The Inflation-Deflation Debate

[Voodooman]

 

Hot monies are being forced back from Asia and emerging markets to the U.S.A. for one last massive round of pump-and-dump the next few years before the USD is sacrificed as a way out of the 18-trillion-dollar debt that they are in.

So it is a trap?

[Wt_know]

whether it's a trap or not ... big financial and investment firm always use the pump and dump method

leaving ordinary people filling up the shithole ... else how to make money?

 

So it is a trap?

 

Edited December 25, 2014 by Wt_know

[Porker]

Christine LaGarde should come here and seek advice. Some of the terms i read also blur don't understand 😂

[OmOm]

So it is a trap?

 

Our present-day monetary system serves two primary purposes.

 

The first is the original purpose of money, as described in the textbooks; specifically, it supports the exchange of services and materials, facilitating trade and commerce.

 

The second purpose is more insidious and came into existence at a later point in time than the original - money allows the general populace to be invisibly enslaved while the minority group (international) that has access to specific knowledge and mechanisms related to the loopholes in the system leverages on them to increase its advantageous hold on resources indefinitely.

 

The greater the volatility, the more numerous the opportunities for the minority group to increase its stranglehold on global resources (services, materials).

 

The challenge that the minority group faces is in ensuring that the majority does not revolt against the gap that inevitably increases between the two groups.

 

In order to achieve this, three elements are necessary: education, distraction and confusion.

 

Education comes in the form of training the general mindset to become inclined towards a standard way of thinking and behaviour e.g. inflation that is not too high is perfectly fine and normal in everyday living.

 

Distraction is achieved through the introduction of tumultaneous and fear-inducing events e.g. stock market crashes, financial crises. Together with education, this ensures that the man-in-the-street is too busy to think beyond the day-to-day and instead fears for his job and income.

 

Confusion is created via the multiple layers of derivatives, financial wizardry. The complexities entailed in financial magic throw the average person off, discouraging him from thinking too much about what is happening in the financial world.

 

Through the combination of these three elements, the masses are constantly being egged on without much questioning, on their part, about the current system.

 

Any deviation and non-mainstream claims by mavericks regarding the preposterousness of the system will be publicly condemned as conspiracy theory and relegated to the mental dungeon of absurdity.

 

Crises thus are key ingredients in the formulae crafted by the minority group. They create volatility and chaos that result in a need for "restructuring" and "recalibration".

 

The financial markets then recover from "damage" done and central banks introduce ever new policies (e.g. QE) that they proclaim will help in the recovery.

 

This minority group moves even farther ahead somewhat surreptitiously in this phase while the masses plod on, bound by the invisible ball-and-chain of modern-day economics, the value of their hard-earned money cleverly and quietly leaking away through mechanisms such as inflation.

 

Is this a trap or is it not?

 

Just a simple example: if the purchasing power of the money you have in your bank account reduces over time due to inflation, where has it gone to?

 

Delve personally into the underlying essence of modern-day economics and monetary system so that you can come to that conclusion for yourself instead of relying on mainstream media and textbooks that play an instrumental role in shaping the beliefs of the masses.

 

Edited December 26, 2014 by OmOm

[Mustank]

 

Our present-day monetary system serves two primary purposes.

 

The first is the original purpose of money, as described in the textbooks; specifically, it supports the exchange of services and materials, facilitating trade and commerce.

 

The second purpose is more insidious and came into existence at a later point in time than the original - money allows the general populace to be invisibly enslaved while the minority group (international) that has access to specific knowledge and mechanisms related to the loopholes in the system leverages on them to increase its advantageous hold on resources indefinitely.

 

The greater the volatility, the more numerous the opportunities for the minority group to increase its stranglehold on global resources (services, materials).

 

The challenge that the minority group faces is in ensuring that the majority does not revolt against the gap that inevitably increases between the two groups.

 

In order to achieve this, three elements are necessary: education, distraction and confusion.

