Mike Maloney: The Dollar As We Know It Will Be Gone Within 6 Years

Treebeard knocks it out of the park and beyond sight! Many thanks for your invaluable input.

[quote=Bankers Slave]Treebeard knocks it out of the park and beyond sight! 
Many thanks for your invaluable input.
Yes, I agree Bankers Slave.  Treebeard, I'd love to see all of your thoughts in one place connected together in one grand landscape/ecosystem.  Have you ever thought of writing a book?

Treebeard…I could not agree with you more. I chuckle at the way people categorize themselves, and seek identity. The only comment I would cautiously add to your final thought "True freedom born of our awareness of our collective responsibility for each other is the only way out. " is that a humble recognition of a higher power might enhance the collective responsibility. When our founding fathers invoked a higher power (God) in the Constitution, I think they were on to something.

One of the thumbs up is from me   : )There is much to think about… I agree that Europe's banking system seems like it may be the detonation point… but I don't think any detonation will be contained for long because of something you didn't mention;  Derivatives, CDS', and the like.  I would say I am generally more positive on having a larger percentage in Gold/Silver/Miners than you suggest above, although with the stipulation that some of it be vaulted outside the banking system, outside of the US (or your home country) AND outside of entities like IRA's.  Regardless of the recent past history of the Gold vs house ratio… I expect that I will be able to buy much more house for my Gold/Silver in the future than I can now.   
Regarding the effect of derivatives on the credit, I have been taking heed of Dave Kranzler's recent red alert;

http://investmentresearchdynamics.com/were-on-cusp-of-a-nuclear-meltdown-in-the-credit-markets/ The Bloomberg article mentions credit default swaps but doesn’t explain the implications.  The implications are that somewhere, some bank or asset manager is on the hook for any “insurance payments” that will need to be made as part of the bet that was made when institutional investors and Wall Street banks placed their bets on Portuguese banks using OTC derivatives.  Eventually someone on the hook for the payment won’t be able to make it and the fun begins.  This is exactly what happened with AIG/Goldman Sachs. It is THIS risk that is hidden away and deeply embedded in the bond market.  It is hidden in your bond funds that your “trusty” registered financial adviser with fancy initials after his/her name put you into.  You are exposed to this catastrophic risk.  In just five minutes of using Google, I found several Black Rock bond funds that are exposed to Portuguese debt.  Your genius adviser probably has you in one of these funds. The bottom line is that you need to get out of your bond funds now before your money gets trapped and destroyed.   My co-producer and I did a video explaining why your money will get trapped in bond funds:   Get Out Of Your Bond Funds Now.
So, I looked at the prospectus info behind my, "safe" interest incoming fund within my Corp. 401K choices.. one I happen to have most of my life's savings in today.  Here's what I found - the thing is packed full of counterparty risk by way of the wrap agreements.  It's like a juice that is only 5% real fruit juice... this fund is only 5% real bonds.. the rest is fluff.  Needless to say I am getting out of this fund... but like you say.. there will probably come a day when there is no place safe in paperland.  I hope to have the 401K extinguished by then if all goes according to plan and the world does not blow in the next few months.      

Though I try to avoid loaded words like capitalism.  To some it represents freedom and a meritocracy, to others a predatory monster.  In the end I don't think that any ism will either save us or destroy us.  It is the diffusion of knowledge and power and our connection to the consequences of how we use those gifts that in the end will save us.  I am a great believer in the open source movement and have similar feelings about the closure of the commons.  But it is the combination of our individual and collective evolution that in the end will triumph.For too long we have been the victims of cold evil, acting without the knowledge or understanding of the consequences of our own actions. We have been blinded by the promise of a technological nirvana.  For too long our heads and our hands have been severed from our hearts.  Technology had promised to transform the world in our own image.  But we had not the wisdom or the capacity to do so.  In the end it was ourselves that needed transformation, and I do believe that is what technology is now doing.  Our access to information and each other is transforming us and our world.  Resource depletion and global climate chaos are the midwives that are transforming centralized energy and control centric systems to the diffuse information intense systems that now thriving.
David Korten has put forth a similar vision, Agenda for a new economy, from phantom wealth to real wealth. The same ideas are now everywhere. When the time for a new way of thinking arrives, there simply no way of going back.

