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The crack up boom


TheCountOfNowhere

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TheCountOfNowhere

Things have taken an unexpected turn.

The FED decided to tell everyone last week that they were only joking about raising interest rates after all ( much like they were only joking about keeping them at 0% and we're going to raise them any minute ).

It's party time again.  No one seems to think they are perhaps "talking the market up" in the same way they have for the last ten years when the shoe was on the other foot.

None the less, this move has come out the blue ( 2 days after the Davos (biggest cunts in the world ) meeting ) and has startled quite a few people.

I keep an eye on Credit deflation and the reflation cycle to come

and I hope to go they are right that we'll see a collapse before the loons go all in with their money printing.

However, a number of people have started mentioning "crack up booms" since the FED changed tact and if you stand back and look at it, we could be on the edge of hyper inflation, i.e. no credit deflation.  This is a terrifying prospect.

I suppose this is a bit of a contraion view to the credit deflation thread though there are plenty signs of this too.  I saw on TOS someone was complaining they were only getting 0.5% more on their savings rate compared to 12 months ago....18 months ago you'd have bit their hands off.

Speaking to a few people in the UK things seem to have been going down hill, 2 car jackings in Brum for friends of friends and 1 threatened knee capping robbery in broad daylight.

Anyway, thoughts please on...

https://www.investopedia.com/terms/c/crackup-boom.asp


Crack-Up Boom
Reviewed by Will Kenton
Updated Apr 10, 2018
What is a Crack-Up Boom

A crack-up boom is the crash of the credit and monetary system due to continual credit expansion and price increases that cannot be sustained long-term. Often, banks will attempt to prevent a crack-up boom by halting credit expansion,

>>> TheCON: That's where we are at right now

which ends up backfiring and yielding the same results that the boom would have caused.

>>> TheCON: Which might be why the FED is backtracking.

Both scenarios result in an economic depression when the bubble finally bursts and the economic system crashes.
BREAKING DOWN Crack-Up Boom

 

When the economy is down, one way to give it a temporary revival is to feed extra money into the system — AKA economic stimulus.

>>> TheCON: QE.

Providing people with credit makes them feel richer and more inclined to spend their money,

>>> The CON: Those Audis aint going to buy themselves.

which in turn feeds more money into the system. When people spend money, they tend to want to continue this trend and continue to buy, despite the fact that their extra cash isn't coming from actual savings. The problem comes when the government continuously pours more and more money into the system and the actual economy beneath the false expansion cannot keep up.

Feeding money into the economy is a quick way to give it a short-term boost,

>>>The CON: Sounds familliar.

but this practice isn't sustainable over the long term. If credit expansion continues without limit, prices continue to rise until they reach the point at which the entire system collapses because it can no longer sustain itself. People can no longer afford the high prices, so credit must expand even more to accommodate these prices, which pushes them even higher.
What Type of Economy Can Be Hit by a Crack-Up Boom?

>>> The CON: So the FED are either doing the bankers talk and will continue tightening or go for Broke.

A crack-up boom is something that can only happen in an economy that relies on paper money rather than the gold standard,

>>> The CON: Pretty much everywhere then.

or electronic systems of monetary transaction rather than physical. In a gold standard economy, interest rates cap out at around 3 to 6%, since credit is based on actual saved money, instead of being adjustable depending on the circumstances. However, in a system that revolves around paper money, more cash can be printed at any time and introduced into the system. This affects the value of each dollar and affects the prices of market commodities. When the government introduces into the economy money that doesn't really exist (in the form of false credit), it's only a matter of time before the economy is damaged, even if the original intention was to boost it.

>>> The CON: Not even sure they intended to boost it, they wanted to save it.  Maybe the $ and £ is so ****ed them have no choice buy to keep printing and take the hyper inflation.  The elite will use it to buy everything and we all end up f**ked, slaves, poor, starving, soldiers.

>>> The CON:. Take your pick, it's a collapse followed by f**ked or straight to f**ked. I'm loading up on gold either way.  All I wanted was a fair priced house, what I'm facing is Armageddon. If DB is right we'll all get a chance to save ourselves if we see the collapse, but from what I see they're just going to go for it.

 

Things to watch: What the ECB does.  What the BOE does.  Wasnt convinced by the January rate rise but if the FED are talking the market up then the BoE will raise soon, so will the ECB. If this happens then sit tight, if they back track...sell your money to anyone willing to buy it.

 

 

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On 02/02/2019 at 16:08, 201p said:

https://www.realvision.com/defensive-investing-in-an-uncertain-world?utm_source=Victor Sperandeo&utm_medium=Referral&utm_campaign=43770_CONREF_JS_WB_RV_W1_Victor Sperandeo

More on Victor Sperandeo.

18mins in; 946 elections in Europe - 94% of the centre left lost in 2017, a move to the centre right.

Worth a listen if you have an hour to spare.

 

@TheCountOfNowhere I don't know but I really liked 52:38 onward explanation of the above-linked video why there wasn't a hyperinflation.  It sort of makes sense to me, as majority are still kept poorer than 10-20 years ago, so we are not there yet.

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Bricks & Mortar

Interesting.  And scary.
Were you one of the ones on Deflation thread who put out the 'straight to inflation' hypothesis early on?  I remember some held that view, back on ToS.

My gut feeling is, the Fed got pulled in a side room at Davos, where everyone agreed they'd already done enough to ensure the deflation happens.  It may be imminent, in that case, as would indicate the other parties can see it coming too.  I think the rate halt is just to create a short separation of time between cause and effect.  Helps ward off the pitchforks, torches and lamp-posts.

My probem with crackup boom is all those rate rises they did.  That would mean they pulled a U-ey right there, 2 days ago.  I agree we're close to something.  To hear the Fed are U-turning at this stage would be stomach churning.  I'd much rather think they were in control and driving us to deflation.

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4 hours ago, Bricks & Mortar said:

Interesting.  And scary.
Were you one of the ones on Deflation thread who put out the 'straight to inflation' hypothesis early on?  I remember some held that view, back on ToS.

My gut feeling is, the Fed got pulled in a side room at Davos, where everyone agreed they'd already done enough to ensure the deflation happens.  It may be imminent, in that case, as would indicate the other parties can see it coming too.  I think the rate halt is just to create a short separation of time between cause and effect.  Helps ward off the pitchforks, torches and lamp-posts.

My probem with crackup boom is all those rate rises they did.  That would mean they pulled a U-ey right there, 2 days ago.  I agree we're close to something.  To hear the Fed are U-turning at this stage would be stomach churning.  I'd much rather think they were in control and driving us to deflation.

Personally,I think Powell doesn't buy the Neo Classical thesis any more that printing money can solve issues of sovency pardon the p;un.

Lot of former Fed Doves have become-if not hawkish- then at least stopped being doves.

Fed needs to cut into the recession.Fed now knows negative rates kill velocity and don't stimulate growth.

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Bricks & Mortar
On 03/02/2019 at 21:24, TheCountOfNowhere said:

it's a collapse followed by f**ked or straight to f**ked. I'm loading up on gold either way.

That's alright for you.  I have little cash to convert to gold.  I have a construction business wrangled into great shape for a reflation - zero debt, tools owned, material stocks, certificates for government projects...

I feel I want too know more about what a crackup boom looks like, on the way in, on the way through, and how they'd solve it in the end.

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