 

Education comes in the form of training the general mindset to become inclined towards a standard way of thinking and behaviour e.g. inflation that is not too high is perfectly fine and normal in everyday living.

 

Distraction is achieved through the introduction of tumultaneous and fear-inducing events e.g. stock market crashes, financial crises. Together with education, this ensures that the man-in-the-street is too busy to think beyond the day-to-day and instead fears for his job and income.

 

Confusion is created via the multiple layers of derivatives, financial wizardry. The complexities entailed in financial magic throw the average person off, discouraging him from thinking too much about what is happening in the financial world.

 

Through the combination of these three elements, the masses are constantly being egged on without much questioning, on their part, about the current system.

 

Any deviation and non-mainstream claims by mavericks regarding the preposterousness of the system will be publicly condemned as conspiracy theory and relegated to the mental dungeon of absurdity.

 

Crises thus are key ingredients in the formulae crafted by the minority group. They create volatility and chaos that result in a need for "restructuring" and "recalibration".

 

The financial markets then recover from "damage" done and central banks introduce ever new policies (e.g. QE) that they proclaim will help in the recovery.

 

This minority group moves even farther ahead somewhat surreptitiously in this phase while the masses plod on, bound by the invisible ball-and-chain of modern-day economics, the value of their hard-earned money cleverly and quietly leaking away through mechanisms such as inflation.

 

Is this a trap or is it not?

 

Just a simple example: if the purchasing power of the money you have in your bank account reduces over time due to inflation, where has it gone to?

 

Delve personally into the underlying essence of modern-day economics and monetary system so that you can come to that conclusion for yourself instead of relying on mainstream media and textbooks that play an instrumental role in shaping the beliefs of the masses.

 

 

like this?

 

[Voodooman]

 

Our present-day monetary system serves two primary purposes.

 

The first is the original purpose of money, as described in the textbooks; specifically, it supports the exchange of services and materials, facilitating trade and commerce.

 

The second purpose is more insidious and came into existence at a later point in time than the original - money allows the general populace to be invisibly enslaved while the minority group (international) that has access to specific knowledge and mechanisms related to the loopholes in the system leverages on them to increase its advantageous hold on resources indefinitely.

 

The greater the volatility, the more numerous the opportunities for the minority group to increase its stranglehold on global resources (services, materials).

 

The challenge that the minority group faces is in ensuring that the majority does not revolt against the gap that inevitably increases between the two groups.

 

In order to achieve this, three elements are necessary: education, distraction and confusion.

 

Education comes in the form of training the general mindset to become inclined towards a standard way of thinking and behaviour e.g. inflation that is not too high is perfectly fine and normal in everyday living.

 

Distraction is achieved through the introduction of tumultaneous and fear-inducing events e.g. stock market crashes, financial crises. Together with education, this ensures that the man-in-the-street is too busy to think beyond the day-to-day and instead fears for his job and income.

 

Confusion is created via the multiple layers of derivatives, financial wizardry. The complexities entailed in financial magic throw the average person off, discouraging him from thinking too much about what is happening in the financial world.

 

Through the combination of these three elements, the masses are constantly being egged on without much questioning, on their part, about the current system.

 

Any deviation and non-mainstream claims by mavericks regarding the preposterousness of the system will be publicly condemned as conspiracy theory and relegated to the mental dungeon of absurdity.

 

Crises thus are key ingredients in the formulae crafted by the minority group. They create volatility and chaos that result in a need for "restructuring" and "recalibration".

 

The financial markets then recover from "damage" done and central banks introduce ever new policies (e.g. QE) that they proclaim will help in the recovery.

 

This minority group moves even farther ahead somewhat surreptitiously in this phase while the masses plod on, bound by the invisible ball-and-chain of modern-day economics, the value of their hard-earned money cleverly and quietly leaking away through mechanisms such as inflation.

 

Is this a trap or is it not?

