Comfort, Karma And Money Velocity

October 3, 2014

I keep hearing...

"You don't want a world where silver is $350 or gold is $10000".

Maybe not. But the probability of that happening, with all the "known, knowns" of risk - make it crucial to own some amount just in case.

Obviously, you know this as well as anyone. And no one wants chaos, suffering, and war. Just as no one wants a world of extreme, speculative excess that is so dangerous and extreme that very little remains of a real economy.

It used to be that in the age of missiles, projectiles, and ballistic, calculus was the most important math. But now we are in the Information Age where political-academic-financial institutions have normalized risk.

They've used statistics to normalize low probability. They’ve eliminated long tale risk; extreme events that appear statistically at the end of the curve. Black swans.

It's a very low likelihood that a candy machine could fall on you today as you walk by. It could happen, but it's perfectly fine to eliminate that from your worries or fears. That’s rare, but not geometric in the potential fallout. Others will not likely be harmed too badly.

However, if you happen to be carrying explosives and the candy machine falls on you, you might destroy the whole building or city or region - depending on the type of explosive.

And that is what constitutes risk in what is left of these markets. The collective confusion over action versus intentions and the power of manifestation bothers me. It's back enough that we've reached the point where generally people prefer not to think for themselves.

In some part they don't have to, thanks in some part to technology and mainly dollar based finance. That will correct itself in a very painful way, initially for the worse. As soon as the subject of collapse arises, most people begin reaching for something to soothe their dissonance.

People are worried that one might somehow magically manifest sentiment by choosing to hedge against potential disaster. If you are a proponent, that means you are willing it via karma.

Collectively, putting on a car seat belt doesn't will a crash to happen. Nor does choosing to invest in firearm training make it more likely that the need to use it will arise.

Or changing eating habits in the name of the desire to feel better or prevent illness. Because if you are eating to prevent getting sick, you are still focusing on being sick at some point.

Choosing a whole set of actions as a way of life so that you don't have to suffer when the very plausible happens again; it reminds me of the rationale used for fighting deflation.

The belief is that if prices are falling, people will put off purchases in order to wait for lower prices. In reality, that doesn't happen because so much of spending occurs for goods that cannot be put off - like food and energy or the cost and maintenance of housing.

Recently, Bloomberg's Comfort Index reported the jobless in America haven't been this comfortable since 2007...This comes as a direct result of government transfer payments.

My contention is that money velocity will rise in the wake of the next crisis as a tsunami of government transfer payments "politically justified" on various fronts; not least of which is by the default avoidance at all costs banking elite.

Remaining comfortable, clueless or unemployed will be a further motivating political factor. But derivatives are the known unknown. We are biased toward liquidity freeze because of now monetary policy.

QE was never tried in a shadow banking system that runs on overnight loans. These loans require a constant flow of high quality collateral. QE competes directly with this.

And yet, all too often it goes without mention that this good collateral is in and of itself hitched to a massively broken set of promises. Ultimately, we get the evil side of usury; total ownership and control.

This is a monopoly ordained by the government to issue the sole legal tender in the land. At the end of the day the referendum on all this will be the real economy.

Everything can look rosy on paper due to the manipulations in the markets, but there won't be enough real goods and services to cash all these promises. Real wealth cannot be printed.

In addition to a hedge against the greed-driven stupidity of the elite - having tangible collateral makes for a trustworthy base of capital.


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