 3%. 

 

Looking at the chart above, it took from the founding until 1981 to get to $1T of debt. $1T in 2023 dollars is $3.4T. But remember, a debt gets cheaper due to inflation. This fact will matter in the years ahead. 

It took from 1981 to 2008 to get from $1T to $10T. 27 years for $9T increase

From 2008 - 2018 it went from ~$10T to ~$20T. 10 years for a 10T increase

From 2018 to now it went from #20T to $33T, with an additional $1.9T of additional debt planned for the second half of 2023, so lets say ~$15T of additional debt in 6 years

The trajectory is parabolic. And keep in mind, we have never had such a high deficit-to-GDP ratio outside of wartime. If the government is taking on this type with record-low unemployment and record-high tax receipts (from 2021 and 2022), what do you think it will look like when the economy just slows down a little?

So, the debt is spread out over a range of Treasury bills, notes, and bonds (just called "bonds" for now) ranging from a few weeks to maturity to 30 years. Because we only exist in a deficit now, when a bond matures, the government must issue another to cover the payout of the maturing bond. In the corporate world this is called rolling over the debt. When you do this, the new bond must be issued at whatever the prevailing interest rate is. 

https://fred.stlouisfed.org/series/DGS30

Click "max" on the chart to see the full series. You'll see that the yield on bonds has been steadily dropping for just under 40 years. That means every time the government had to pay out a bond, they were able to cover it with a cheaper bond. Imagine if every month your car payment went down through no effort of your own. You'd probably use the extra money each month to buy something else. So too did the government. 

The problem with a normal yield curve (the chart that shows the various interest rates of the increasing bond durations, click here) is that its usually cheaper to give out shorter-term bonds than longer term bonds. So in 2019-2020 when the government could have been issuing 30 year bonds at less than 2% to fund the government, they instead chose a whole lot of < 2year bonds yielding less than .25% (a quarter of a percent!), because lower is better, right?

 

Well now the best rate they can get is 4%, which is devastating when you have to roll over trillions in debt from .25% to 4%. This article explains it well, but I'll include a couple highlights:

"Net interest payments on the national debt rose from $352 billion in 2021 to $475 billion in 2022 — the highest nominal dollar amount in recorded history."

"Much of that increase was due to higher interest rates on U.S. Treasury securities. Although borrowing rose sharply over the past few years to address the COVID-19 pandemic, interest costs were muted as a result of low interest rates."

"Interest costs represented about 8 percent of total federal outlays in 2022. By 2033, that share will rise to 14 percent and will exceed programs such as defense and Medicaid."

Keep in mind, the article uses CBO estimates which are grossly optimistic, and always wrong. Always.

 

So basically, with interests rates anywhere above 1%, we have an unsustainable debt spiral. It's not just us. The EU was using negative interest rates to support their insane deficit spending. China plowed trillions into worthless ghost cities. 

Now you might ask, why doesn't the Fed (and other central banks) just lower interest rates if they are so devastating?

Inflation. The great destroyer. Inflation is great for governments. It turns big debts into small debts. Ever wonder why the Fed targets 2% inflation instead of 0%? It's because they long ago realized that governments operating under fiat currency will never pay down their debts. But if you let inflation slowly erode the value of a dollar, you can keep the debts manageable, if you manage to keep the growth of the debt under the growth of the economy. We haven't.

Unchecked inflation is the quickest way to social upheaval. Not just because people see their purchasing power decline, but because government money-printing always disproportionately goes to the already-rich and connected. Take a look here. 

Pay close attention to the differing slopes. Also notice that the runaway increase at the top coincides with the Fed interventions in 2002 (tech bubble popping), 2008 (quantitative easing from the Global Financial Crisis) and 2020 (Covid crash). 

So when inflation really comes to eat our lunch, and it hasn't yet, a 50% decrease in purchasing power is going to hit the bottom lines a lot harder than the top lines. You want a civil war? This is how you get a civil war. 