 

Just a simple example: if the purchasing power of the money you have in your bank account reduces over time due to inflation, where has it gone to?

 

Delve personally into the underlying essence of modern-day economics and monetary system so that you can come to that conclusion for yourself instead of relying on mainstream media and textbooks that play an instrumental role in shaping the beliefs of the masses.

 

I agree somewhat with your views although this has always been the case since the time of the Lion King, the guy with the biggest gun in the room (Paw in the case of the Lion King) will always set the rule and the rest will have to follow. He will milk everyone as much as possible but not to the extent of precipitating a general revolt. It is modern day slavery in some ways. Like the massive QE, it screwed everyone but the USD did not collapse despite all the predictions made for years. When we had the Asian Financial Crisis, we were told to bite the bullet and take it like a man.

 

Hence, so long as he still has the biggest and most powerful gun in the room, it will be business as usual. Only when he is weak, then there will be a regime change, I don't see it in the near future. At least not for another 20 years.

 

How do you foresee a USD collapse? The rules will be changed so that all those debts can be forgiven? But how?

[OmOm]

I agree somewhat with your views although this has always been the case since the time of the Lion King, the guy with the biggest gun in the room (Paw in the case of the Lion King) will always set the rule and the rest will have to follow. He will milk everyone as much as possible but not to the extent of precipitating a general revolt. It is modern day slavery in some ways. Like the massive QE, it screwed everyone but the USD did not collapse despite all the predictions made for years. When we had the Asian Financial Crisis, we were told to bite the bullet and take it like a man.

 

Hence, so long as he still has the biggest and most powerful gun in the room, it will be business as usual. Only when he is weak, then there will be a regime change, I don't see it in the near future. At least not for another 20 years.

 

How do you foresee a USD collapse? The rules will be changed so that all those debts can be forgiven? But how?

 

You are right in saying that the biggest gun usually has the biggest say and traditionally/historically everything boils down to military might.

 

However we might also want to consider the position that Uncle Sam has taken - huge amount of debt, unrestrained spending and worrying annual deficits that show no signs of abating.

 

All these are happening in spite of the military superiority that the U.S.A. has had for the longest time. The closing gap between them and the runner-ups in terms of conventional military hardware and software strength comparisons does not help.

 

When we also take into account the access to nuclear technology that many nations officially (and unofficially) have today, the lead that the U.S.A. has from military prowess diminishes drastically, given the levelling devastation that a single nuclear warhead from a maverick nation running amok (such as North Korea) can produce.

 

Thus it may not be unreasonable to temporarily disconnect the relevance of military might from the strategic financial/economic plans of Uncle Sam.

 

18 trillion dollars is a huge sum of money even with the wanton and flagrant use of the term "billions of dollars" in mainstream media nowadays.

 

It is inconceivable that the U.S.A. would be able to pay off this debt any time soon given that their leaders have shown no signs of reining in the borrowings. Ideally they would want to carry this debt forward forever but it is unrealistic to think that lenders would be so kind.

 

Based on this, the question that then rides on the lips of financial folks is not "if" but "when" the inevitable breakdown will happen.

 

China is sitting in unease, being the biggest holder of U.S.A. bonds. It is unlikely that they are just sitting on their hands and waiting for the big one to happen.

 

It is a tough position that they are in.

 

On one hand, to survive the catastrophic collapse of the U.S. bonds, China needs to move their own economy (and the rest of the global economy) away from the time-bomb that everything related to the U.S.A. has become - first and foremost the USD, followed by american trade consumerism/demand, and last but not the huge amount of bonds that run through the global financial system like thorny vines.

 

On the other, every step that China takes in shifting other global participating economy away from the U.S. through trade agreements, currency swaps, etc is driving the stake deeper into the heart of U.S. profligation and the associated mechanisms.

 

The artificial dependence that Uncle Sam created with the petrodollars scheme is falling away. Nations have become ever more wary of the risks that the immense debt that the U.S.A. has is producing.