JimH-First - glad you liked my post.  :slight_smile:
Next - I really agree with you, its important to dig down and understand what is behind your paper products.  Some of these ETFs are nothing but a collection of swap agreements with a bank.  Most of the "short" ETFs are like that.  They aren't actual shorts, but rather just a swap agreement with one of the big guys.
And Kranzler has an excellent point about the whole "exit charge" on mutual funds, and about it being something that gets imposed ex post facto.  I see that with money market funds too, potentially - "for the good of the system."  It is possible that bond ETFs will be more liquid than bond mutual funds.  (It might also be that they'll be trading at a nice discount to NAV too - after a big selloff).  I also like the theory he describes: roughly paraphrased - the elites always give you fair warning before dropping something on your head.  Its up to you to pay attention.
If you are in paper, try and pick the highest quality paper you can find.  All paper was not created equal.  Caveat emptor, there's a lot of really junky stuff out there.
Last - a chunk of the derivatives won't be a problem because of bail-ins and sovereign reprofiling.  The whole point of reprofiling is so that bank balance sheets won't be hit and taken down by a sovereign restructuring.  In turn, this says few if any of the bank-oriented CDs will trigger, unless the bank was in bad shape already.  And even then, bail-ins could end up with depositors taking losses but the banks themselves remaining in place.  Depending on the ruling and how afraid everyone is of "contagion" - that magical phrase bankers use to terrify regulators into saving them at taxpayer expense.
On a sovereign reprofiling, the sovereign CDS might trigger, depending on the ruling from the ISDA - which likely depends on who is long and who is short those sovereign CDS and who has more pull with the organization.  (My feeling, anyway - there was a whole lot of iffy talk last time around from ISDA about what was, and what wasn't a default)
If the fire gets bad enough, of course, you're right - derivatives will be an issue.  All those derivatives are backed by the deposit-taking arm of the various banks, and the derivatives are first in line to get paid back when trouble strikes.  We saw that at AIG.  Derivative holders are a plague of locusts - they come in, devour the assets to pay off their claims, leaving very little left for depositors and other unsecured creditors/bagholders on the wrong side of the derivative-writing bank's balance sheet.
Which is a reason not to be an unsecured creditor of a derivative-playing bank. There are a whole lot of claims on that bank's underlying assets.  As you put it - 5% real juice.

 True freedom born of our awareness of our collective responsibility for each other is the only way out. 
Wow. Very well said. You are a prophet. Maybe there is hope if these words start to resonate widely. 

It is up to us to be the change… to imagine the change and get out of the fear-based, victim mentality.  Most people are so afraid they don't even want to understand what is going on… can't on some subconscious level deal with what is going on.   This sentence from Treebeard gets a spot in my top 10 of all time in terms of using words to paint an expansive, meaningful, beautiful (artistic) picture - reminds me of something Buckminster Fuller might have written;

Resource depletion and global climate chaos are the midwives that are transforming centralized energy and control centric systems to the diffuse information intense systems that now thriving.
  This conscious awakening is happening... here is one person talking about their own progressing awakening - I found it inspiring;   http://www.youtube.com/watch?v=X0dME6Z-O-M

Treebeard, I'm going to need your real name so I can submit you as a write-in candidate for the 2016 elections.  Don't worry, I won't expect you to fix anything.  We're past that now.  I'm just hoping you can make our reckoning with reality suck a little less by virtue of actually representing the people and setting a good example of moral character.  (That OR…maybe once you're president you can help me push through a couple of my pet projects as a thank you for my early support.)

And I thought that those thoughts in my head were like Tim's toaster.

First, thank you Mike Maloney, for your relentless and selfless commitment to education about money and wealth.  Your documentaries are beautifully done and clearly well written.  You show true agape to your fellow man with this effort and you will be rewarded.

Chris, this was one of the most important Voices this year, and should be a reference point for newbies that are awakening and wanting to learn more.

Is there a way to nominate a "Best PP Voices" of the year award?

I agree with Mr. Maloney's and your core construct of wealth, wealth transfer, et al.  However, there are additional factors that change the game from a simple "it's going to simply be a wealth transfer" construct.

I also agree that the core and best concept is to look at hard assets as where the "wealth" is.  So let's put houses, land, PM's, oil, food stocks, cattle, firearms, furniture and many hard assets in that bucket.  We should think of it at as "before the currency collapse I had a house, two tables, six chairs, two radios, a shovel, and 1 years worth of food, and after the currency collapse I had a house, two tables, six chairs, two radios, a shovel and 1 years worth of food."  That's easy to calculate.

We need to recognized that we cannot say the same for "I had $100,000 of UST, $100,000 of money market funds, $50,000 of stocks, $50,000 of cash before the currency collapse and now I have $100,000 of UST, $100,000 of money market funds, $50,000 of stocks, $50,000 of cash after the currency collapse."  Clearly, in a simple 50% devaluation of USD, will have "$50,000 of UST, $50,000 of money market funds, $25,000 of stocks, $25,000 of cash" in actually purchasing power, assuming housing prices and prices of things you care to buy don't equally deflate by 50%. 

Which is not the best assumption, since I agree with Mike that some necessities will go up in price, notably food and energy, defying deflation.  I've said many times, I don't care for terms like inflation and deflation since they are such "averaging" terms by definition.  Reminds one of the saying "did you hear about the man who drowned in the lake of average depth 6 inches".   I want to know the depth of the lake in the next 6 feet that I am walking toward.  I could not care less about the other 316 acres of lake.

