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Running Bears and Waterfalls

Running Bears and Waterfalls

Dear friend and foes alike,

You can’t outrun the bear, but you can outrun your neighbour.

Below are two bits of information, at first they may appear to some as being unrelated, but if you take the time and follow the links you may understand where this old wombat is coming from.

Firstly, did you hear the news?

Inflation is up, and apparently it surprised the lads at the RBA, who immediately signalled the possibility of another interest rate rise. The market immediately factored that one in. As I write this we can now exchange our AUD for 1.092 greenbacks. Wow, over a 100% rise in only 10 years.

But who wants greenbacks?

I must admit this sudden rise in inflation, especially here in Oz sort of surprised me as well – simply because the AUD has never been stronger. One would expect that this would help keep living costs low, but overall life’s necessities are on the rise. Imagine if the AUD was 50c to the USD (as it was in 2001), and oil at $113 a barrel as it is now (do the arithmetic)?

Next is what appears to be a totally unrelated piece of information that would interest few, but it is significant:

Good evening Ladies and Gentlemen:
The data for the next few days will be extremely important and I will bring them to you as I receive them.
Before beginning, Adrian Douglas of GATA and Market Force Analysis has just commented that the options exercised in gold for the month of May totalled an astronomical 18,366 or 1.8366 million oz of gold. In silver he announced that 21,721 contracts or 108 million oz of silver were exercised.
If this is true, either Blythe asks the Fed to start printing massive dollars or the Comex goes belly-up.
I am in the process of verifying this and I will inform you. If true this is a major development.
Here is Adrian's comments:
In a stunning development yesterday 18,366 MAY GOLD CALL options were EXERCISED for futures contracts and 21,721 MAY SILVER CALL options were EXERCISED for futures. If these are not settled in a backroom cash deal for large premiums a default is looming!

In short the precious metal derivative market could be unwinding, and those too big to fail banks (J P Morgan Chase & HSBC in particular) are in deep shit. They have sold far too much paper silver and gold and now the holders of paper contracts may want/demand their stuff, the real stuff. But Comex (JPM) doesn’t have nearly enough of the real stuff; only paper (something anyone playing the market would/should know by now) – sooner or later the music always stops.

But never fear, the contract holders will be paid out in cash with a hefty premium to shut them up. This has already happened in the silver game.

The team who pulled that one off apparently walked with an 80% premium on an unknown number of 5,000 oz silver contracts as a cash settlement. But remember the Federal Reserve Bank on behalf of JPM can just print cash all day to pay off their dodgy “contracts”.

Now, here is an essay that will help you connect the two pieces of information above.

I have no idea who wrote it, nor does anyone else on the web, but I would recommend you all to read it (it’s sort of longish), and if possible take time and try to make sense of it, because it is very important (re-read it if need be – I did).

This is what someone else, who held the opposite view, had to say about this essay after digesting it.

Sheesh! Where to begin? It’s difficult to give up a belief system that took root 30 years ago, but I find your arguments irresistible. I took notes as I read the essay, thinking to rebut you point-by-point; instead, halfway through it I found myself overwhelmed by the clarity of your thoughts. The real power of this essay is that each step of the hyperinflationary endgame you foresee is entirely consistent with human nature, particularly where self-interest and self-preservation are fated to play out.

Good luck

the wombat

PS. Alan, I bet you got all paranoid with the title of this post old mate, but if you read the above I’m sure you’ll enjoy it.


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No one or nation can live on credit indefinitely. Whenever a debt is incurred, at some point it has to be redressed and whether it is the borrower that forks out or the lender that takes the hit  from default is immaterial...

No, it is highly material who takes the hit, would anyone disagree, and if so why?

The imperfect art

If you asked 100 economists for an example of the perfect economy, you'd walk away with 100 differing examples - a little like asking someone for the definition of perfect happiness.

Economics does make much use of mathematics, game theory etc, however, it has always been, and it will always be, a social science. The bedrock of ALL economics is philosophical.

I've always thought that academic economists (the only people in the position to be able to fly the philosophical flag), should identify what school they adhere too, as a matter of courtesy. This would apply when publicly "giving their opinion". The particular school an economist adheres, is a major factor in how processes and outcomes are "judged good".

Unfortunately the above isn't well understood by the public (probably never will be, which is understandable), however, it's of critical importance, especially when it comes to making public policy. It really does shape an entire direction a nation may choose to take.

Method of elenchus

 Never mind Scott, it was a long (and challenging) read, and yes one does have to spend the time. Twas an invitation that's all.

But one might ask: if economics remains "simple" to you, then what are the secrets of its simplicity, and how did you learn same?

I ask this question because I have always found economics somewhat challenging, and not very entertaining (and definitely nowhere near as entertaining as the execution of a sick and twisted icon, or the dilution of the Royal gene pool), but I do like a bit of a challenge - it keeps the remaining family brain cell a little bit active.

Cheers mate.

First things first

Sorry  Justin my last post was a late in the day job and I forgot this which will explain my title. There are many similar articles.

As to explaining economics, well I've already covered that ground but at the risk of giving  John Pratt the shits, basically it all starts and ends with Adam Smith and his Wealth of Nations. Of course the world has become more complex since it was written 300 odd years ago but the principles hold as true as ever.

You might remember David's post, Kipling's Ghosts of the Copy Book Headings written shortly after our schism. That explains a lot but in one sense, takes the prize for stating the bleedin' obvious.

The worst thing about our current situation is the disparity in comparative debt to credit ratios on an international level; all brought about by globalisation and the fixation on short term "bottom lines", because in the long term the bottom lines aren't.