 

At this point in time, the only way out for the Land of the Free has been to first pump the entire global financial system full of liquidity (via their QE programmes), allow this burgeoning liquidity to push asset prices up in Asia, and then systematically breaking down the status of Yen as a safe haven currency, causing the rest of the asian currencies to follow suit, and finally draw the hot monies back to the U.S. markets.

 

This was the recipe for financial devastation in the 1997 Asian Financial Crisis and tracing the events back then would let any keen observer see the parallels between then and now.

 

The vacuum created in Asia and the emerging markets by the exiting hot monies will produce a rapid deflation of the huge bubble created by the liquidity injection done in the years following 2009.

 

Even as this takes place, the U.S. markets are soaring to new highs and breaking new records, creating an immense draw of money that had originally been in Asia and emerging markets. Europe will also benefit from the spillover effect of the returning monies.

 

Eventually the fall in asset prices in Asia and emerging markets will reach a bottom because fundamentally there is still much more potential for growth there than in the western world, at which point the flow of funds will reverse and exit the american and european markets.

 

With mounting debt that will have far exceeded 18T (linear projection) by then and sky-high record levels in the U.S. markets, and with the Asian and emerging markets appearing much more attractive then due to the rock-bottom valuations at that time, market players would likely start to shortsell and exit the USD and equities.

 

Without a viable reason for retaining confidence in the U.S. markets and USD given the global move away from the currency, a perceived free-fall collapse of the U.S. economy would set conditions for the default of their bonds.

 

This may very well serve the purpose of resolving the debt issues that they have by allowing them to pay only a pittance for every dollar of debt that they have under the guise of bankruptcy, a not-so-graceful but viable exit nonetheless.

[Voodooman]

 

You are right in saying that the biggest gun usually has the biggest say and traditionally/historically everything boils down to military might.

 

However we might also want to consider the position that Uncle Sam has taken - huge amount of debt, unrestrained spending and worrying annual deficits that show no signs of abating.

 

All these are happening in spite of the military superiority that the U.S.A. has had for the longest time. The closing gap between them and the runner-ups in terms of conventional military hardware and software strength comparisons does not help.

 

When we also take into account the access to nuclear technology that many nations officially (and unofficially) have today, the lead that the U.S.A. has from military prowess diminishes drastically, given the levelling devastation that a single nuclear warhead from a maverick nation running amok (such as North Korea) can produce.

 

Thus it may not be unreasonable to temporarily disconnect the relevance of military might from the strategic financial/economic plans of Uncle Sam.

 

18 trillion dollars is a huge sum of money even with the wanton and flagrant use of the term "billions of dollars" in mainstream media nowadays.

 

It is inconceivable that the U.S.A. would be able to pay off this debt any time soon given that their leaders have shown no signs of reining in the borrowings. Ideally they would want to carry this debt forward forever but it is unrealistic to think that lenders would be so kind.

 

Based on this, the question that then rides on the lips of financial folks is not "if" but "when" the inevitable breakdown will happen.

 

China is sitting in unease, being the biggest holder of U.S.A. bonds. It is unlikely that they are just sitting on their hands and waiting for the big one to happen.

 

It is a tough position that they are in.

 

On one hand, to survive the catastrophic collapse of the U.S. bonds, China needs to move their own economy (and the rest of the global economy) away from the time-bomb that everything related to the U.S.A. has become - first and foremost the USD, followed by american trade consumerism/demand, and last but not the huge amount of bonds that run through the global financial system like thorny vines.

 

On the other, every step that China takes in shifting other global participating economy away from the U.S. through trade agreements, currency swaps, etc is driving the stake deeper into the heart of U.S. profligation and the associated mechanisms.

 

The artificial dependence that Uncle Sam created with the petrodollars scheme is falling away. Nations have become ever more wary of the risks that the immense debt that the U.S.A. has is producing.

