Foreseeing and preparing for the next fiscal meltdown.

[Baa_Baa]

I tried googling 'debt is the new currency' to see what comes up.

One of the things that does is http://www.positivemoney.org.nz which gets right to the heart of how the banks create money outside of the reserve banking system, and the role of banking in feeding the indebted society, with suggested solutions to the problems, right here in NZ.

Impressive and worth a decent read. I haven't decided whether to follow up on it but I have to applaud their efforts, it makes a great deal of sense, though I wonder why I didn't know about this before now so have subscribed to their email updates.

[Joshuatree]

Just one more point of view, opinion.Many sitting on the side with cash still?.Missed some great gains.

• How Worried Should You Be About A Market Crash?

[Baa_Baa]

Interesting Joshuatree, thanks for the link.

It doesn't say that there isn't a problem, though it does say that things should be fine for a couple of years yet, in equities at least, if we believe it. Ride the equities wave while we can. That also suggests time to put in place the contingencies for when it all turns to custard again, as seems inevitable.

We saw it in the GFC as well, that solid and counter cyclical companies take a hit but recover and do well in the long run, despite downturns, whereas weak or too-good-to-be-true companies (even whole sectors, ergo finance companies) get slaughtered and take down their investors with them.

Here's another view of the problem that I found difficult to argue against, except that it stops short of predicting when the calamity happens, or what triggers it. Credit to Positive Money NZ for the next articles:

About massive unprecedented liquidity underpinned by personal debt exceeding GDP (and sovereign debt?), being channeled into banking .. http://www.theguardian.com/commentisfree/video/2015/feb/04/another-economic-crash-is-coming-how-did-this-happen-video?CMP=twt_gu

And, Can banks individually create money out of nothing?
http://www.sciencedirect.com/science/article/pii/S1057521914001070

How do banks create money, and why can other firms not do the same?
http://www.sciencedirect.com/science...57521914001434

... which in turn is fuelling more personal and sovereign debt, instead of it going into the productive economy.

(It's obviously working for the banks) I have doubts whether we can do much about that though having read all the of the Positive Money NZ http://www.positivemoney.org.nzwebsite and articles, I'm encouraged.

BAA

Just one more point of view, opinion.Many sitting on the side with cash still?.Missed some great gains.

� How Worried Should You Be About A Market Crash?

[BlackPeter]

Just one more point of view, opinion.Many sitting on the side with cash still?.Missed some great gains.

• How Worried Should You Be About A Market Crash?

JT - just help me to understand who said that sitting on the side with cash is a good strategy? Well - at the top of some bull cycles leading into the GFC or some other recessions it obviously would have been, but otherwise?

Actually - if you look at history, I think this would normally one of the most stupid strategies I could possibly think of. Cash (i.e. fiat money) went during inflationary cycles much more often down the drain than e.g. real estate (though, there is obviously a risk - buy a villa in an area going downhill for whatever reason, and you are doomed), gold or ownership (like shares) in companies making stuff people not just want but need. And as always - anything can go downhill, so you need to diversify.

Personally I think that lulling people into a false sense of safety by ridiculing voices of caution is as irresponsible as the alarmist and self serving people pointing to the next crash just to sell their false remedies. I think we can do without either.

[Joshuatree]

Cheers BaaBaa will have a read.
BP People go to cash for all sorts of reasons ,different ages, health problems, concerns, risk averse,caution whatever. Stupid!!?Such weird thing to say unless one can't see out of their own myopic bubble.
Ive done it a few times ;and boy what a relief based on what id interpreted from amidst the mkt noise. Mostly though I've stayed in as i have the last few years and as is said above made some fab gains. Its great to get all opinions and decide for oneself.And to the folks who have stayed on the sidelines recently thats fine if you are comfortable with that. NZ mkt looking pricey atm in my opinion. Hunt for yield pushing PE's up.

[BlackPeter]

Cheers BaaBaa will have a read.
BP People go to cash for all sorts of reasons ,different ages, health problems, concerns, risk averse,caution whatever. Stupid!!?Such weird thing to say unless one can't see out of their own myopic bubble.
Ive done it a few times ;and boy what a relief based on what id interpreted from amidst the mkt noise. Mostly though I've stayed in as i have the last few years and as is said above made some fab gains. Its great to get all opinions and decide for oneself.And to the folks who have stayed on the sidelines recently thats fine if you are comfortable with that. NZ mkt looking pricey atm in my opinion. Hunt for yield pushing PE's up.