 

And overwhelmingly, all of this madness was brought to you by a federal reserve that decided that artificially-low interest rates would help government spending spur economic growth, and a congress that was all too happy to increase their spending ability through the roof, while telling the American people that it was actually good for the economy for the government to spend this way. Keynesian economics reaching it's only logical conclusion: collapse. 

 

Buckle up, kids. It's going to be an interesting decade or two. 

[FlyingWolf]

8 hours ago, Lord Ratner said:

Wisdom

Well layed out thoughts here, you largely supported my intuited fears.

What is a middle class man to do in such a world?

Best I can figure, its buy arable land and ammo, but more practical advice would be appreciate.

[Clark Griswold]

https://fred.stlouisfed.org/series/GFDEBTN
Sadly, the true best-case scenario would be for rates to stay just high enough to exert such extreme pressure on the global financial system that the world is forced into a very painful, but survivable, bad-debt detox. Laughably, that rate would probably only be about 3%. 
 
Looking at the chart above, it took from the founding until 1981 to get to $1T of debt. $1T in 2023 dollars is $3.4T. But remember, a debt gets cheaper due to inflation. This fact will matter in the years ahead. 
It took from 1981 to 2008 to get from $1T to $10T. 27 years for $9T increase
From 2008 - 2018 it went from ~$10T to ~$20T. 10 years for a 10T increase
From 2018 to now it went from #20T to $33T, with an additional $1.9T of additional debt planned for the second half of 2023, so lets say ~$15T of additional debt in 6 years
The trajectory is parabolic. And keep in mind, we have never had such a high deficit-to-GDP ratio outside of wartime. If the government is taking on this type with record-low unemployment and record-high tax receipts (from 2021 and 2022), what do you think it will look like when the economy just slows down a little?
So, the debt is spread out over a range of Treasury bills, notes, and bonds (just called "bonds" for now) ranging from a few weeks to maturity to 30 years. Because we only exist in a deficit now, when a bond matures, the government must issue another to cover the payout of the maturing bond. In the corporate world this is called rolling over the debt. When you do this, the new bond must be issued at whatever the prevailing interest rate is. 
https://fred.stlouisfed.org/series/DGS30
Click "max" on the chart to see the full series. You'll see that the yield on bonds has been steadily dropping for just under 40 years. That means every time the government had to pay out a bond, they were able to cover it with a cheaper bond. Imagine if every month your car payment went down through no effort of your own. You'd probably use the extra money each month to buy something else. So too did the government. 
The problem with a normal yield curve (the chart that shows the various interest rates of the increasing bond durations, click here) is that its usually cheaper to give out shorter-term bonds than longer term bonds. So in 2019-2020 when the government could have been issuing 30 year bonds at less than 2% to fund the government, they instead chose a whole lot of < 2year bonds yielding less than .25% (a quarter of a percent!), because lower is better, right?
 
Well now the best rate they can get is 4%, which is devastating when you have to roll over trillions in debt from .25% to 4%. This article explains it well, but I'll include a couple highlights:
"Net interest payments on the national debt rose from $352 billion in 2021 to $475 billion in 2022 — the highest nominal dollar amount in recorded history."
"Much of that increase was due to higher interest rates on U.S. Treasury securities. Although borrowing rose sharply over the past few years to address the COVID-19 pandemic, interest costs were muted as a result of low interest rates."
"Interest costs represented about 8 percent of total federal outlays in 2022. By 2033, that share will rise to 14 percent and will exceed programs such as defense and Medicaid."
Keep in mind, the article uses CBO estimates which are grossly optimistic, and always wrong. Always.
 
So basically, with interests rates anywhere above 1%, we have an unsustainable debt spiral. It's not just us. The EU was using negative interest rates to support their insane deficit spending. China plowed trillions into worthless ghost cities. 
Now you might ask, why doesn't the Fed (and other central banks) just lower interest rates if they are so devastating?
Inflation. The great destroyer. Inflation is great for governments. It turns big debts into small debts. Ever wonder why the Fed targets 2% inflation instead of 0%? It's because they long ago realized that governments operating under fiat currency will never pay down their debts. But if you let inflation slowly erode the value of a dollar, you can keep the debts manageable, if you manage to keep the growth of the debt under the growth of the economy. We haven't.
Unchecked inflation is the quickest way to social upheaval. Not just because people see their purchasing power decline, but because government money-printing always disproportionately goes to the already-rich and connected. Take a look here. 