 

At this point in time, the only way out for the Land of the Free has been to first pump the entire global financial system full of liquidity (via their QE programmes), allow this burgeoning liquidity to push asset prices up in Asia, and then systematically breaking down the status of Yen as a safe haven currency, causing the rest of the asian currencies to follow suit, and finally draw the hot monies back to the U.S. markets.

 

This was the recipe for financial devastation in the 1997 Asian Financial Crisis and tracing the events back then would let any keen observer see the parallels between then and now.

 

The vacuum created in Asia and the emerging markets by the exiting hot monies will produce a rapid deflation of the huge bubble created by the liquidity injection done in the years following 2009.

 

Even as this takes place, the U.S. markets are soaring to new highs and breaking new records, creating an immense draw of money that had originally been in Asia and emerging markets. Europe will also benefit from the spillover effect of the returning monies.

 

Eventually the fall in asset prices in Asia and emerging markets will reach a bottom because fundamentally there is still much more potential for growth there than in the western world, at which point the flow of funds will reverse and exit the american and european markets.

 

With mounting debt that will have far exceeded 18T (linear projection) by then and sky-high record levels in the U.S. markets, and with the Asian and emerging markets appearing much more attractive then due to the rock-bottom valuations at that time, market players would likely start to shortsell and exit the USD and equities.

 

Without a viable reason for retaining confidence in the U.S. markets and USD given the global move away from the currency, a perceived free-fall collapse of the U.S. economy would set conditions for the default of their bonds.

 

This may very well serve the purpose of resolving the debt issues that they have by allowing them to pay only a pittance for every dollar of debt that they have under the guise of bankruptcy, a not-so-graceful but viable exit nonetheless.

Thanks OmOm, your willingness to share is greatly appreciated. It is an interesting argument and you are good at making it so layman and easy to understand.

 

So, this is obviously a confidence game. Given its high debt and the possible collapse of the USD in the future why are hot monies moving to the US again? If you know the bank is going down, you would withdraw your money, not add to your deposit, right? So this scenario we are talking about, while plausible (it sounds logical), may still be years away and this may not be the last pump and dump cycle before the great devaluation of the USD.

 

I hope to see that day as noone should be allowed to print monies/issue debt papers with nothing and let the working world pays for it with real goods and services.... but this world is so screwed up and the party may just go on for a while. Cheers and have a good weekend ahead.

Edited December 26, 2014 by Voodooman

[Goldbug]

 

You are right in saying that the biggest gun usually has the biggest say and traditionally/historically everything boils down to military might.

 

However we might also want to consider the position that Uncle Sam has taken - huge amount of debt, unrestrained spending and worrying annual deficits that show no signs of abating.

 

All these are happening in spite of the military superiority that the U.S.A. has had for the longest time. The closing gap between them and the runner-ups in terms of conventional military hardware and software strength comparisons does not help.

 

When we also take into account the access to nuclear technology that many nations officially (and unofficially) have today, the lead that the U.S.A. has from military prowess diminishes drastically, given the levelling devastation that a single nuclear warhead from a maverick nation running amok (such as North Korea) can produce.

 

Thus it may not be unreasonable to temporarily disconnect the relevance of military might from the strategic financial/economic plans of Uncle Sam.

 

18 trillion dollars is a huge sum of money even with the wanton and flagrant use of the term "billions of dollars" in mainstream media nowadays.

 

It is inconceivable that the U.S.A. would be able to pay off this debt any time soon given that their leaders have shown no signs of reining in the borrowings. Ideally they would want to carry this debt forward forever but it is unrealistic to think that lenders would be so kind.

 

Based on this, the question that then rides on the lips of financial folks is not "if" but "when" the inevitable breakdown will happen.

 

China is sitting in unease, being the biggest holder of U.S.A. bonds. It is unlikely that they are just sitting on their hands and waiting for the big one to happen.

 

It is a tough position that they are in.