Yes, and if we put this post and your previous post together - your point is?

[Joshuatree]

Well you could take up whittling , see if you can get a sharp point and prick that bubble and become open to all views or enter the National 4 yearly hide and seek championship.

​ps a friend and mentor is all in cash and gold stocks atm. I respect his position and point of view re the mkts and his risk profile.

[skid]

Has anyone in this forum ever tried to take a million bucks out of the bank?--Not an electronic digit going into another acc---Not transfering an electronic digit for a house or a huge chunk of gold--Im talking about 1 million bucks worth of actual cash---It would be interesting to know how that went..

[Baa_Baa]

Try withdrawing just $10k in cash, you'll trigger the banks AML processes and have to jump through hoops. A million$, well you have to have a million deposited in the first place, so maybe someone else can try that one.

Has anyone in this forum ever tried to take a million bucks out of the bank?--Not an electronic digit going into another acc---Not transfering an electronic digit for a house or a huge chunk of gold--Im talking about 1 million bucks worth of actual cash---It would be interesting to know how that went..

[winner69]

BaaBaa, have a read of this. This 'economic singularity' is a real thing, i have seen it in action, on a smaller local scale.

The Economic Singularity
Singularity was originally a mathematical term for a point at which an equation has no solution. In physics, it was proven that a large enough collapsing star would eventually become a black hole so dense that its own gravity would cause a singularity in the fabric of space-time, a point at which many standard physics equations suddenly have no solution.
Beyond the “event horizon” of the black hole, the models no longer work. In general relativity, an event horizon is the boundary in space-time beyond which events cannot affect an outside observer. In a black hole it is “the point of no return,” i.e., the point at which the gravitational pull becomes so great that nothing can escape.
This theme is an old friend to readers of science fiction. Everyone knows that you can’t get too close to a black hole or you will get sucked in; but if you can get just close enough, you can use the powerful and deadly gravity to slingshot you across the vast reaches of space-time.
One way that a black hole can (theoretically) be created is for a star to collapse in upon itself. The larger the mass of the star, the greater the gravity of the black hole and the more surrounding space-stuff that will get sucked down its gravity well. The center of our galaxy is thought to be a black hole with the mass of 4.3 million suns.
We can draw a rough parallel between a black hole and our current global economic situation. (For physicists this will be a very rough parallel indeed, but work with me, please.) An economic bubble of any type, but especially a debt bubble, can be thought of as an emergent black hole. When the bubble gets too big and then collapses in upon itself, it creates its own black hole with an event horizon beyond which all traditional economic modeling breaks down. Any economic theory that does not attempt to transcend the event horizon associated with excessive debt will be incapable of offering a viable solution to an economic crisis. Even worse, it is likely that any proposed solution will make the crisis more severe.
We are fast reaching the point where markets are crossing the event horizon, where mathematical investment analysis no longer makes sense. We read that some 25% of bonds in Europe now offer negative interest rates. How do your value equations work in an environment of negative yields? It becomes mathematically impossible for pensions and insurance companies to meet their goals, given their investment mandates, in a world of negative interest rates. While economists may applaud negative rates, those who will need their annuities and pensions are probably not yet aware that their futures have been mortgaged for a set of narrow economic goals, which look as though they are not being fulfilled at any rate. When the bill comes due in 10 years, those in charge today will have moved on to other more lucrative opportunities, and pensioners will realize how screwed they have been.
German bonds have negative yields out to the eight-year mark, as yields have steadily dropped for the last three years:

Switzerland is now issuing 10-year bonds at negative rates. Has lending returned to Europe? If you squint real hard, you might be able to detect an uptick in the next chart.

However, when you take a closer look, you find that the recent uptick is almost all in finance (in just two financial corporations, to be specific) and not in the household and business sectors, which are seeing credit lines being close to them. (Hat tip Alhambra Partners.)
I believe the world will soon find out that by holding interest rates down and allowing sovereign debts to accumulate past the point of rational expectation for being paid, in one country in Europe after another (Greece is just the first), central banks have pushed us past the event horizon, believing they have supernatural powers that will let the global economy escape the debt black hole that has been created by and for governments.

http://www.mauldineconomics.com/fron...ff-dead-center