Pay close attention to the differing slopes. Also notice that the runaway increase at the top coincides with the Fed interventions in 2002 (tech bubble popping), 2008 (quantitative easing from the Global Financial Crisis) and 2020 (Covid crash). 
So when inflation really comes to eat our lunch, and it hasn't yet, a 50% decrease in purchasing power is going to hit the bottom lines a lot harder than the top lines. You want a civil war? This is how you get a civil war. 
 
And overwhelmingly, all of this madness was brought to you by a federal reserve that decided that artificially-low interest rates would help government spending spur economic growth, and a congress that was all too happy to increase their spending ability through the roof, while telling the American people that it was actually good for the economy for the government to spend this way. Keynesian economics reaching it's only logical conclusion: collapse. 
 
Buckle up, kids. It's going to be an interesting decade or two. 

They’ve hedged their bet they can ride this out with an unending media driven narrative, tech monopolies, surveillance state, two tier legal system, cancel culture, promotion / legalization of vices, a Brownshirt army (Antifa, BLM) & distracting social perversions

I doubt that will work, it’s not an American Civil War 2 I worry about but an American Insurgency when things fall apart


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[Lord Ratner]

8 hours ago, FlyingWolf said:

Well layed out thoughts here, you largely supported my intuited fears.

What is a middle class man to do in such a world?

Best I can figure, its buy arable land and ammo, but more practical advice would be appreciate.

Investing in the possibility of a societal collapse is a losing game. Even though it's possible. Think about what happens between now and a collapse, and invest in that. 

 

Inflation will be the name of the game going forward. Not immediately, but once "something breaks" and the Fed is forced to drop rates (from political pressure), the inflation fire will be reignited.

 

The West has been at war with fossil fuels for 20 years now, and failed to produce an alternative. The lack of investment in exploration and extraction will come back to bite us. Fossil fuels and nuclear (the only viable alternative) will probably see huge gains as constricted supply and an inflated dollar collide.

If the narrative shifts to entrenched inflation, gold probably does very well. 

The last time tech was this elevated, it fell 80%. Real estate looks ugly too.

Healthcare is hard to bet against when the largest voting block is too old to survive without medical intervention.

Edited September 8, 2023 by Lord Ratner

[Milton]

10 hours ago, Lord Ratner said:

Keynesian economics reaching it's only logical conclusion: collapse. 

I'm by no means an expert on monetary policy, but it is fascinating that the same people who bemoan "trickle down economics" are generally the same types that support Keynesian principles like central banking, manipulating the business cycle, and fiat currency which generally follows a path from the Federal Reserve, to national banks, to large corporations and smaller banks, investors, smaller banks, and then on to the working class. It almost sounds like...wait, no that can't be.

I think your graph summed that up pretty well; quantitative easing (aka money printing) lined up pretty nicely with spikes in wealth amongst the top 0.1%.

But I'm sure the "Inflation Reduction Act" will reduce inflation...

[Khruangbin33]

https://hiddenforces.io/podcasts/fiscal-dominance-banking-syste-us-deficit-charles-calomiris/

"How the U.S. Government Will Force Banks to Fund the Deficit"

This podcast leaves the juicy bits for the premium second hour and I'm not a paying subscriber, so I don't know the specifics, but the propositions in the first hour do track with what's being discussed here.