I expect that the things I want to buy (since I am like a lot of other people) will be the things that go up in price, i.e. gold, silver, gasoline, food, water, housing, toilet paper, beer, etc.  Maybe strip malls and nerf guns will deflate in price, but why do I care?  I won't be in the market for a strip mall.

As a side bar, the more I think about it, the most valuable hard assets, besides the monetary metals, will be tools needed to make the high-priced and highly-valued assets, such as food, since tools are like "wealth force multipliers".  So trucks, tractors, chainsaws, foundries, pharmaceutical manufacturing facilities, energy facilities, oil drilling rigs, railroads and tank cars, sawmills, etc will be very valuable.  Tools are so valuable because they have intrinsic resale value themselves and they can be used, provided you have access to raw materials, to make wealth.

Tools also build on Ethan Rowland 8 Forms of Capital.  So we need the knowledge and experience to use the tools, so consider that as intellectual capital (wealth), and we also need social capital (social wealth) to get access to raw materials and labor.  Also experiential capital and others.  These types of capital will not be transferred or destroyed.

Please note that personal intellectual capital and social capital is non-transferrable, though you might argue that it can be purchased.

I agree with Mark BC that their will be a great deal of wealth destruction alongside wealth transfer. 

One thing I think Mike and yourself may be a bit too rose-colored glassed about is that this will all be orderly, though to be fair, you did caveat that it might not.

Take ghost cities and infrastructure in China.  Mike talks about them as wealth.  Fair enough.  However, anyone who knows anything about buildings knows that a) they require continuous maintenance to hold their value, and b) unoccupied buildings decay much faster.  So we should understand that all this fabulous infrastructure and ghost cities in China could be reduced relatively quickly to the value of the typical inner city Detroit single family home.  I.e., not much, and closing in on zero.

I agree with Mark BC's analysis of the false notion of "financial wealth" and we should extend it further.  There are a lot of folks who make money, i.e. generate "wealth" based on their relationships with financial PTBs and government PTBs, both of  these types of PTBs can have greatly diminished value if their institutions have failed, they are discredited and gone, and especially as they are replaced by either an orderly societal transition or a disorderly one.  Consider Tsar Nicholas II of Russia.  Post Revolution, it would be far more valuable from a social capital perspective to have relationships with Lenin than with Nicholas (who was dead, of course).  So your "Nicholas capital" would have been destroyed instantly in that room in the Ipatiev house on July 1918.

And finally, speaking of disorderly transition, the potential for man-caused wealth destruction is much higher than you discuss.  Perhaps it was too dark a discussion, but again, we need to have adult conversation, so again, I will advance one.

I have noticed a fundamental response in humans to anger and anxiety, whether it is Rodney King verdicts, or Greek government pension reductions and austerity.  People burn stuff down.  I can't explain it, I simply observe it.  People burn things down over relatively small events that are surmountable.  Speaking of sports, for example, losing a basketball championship. 

If the currency reset is as great as it appears to be heading, I predict a lot of people will be burning a whole lot of things down.  Houses, stores and factories.  I hope it doesn't happen, but I simply observe and report history. 

I'm sure you agree that burning something down to the ground destroys wealth.

A less talked about issue that is related to burning things down is incapacitating or killing people with intellectual capital who have the ability to create more wealth, such as farmers.

Both Mao's China and Stalin's Russia destroyed wealth (and potential wealth) by removing farmers from their farms in their glorious central planning wisdom, and installed people on these farms who had no idea what they were doing.  Thus no wheat, and millions of death due to famine.  So in these ways, other forms of capital can be damaged or destroyed.

Not to be negative, but we need to face to possibilities of this very consequential destruction of wealth.

It's amazing how you can talk so much but say so little. 

This site as well as many others now show how we as a species constantly hamstring ourselves with shortsightedness. We obviously have the ability to forget what has happened even a decade ago and if you work that into the exponential function which is a key concept of the site as well you find that we like to forget just how fast things happen. We clearly see denial written throughout history as we see today. That all being said these crashes and bubbles are happening faster and faster.
    Now the Vatican Library which is largely closed off to the public has knowledge in it that no one in the common folk has seen for centuries. If this knowledge was known before and kept secret then a small amout of  connected people obviously have a better idea of how fast it will happen again. So point being when I hear things like "they really have no idea what they're talking about or doing " (The Fed) really makes me think that we're not being an adult about this and facing problems face first. I think that's the largest reason of why we find ourselves in the current state of affairs that were in. As you start to see things in history as Kennedy getting shot for whatever reason that may have been he clearly spoke out against and being opposed by, a ruthless and secret conspiracy. I guess what I'm trying to say is if there's any advancement for the human race we need to start connecting dots faster and faster and sharing those connections faster and faster or the people in "the know" will continue to take over and restrict us into the small, poorly described "Utopia" that is the buzz on the Internet today. We are waking up but sometimes it sure feels like we need a cup of  coffee. 

Cheers. ~ Roan