 

On one hand, to survive the catastrophic collapse of the U.S. bonds, China needs to move their own economy (and the rest of the global economy) away from the time-bomb that everything related to the U.S.A. has become - first and foremost the USD, followed by american trade consumerism/demand, and last but not the huge amount of bonds that run through the global financial system like thorny vines.

 

On the other, every step that China takes in shifting other global participating economy away from the U.S. through trade agreements, currency swaps, etc is driving the stake deeper into the heart of U.S. profligation and the associated mechanisms.

 

The artificial dependence that Uncle Sam created with the petrodollars scheme is falling away. Nations have become ever more wary of the risks that the immense debt that the U.S.A. has is producing.

 

At this point in time, the only way out for the Land of the Free has been to first pump the entire global financial system full of liquidity (via their QE programmes), allow this burgeoning liquidity to push asset prices up in Asia, and then systematically breaking down the status of Yen as a safe haven currency, causing the rest of the asian currencies to follow suit, and finally draw the hot monies back to the U.S. markets.

 

This was the recipe for financial devastation in the 1997 Asian Financial Crisis and tracing the events back then would let any keen observer see the parallels between then and now.

 

The vacuum created in Asia and the emerging markets by the exiting hot monies will produce a rapid deflation of the huge bubble created by the liquidity injection done in the years following 2009.

 

Even as this takes place, the U.S. markets are soaring to new highs and breaking new records, creating an immense draw of money that had originally been in Asia and emerging markets. Europe will also benefit from the spillover effect of the returning monies.

 

Eventually the fall in asset prices in Asia and emerging markets will reach a bottom because fundamentally there is still much more potential for growth there than in the western world, at which point the flow of funds will reverse and exit the american and european markets.

 

With mounting debt that will have far exceeded 18T (linear projection) by then and sky-high record levels in the U.S. markets, and with the Asian and emerging markets appearing much more attractive then due to the rock-bottom valuations at that time, market players would likely start to shortsell and exit the USD and equities.

 

Without a viable reason for retaining confidence in the U.S. markets and USD given the global move away from the currency, a perceived free-fall collapse of the U.S. economy would set conditions for the default of their bonds.

 

This may very well serve the purpose of resolving the debt issues that they have by allowing them to pay only a pittance for every dollar of debt that they have under the guise of bankruptcy, a not-so-graceful but viable exit nonetheless.

 

Adam Smith talks about the hidden hand that guides free trade. The US military is the hidden fist that enforces Pax America. Uncle Sam has done a pretty good job in being bankrupt and still maintaining the USD as a reserve currency. She has no intention what so ever to repay her debt what so ever.

 

To usurp the USD status, the leader of OPEC can sell oil in Euros Yen and RMB . But the Saud family very be toppled in no time if she does that.

[Yewheng]

Thanks OmOm, your willingness to share is greatly appreciated. It is an interesting argument and you are good at making it so layman and easy to understand.

 

So, this is obviously a confidence game. Given its high debt and the possible collapse of the USD in the future why are hot monies moving to the US again? If you know the bank is going down, you would withdraw your money, not add to your deposit, right? So this scenario we are talking about, while plausible (it sounds logical), may still be years away and this may not be the last pump and dump cycle before the great devaluation of the USD.

 

I hope to see that day as noone should be allowed to print monies/issue debt papers with nothing and let the working world pays for it with real goods and services.... but this world is so screwed up and the party may just go on for a while. Cheers and have a good weekend ahead.

 

I believe it's temporary rise given November job report added about 321,000 jobs which is the highest since year 1999 boost confidence in investors to invest in US thinking USA is now on the route to recovery.

 

http://money.cnn.com/2014/12/05/news/economy/november-jobs-report/

 

However many people overlook. If one look closely in US labour participation rate, it's on decline for many years. This cannot continue decline forever.

 

http://www.prisonplanet.com/people-not-in-labor-force-soar-to-record-91-8-million-participation-rate-plunges-to-1978-levels.html

 

Plus look at this chart..