The guest's paper:  https://files.stlouisfed.org/files/htdocs/publications/review/2023/06/02/fiscal-dominance-and-the-return-of-zero-interest-bank-reserve-requirements.pdf

[Lord Ratner]

7 hours ago, Khruangbin33 said:

https://hiddenforces.io/podcasts/fiscal-dominance-banking-syste-us-deficit-charles-calomiris/

"How the U.S. Government Will Force Banks to Fund the Deficit"

This podcast leaves the juicy bits for the premium second hour and I'm not a paying subscriber, so I don't know the specifics, but the propositions in the first hour do track with what's being discussed here.

The guest's paper:  https://files.stlouisfed.org/files/htdocs/publications/review/2023/06/02/fiscal-dominance-and-the-return-of-zero-interest-bank-reserve-requirements.pdf

Maybe the best summation I've read so far of what I think will happen. The concept of "expected and unexpected inflation tax" is a bit difficult to grok, but the basic idea is that inflation will be the chosen solution eventually.

[HeloDude]

On 9/7/2023 at 11:32 AM, Lord Ratner said:

And overwhelmingly, all of this madness was brought to you by a federal reserve that decided that artificially-low interest rates would help government spending spur economic growth, and a congress that was all too happy to increase their spending ability through the roof, while telling the American people that it was actually good for the economy for the government to spend this way. Keynesian economics reaching it's only logical conclusion: collapse. 

 

Buckle up, kids. It's going to be an interesting decade or two. 

Appreciate the data.  My question is this:  When does all this start that it becomes obvious to a majority of Americans that we’re in trouble?  Predictions are great and all, but if the person making them can’t be fairly accurate with the timeline then the predictions are near useless…just take a look at the global warming/climate change nonsense predictions over the last 30+ years. 

[ViperMan]

32 minutes ago, HeloDude said:

Appreciate the data.  My question is this:  When does all this start that it becomes obvious to a majority of Americans that we’re in trouble?  Predictions are great and all, but if the person making them can’t be fairly accurate with the timeline then the predictions are near useless…just take a look at the global warming/climate change nonsense predictions over the last 30+ years. 

That process is beginning now, IMO, but there are many naysayers out there whose job is to spout rainbows and keep people in denial. Read a book called "The Coming Generational Storm." It points to the size of generations and how accounting needs to be internally balanced. The baby boom generation has written more checks than they can cash, now, smaller generations below them who are less productive are going to have to make up that productivity gap and pay those bills. This, combined with the flattening (redistribution) of productivity to many other parts of the world are going to lead to tougher economic conditions for those who don't have the means or wealth to support themselves and their families.

Current housing prices are probably the thing that is going to cause the most people to wake up - that they may never come down again, combined with flat wages, is going to mean many people must permanently work.

Edited September 11, 2023 by ViperMan

[HeloDude]

13 minutes ago, ViperMan said:

That process is beginning now, IMO, but there are many naysayers out there whose job is to spout rainbows and keep people in denial. Read a book called "The Coming Generational Storm." It points to the size of generations and how accounting needs to be internally balanced. The baby boom generation has written more checks than they can cash, now, smaller generations below them who are less productive are going to have to make up that productivity gap and pay those bills. This, combined with the flattening (redistribution) of productivity to many other parts of the world are going to lead to tougher economic conditions for those who don't have the means or wealth to support themselves and their families.

Current housing prices are probably the thing that is going to cause the most people to wake up - that they may never come down again, combined with flat wages, is going to mean many people must permanently work.

I don’t doubt that all the massive spending, policies/regulations making products more expensive, energy situation, etc is good. My question is when are we going to notice this massive economic downturn?  If you say now, then I would very much disagree.  While I don’t think the economy is good, we’re not in 2001 or 2008/2009 levels yet.  

[ViperMan]

2 hours ago, HeloDude said:

I don’t doubt that all the massive spending, policies/regulations making products more expensive, energy situation, etc is good. My question is when are we going to notice this massive economic downturn?  If you say now, then I would very much disagree.  While I don’t think the economy is good, we’re not in 2001 or 2008/2009 levels yet.  

This is where you just have to look.

Look at the housing market. Can you afford a new house? Can a working family afford a house almost anywhere in this country anymore? Look at the level of capital it take to purchase an asset now-a-days (i.e. something that's going to hold value).