No one or nation can live on credit indefinitely. Whenever a debt is incurred, at some point it has to be redressed and whether it is the borrower that forks out or the lender that takes the hit  from default is immaterial as the Chinese are about to find out.

Years ago I was decried for saying America was an economic basket case.

Well, I suggest US dollars will figure less and less in international contracts. It no longer is the world currency. Of course it would be ideal if we could trade apples for apples but it isn't possible all the time that some currencies are floated while others are kept artificially low and lifestyles are vastly different. Someone said we already had an international currency but they were talking about bonds, just another way for the smartarses that got us into this mess to yet make more money from suckers; in other words just another "derivative" and that's where it all gets complicated.

That's the best I can do at the moment, another late night post, been busy but here's something else for you to chew on.

Over to you Geoff.

Free, fast and loose

Don't ask me Scott. I did an economics major over thirty years ago but I am not and have never been an economist.

I believe in free markets. I think the free flow across the world of goods, services, information, ideas, money, books, news, knowledge and as far as possible, people, is a good thing. I believe this instinctively.

That is all I have to offer on the subject of economics.

Justin, I am guessing you might be a bank economist. If so you might know an old friend of mine who works for the Commonwealth Bank. He thinks a lot like you. He might even be you.

Just saying.

Living with the intellectually lethal

No Geoff iJustin is not an economist, he's a bloody wombat, and a harmless one at that. If you saw me you'd want to cuddle me, except for the mange that is.

Anyway, if iJustin was an economist then he would have to be human - that would make him intellectually lethal, and that would be unfortunate.

Question time

No one or nation can live on credit indefinitely. Whenever a debt is incurred, at some point it has to be redressed and whether it is the borrower that forks out or the lender that takes the hit  from default is immaterial as the Chinese are about to find out.

Scott:  If you were a lender would you prefer to take "the hit" and write off your investment, or would you prefer to retain your wealth and have somebody else take the hit - and why would such a hit be immaterial {to either the borrower or the lender}?

The (collapsed) state of things to come?

Justin, watching the housing constructors around me go like the clappers to beat the W Curve, if I had the liquidities to take your advice I would.  So many houses being built, such a crash to come.  Maybe it's my love of Irish music that draws me to the precedent?


The point is that attacking a building and its inhabitants is not enforcement of a no-fly zone.  Except if the building is an aircraft hangar or an airfield control tower.  And it is not "creep", the pushing of the envelope.  Rather, it is conduct contrary to the spirit of any notion of enforcement of a no-fly zone.  It is illegitimate.

In other civil war situations, such as in the break-up of Yugoslavia, it has been normal for an arms embargo to be imposed on both sides.  But here the rebels are being assisted to buy weapons, and only the government forces are subject to an arms embargo.

And the whole thing is supposed to be about protecting the civilian population, when even Hitler did not conduct a general attack on the German population.  There might indeed have been murderous retribution by Gaddafi against some or many activists, but retribution is a very different thing from a murderous attack on the population at large.  Even the worst dictator would not do that.  What could be the point of a dictator destroying his own population?

The only specifics I have seen regarding the targets of Libyan army shelling or mortar attacks were a power station and a water treatment plant, which would be part of a general siege of a city.  In such attacks there would probably be a few civilian deaths, but they would be collateral and accidental, not intended targets.  I've seen no indication that Gaddafi has targeted civilians as such, and obviously he would not do that, yet it is claimed in justification of the US/NATO attacks that he was doing that.

All, all is false in the United States and NATO justification of their aggression in Libya.

It is bad because the legitimacy of our own security forces is compromised.  If there is a distinction between the US/NATO military actions and pure terrorism, what is it?  There would need to have been a legitimate reason for the attacks on the Libyan government.  The justifications that have been claimed are false, so what is that legitimate reason?  You don't protect the civilian population by encouraging them to rebel and by fomenting a civil war.

I feel that our own security and military authorities should dissociate themselves from the US/NATO actions in Libya in order to retain legitimacy.  If the security forces are just the terrorists that are on our side, consequences follow.

And I'd like to hear more from Kevin Rudd, who was the vocal mouthpiece calling for a no-fly zone in the first place.  Is this, a general military attack on buildings unconnected with aerial warfare, what he meant by a no-fly zone?

It probably is. The whole idea was sinister in the first place because the only earlier "no-fly zone" was against Irak and its reputed victims were mostly children who died as a result of the sanctions enforced by it.  Still, I'd like to hear what Rudd might say.  Is he implicated, or did he mean something different?

Gaddafi? Money!

Justin, thanks for the link.  A NATO general even in the last couple of days explained that a strike by warplanes against a "compound" belonging to Gaddafi was enforcement of a no-fly zone.  He didn't explain how Gaddafi flies his "compound", which obviously must have been a kind of warplane itself.

Such blatant, shameless lying!  And no-one cares that we in the West become the moral inferiors of Bin Laden, that it is just two gangs of murderers against each other.  No-one cares!


A regression to pure, murderous colonialism.  Any excuse, any pretence, will do. 

Invest in Tungsten futures

Gold as currency  Justin? Small problem problem with dinars, what do you use for loose change and there simply isn't enough gold to replace the paper money. It's not just that, wealth is not all about gold, that's why you need paper money although it has to be worth more than the value of the paper if you get my drift. A bigger problem is the forging of the currency which has happened in the past and the practice of snipping bits of the coinage.

As to your post, you must have more time on your hands than I do because I read it but am not prepared to spend the time analysing the arcane language and convoluted economic theories that underly the arguments. Economics is still simple to me but can be as complicated as human invention will make it. Best of luck.

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