 

http://econsnapshot.com/tag/labor-force-participation-rate/

The employment ratio still as bad as during economy crisis during year 2008, the average hourly earnings and production for salary workers are nowhere near before 2008, more people are working in part time job and are working in non productive sector like healthcare etc.

 

So sum up, USA is not in recovery mode, but rather that is because of the false impression that USA is in the recovery and that drives stock market up. Stock market up does not mean any better to average working people in the US ( AKA the rich gets richer, the average guys gets poorer). Sooner or later when USA cannot hide the truth anymore and the world lose confidence in USA and the amount of debt, that's it for USA. Those banks that buy bounds from US treasury will be the one that will see their reserve wipe out as either USA default on loan or Fed keep printing money at an even faster rate that devalue their currency.

 

* That is also why I hope government to remain TDSR even if during economy crisis as this forces bank to no choice but to have the principle of sound $, if not when banks get reckless, they always think they are king and queen where they will not fail as government will surely bail them out as banks bankrupt is a symbol of disaster for the country and no government will want to let the banks fail. But if government don't do prevention in the 1st place where the problem still can be controlled and let it run into uncontrollable mess, no matter what government do will not help at all by then.

 

* Credit card debt is also another one that I hope government to look deep into. I remember one article I read recently that credit card debt is on the rise, and there is this person that plays down credit card debt by saying because more people now owe credit card and that's why credit card debt is on the rise, so there is no much concern here. But the truth is if the credit card debt keep on rising average people savings decreases, when economy is good nothing happen, but all it need is a swing to bad economy and will see the full impact. Singapore will be in a lot better shape should people be more in savings side then on overspending side.

 

Edited December 27, 2014 by Yewheng

[OmOm]

Thanks OmOm, your willingness to share is greatly appreciated. It is an interesting argument and you are good at making it so layman and easy to understand.

 

So, this is obviously a confidence game. Given its high debt and the possible collapse of the USD in the future why are hot monies moving to the US again? If you know the bank is going down, you would withdraw your money, not add to your deposit, right? So this scenario we are talking about, while plausible (it sounds logical), may still be years away and this may not be the last pump and dump cycle before the great devaluation of the USD.

 

I hope to see that day as noone should be allowed to print monies/issue debt papers with nothing and let the working world pays for it with real goods and services.... but this world is so screwed up and the party may just go on for a while. Cheers and have a good weekend ahead.

 

The minority group sets the general script and direction for the financial markets, their tools being the media (both mainstream and online) and the vehicles being the key financial organisations.

 

The majority group is predictable because they have been shaped by the three pillars of education, distraction and confusion.

 

Their behaviour is driven by two forces - greed and fear.

 

Greed is the pull factor. Fear is the push factor. By tapping on greed and fear, the minority group manipulates the masses by pulling them into or pushing them out of markets.

 

This applies to all the different market types - equities, properties, commodities, bonds, etc.

 

Hot monies is a collective term referring to the liquidity that is live and active, and moving rapidly. These are held by various groups - retail speculators and investors, mutual funds, hedge funds, public-private funds, government investment vehicles, etc.

 

All are motivated by the need to grow whatever holdings they have.

Yet most of the growth that is experienced is largely illusionary because the minority group determines the total number of money units floating in the system today and that is an enormous number that grows and shrinks beneath the public eye to fit the needs of the group.

 

The actual value in the system is determined as the sum of services / materials globally. Money is an artificial and dynamic representation of that value.

 

The relationship between money and the actual value in the system is controlled by the minority group via the numerous mechanisms that they have on-hand.

 

Money is not as important as the actual value in the system. However, the masses are made to think that money is more important (through the three pillars), and the minority group is able to obtain the actual value through money-related programmes/events.

 

The parameters that the masses use to ascertain safety float above the real risk indicators. The masses look toward rating agencies, central banks and stock market numbers. These are all vehicles/mechanisms of influence and behaviour-shaping.