The degradation has begun. If you need to see a "crash" to have the point proven to you, well you may wait for eternity. But I'll just point to the above fact again. We didn't need a crash to cause housing to be unaffordable, and yet if no one can afford a place to live, how is your QOL doing? If you define a downturn as stock prices crashing, then sure, maybe that's not going to happen, but if you can't buy a house to live and thus you have to work forever, then I'd say the crash was a stealth crash. It didn't look like what you were expecting, but the affect has been the same.

[HeloDude]

33 minutes ago, ViperMan said:

This is where you just have to look.

Look at the housing market. Can you afford a new house? Can a working family afford a house almost anywhere in this country anymore? Look at the level of capital it take to purchase an asset now-a-days (i.e. something that's going to hold value).

The degradation has begun. If you need to see a "crash" to have the point proven to you, well you may wait for eternity. But I'll just point to the above fact again. We didn't need a crash to cause housing to be unaffordable, and yet if no one can afford a place to live, how is your QOL doing? If you define a downturn as stock prices crashing, then sure, maybe that's not going to happen, but if you can't buy a house to live and thus you have to work forever, then I'd say the crash was a stealth crash. It didn't look like what you were expecting, but the affect has been the same.

If housing is (or going to soon be) so unaffordable that the vast majority of people won’t be able to afford one…or won’t be able to afford one without working until they’re near death/old age, then there has to be very large bad visible 2nd and 3rd order affects to the economy.  If you’re spending so much for housing, rent or mortgage, then you have less money to buy clothes, eat out, fix your car, buy a new cell phone, etc.  That means that these businesses will earn less, hire fewer people, and on and on.  All that most definitely affects the economy—and yes, it will then most definitely affect the stock market. 
 

So again, my question is when?  I’m not buying this “stealth crash”.  I think we’ll eventually see the signs I mentioned above…but again, when?

[ViperMan]

13 hours ago, HeloDude said:

If housing is (or going to soon be) so unaffordable that the vast majority of people won’t be able to afford one…or won’t be able to afford one without working until they’re near death/old age, then there has to be very large bad visible 2nd and 3rd order affects to the economy.  If you’re spending so much for housing, rent or mortgage, then you have less money to buy clothes, eat out, fix your car, buy a new cell phone, etc.  That means that these businesses will earn less, hire fewer people, and on and on.  All that most definitely affects the economy—and yes, it will then most definitely affect the stock market. 
 

So again, my question is when?  I’m not buying this “stealth crash”.  I think we’ll eventually see the signs I mentioned above…but again, when?

When is anybody's guess, and it's a fool's errand to try to predict crashes. I hear what you're saying re: offsetting effects through the rest of the economy, but there is a reason why your average asset has become so decoupled in price from other goods. For example, I can still buy a pretty decent car for $20K. That was true in 2000. I could buy an amazing home in 2000 for $500K. Now? Don't even think that'll get you a shack in certain areas. This decoupling is what I'm talking about. The money class figured out a way to inflate the price/cost of anything that can be used as a vehicle to pass on wealth and has pushed it out of reach for your average American - this is a humongous social problem in the offing.

So sure, don't buy the stealth crash. It was meant as a metaphorical way to simply describe what I've laid out above - which is that if you try to buy anything right now that is going to hold value indefinitely, you're out of luck. Americans have been split into two classes by the last 15-20 years of monetary policy. Or perhaps a better way to say it is where the "slice" between the classes cuts, has moved waaaaaaaaaaaay to the right. Not good.

Edited September 11, 2023 by ViperMan

[Lord Ratner]

21 hours ago, HeloDude said:

Appreciate the data.  My question is this:  When does all this start that it becomes obvious to a majority of Americans that we’re in trouble?  Predictions are great and all, but if the person making them can’t be fairly accurate with the timeline then the predictions are near useless…just take a look at the global warming/climate change nonsense predictions over the last 30+ years. 

Exact timing? Dunno. We are at a fork in the road between an asset-value-crash and reigniting inflation. I have no clue what the Fed picks, but I don't expect them to let the government go insolvent until they have no choice. That means a new tea-party wave of politicians replacing the entrenched incumbents and forcing the Fed to fix their mess. That too will take time. 

 

In the short term, they can't stop inflation and protect the government/stock market/investor class. These are now mutually exclusive interests. So if you want to invest in something, keep an eye on commodities. The government can't control the price of oil, copper, etc. 

 

But the safe answer right now is to shovel your money into short-term treasuries. No risk from rate-changes and a pretty good yield right now. Whatever you do, don't sit on cash right now. When the Fed starts cutting rates, move your money into something that will benefit from inflation. 

 

Fun Fact: Because the Fed has increased their balance sheet so spectacularly, the only way they are able to keep rates above ~0% is by directly paying the banks and money-market funds to not put their money into treasuries (which would push up the prices and lower the yields/rates). So as we speak, the Fed is paying the banks billions to sit on the reserves that the Fed forced them to take in the first place. If you don't think the system is rigged, your aren't paying attention. But I don't think this madness can go on for too long.

[arg]

 

Injured Grand Canyon hiker, 63, saved after friends abandoned him to continue backpacking

 

https://www.foxnews.com/us/injured-grand-canyon-hiker-63-saved-friends-abandoned-him-continue-backpacking

 

 

[VMFA187]

4 minutes ago, arg said:

 

Injured Grand Canyon hiker, 63, saved after friends abandoned him to continue backpacking

 

 

 

Pirate rules. You fall behind, you get left behind. 

[nunya]

That dude better be careful diming out his group. With friends like that, snitches get stitches.

[Smokin]

That group better be careful before that dude pulls a Hugh Glass on them. 

I first read the headlines and thought, no big deal.  If I'm hiking with a group of friends and twist my ankle in the canyon then sure, I'll sit on this rock for a few hours and you guys can pick me up on the way back out.  But walking away from a dude that needs a helicopter evac?  That's not cool.

[brabus]

Even if it was an “out and back” hike, you should never leave someone alone unless in an absolute live or die situation. Even just for a few hours. Technology/social media has driven so many idiots (or at least extremely naive) to have a false sense of backcountry capability/safety. Like the occasional tourist who looks at me sideways when they pass me with a pistol and bear spray on me. Yeah dumbass, there’s grizz everywhere and they will rapidly help you experience an excruciating death.

[Swizzle]

Had to research a project and find Army pubs. Opening the page found the ?quintessential Army experience? under the top downloaded forms and it gave me a good laugh...

1. I want to leave, take leave

2. You've been counseled

3. We're taking admin action against you

4. I have a new dependent to add to MilPDS

5. I need to borrow something

[Lawman]

Had to research a project and find Army pubs. Opening the page found the ?quintessential Army experience? under the top downloaded forms and it gave me a good laugh...
1. I want to leave, take leave
2. You've been counseled
3. We're taking admin action against you
4. I have a new dependent to add to MilPDS
5. I need to borrow something

That’s a pretty significant misunderstanding of what 4 of those forms actually do, but ok…

3. (personnel action) is used administratively for literally any change in your records (senior wings, change of unit within guidon, school application).




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[Swizzle]

8 hours ago, Lawman said:

That’s a pretty significant misunderstanding of what 4 of those forms actually do, but ok…

3. (personnel action) is used administratively for literally any change in your records (senior wings, change of unit within guidon, school application).




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Likely, but not as entertaining 

[M2]

 

[tac airlifter]

1 hour ago, M2 said:

 

 

 

[M2]

On 9/26/2023 at 6:43 PM, M2 said:

 

https://www.themirror.com/entertainment/celebrity-news/britney-spears-concerns-grow-star-119217?fbclid=IwAR1Wwb8U7hfGKXZGaSPU58LOMsMH7adVPsbtWLkT89ThwpQM6pZlIAZWIq4

🤣🤣🤣