 

This produces scenarios such as what you have mentioned. Irrational behaviour in the form of rushing into the U.S. markets even though the underlying mountainous debt makes the risk sky-high.

[OmOm]

Singapore will be in a lot better shape should people be more in savings side then on overspending side.

 

 

Actually swinging to the extremes at both ends of the savings-spending spectrum will always produce disastrous results.

 

Imagine everyone saving as much as they can. This translates to a lot of money being locked up and not being used to facilitate trade/commerce (exchange of services/materials).

 

The entire economy then slows down to a trickle and fear mounts because the economy performs poorly.

 

The need to save comes from the uncertainties that the present economic and monetary systems create because of their flawed characteristics.

 

Once the roots of economic turbulence can be resolved with a revamped global economic/monetary system, there is in fact no requirement for savings by individuals since the objective is always to keep trade/commerce chugging along at the maximum possible rate i.e. maximum service interaction and material exchange between every participant in the economy.

 

Until then we are forced to live with the current sub-optimal hodge-podge mix of income-generation/saving/investment model (fraught with plenty of financial ups and downs) that the world has subscribed to for the longest time.

Edited December 27, 2014 by OmOm

[Yewheng]

 

Actually swinging to the extremes at both ends of the savings-spending spectrum will always produce disastrous results.

 

Imagine everyone saving as much as they can. This translates to a lot of money being locked up and not being used to facilitate trade/commerce (exchange of services/materials).

 

The entire economy then slows down to a trickle and fear mounts because the economy performs poorly.

 

The need to save comes from the uncertainties that the present economic and monetary systems create because of their flawed characteristics.

 

Once the roots of economic turbulence can be resolved with a revamped global economic/monetary system, there is in fact no requirement for savings by individuals since the objective is always to keep trade/commerce chugging along at the maximum possible rate i.e. maximum service interaction and material exchange between every participant in the economy.

 

Until then we are forced to live with the current sub-optimal hodge-podge mix of income-generation/saving/investment model (fraught with plenty of financial ups and downs) that the world has subscribed to for the longest time.

Yes swinging to the extremes at both ends are unhealthy. But now it seems like we are swinging to the spending side towards the extreme ( lucky government step in to brake the acceleration ) . What I am very afraid is because financial institution are too focus on KPI that overlook the fundamentals of sound $. Just like recently " Blackstone, CIMB in invest in CDL Sentosa Cove properties " . http://www.channelnewsasia.com/news/business/singapore/blackstone-cimb-to-invest/1531360.html . This is good news of coz, but they are now getting more clever in creating more sophisticated packages just to hit KPI which principle of sound $ maybe last thing on their mind.

 

Just like insurance companies also have their KPI, that the more the agent sells, the better the company performs. True to certain extend. However if the risk is such that they are getting more creative in taking in by creating at sort of complicated packages ( I don't know ) then it's quite a dangerous game. Example, Insurance company may go for reinsure to insure the risk that they take in by selling their products to mass market which is not possible if they would to do it alone. Definition of reinsure "http://en.wikipedia.org/wiki/Reinsurance" . It is such that they can now take higher risk which may not be sustainable, but on paper it looks good.

 

Do financial institution learnt from the year 2008 recession ? I don't think so. If so, government would not need to step in on TDSR. Imagine no TDSR, banks will still want to lend more $ to hit KPI. This makes property market sky rocket even higher, but who cares as long as they hit KPI. If so, credit card will not be so easily available now and the credit card debt is ever increasing. Then they are also thinking of creative ways to make $ to hit KPI, a lot of pressure. Sound $ principle?? Last on their mind perhaps.

 

That is why I still feel government still need to get down even harder on financial institution to reinforce the importance of sound $ principle and to step in to make sure they don't repeat the mistake that happened in the past that cause economy crisis.

 

 

Edited December 27, 2014 by Yewheng