'Where is this business model? Google provides a service – a search algorithm. Microsoft provides computer software. Apple provides innovative and beautiful software.What exactly is the bottom line for Facebook? Essentially, the company is worth whatever information it can pilfer from its client base. And that information may be worth more to the American intelligence companies that apparently crowd around Facebook than to the private sector itself. This is a company, then, that is fundamentally at war with its users. It provides the "thinnest" of services – social connectivity. Go online and it is hard to find a kind word for Facebook. Feedback to articles (not the articles themselves) is crammed with comments on Facebook's various problems from a business standpoint. Many deplore Facebook's lack of real privacy and manipulation of data and are skeptical about the company's prospects going forward. We share the same sentiments. We cannot account for the US$ 104 billion that the company is putatively worth now. Google, with ten times the earnings, is worth the same amount, capitalization-wise. The money being tossed around this Facebook deal is phenomenal. Central banks, in fact, have printed so much money over the past four years that some of it has got to go somewhere. Some of it has gone toward Facebook.'

'It's the NEW AMERICAN WAY....' -- Keeping those land prices high

'...the PayPal team reached an important conclusion: BD didn’t work. They needed organic, viral growth. They needed to give people money. So that’s what they did. New customers got $10 for signing up, and existing ones got $10 for referrals. Growth went exponential, and PayPal wound up paying $20 for each new customer. It felt like things were working and not working at the same time; 7 to 10% daily growth and 100 million users was good. No revenues and an exponentially growing cost structure were not. Things felt a little unstable. PayPal needed buzz so it could raise more capital and continue on. (Ultimately, this worked out. That does not mean it’s the best way to run a company. Indeed, it probably isn’t.) Feb 16, 2000 was a good day for PayPal; the Wall Street Journal ran a flattering piece that covered the company’s exponential growth and gave it a very back of the envelope valuation of $500M. The next month, when PayPal raised another round of funding, the lead investor accepted the WSJ’s Feb. 16 valuation as authoritative. That March was thoroughly crazy. PayPal closed its $100M round on March 31st. The timing was fortunate, since after that everything sort of crashed. PayPal was left with the challenge of building a real business. -- You can’t have a bubble absent widespread, intense belief. The incredible narrative about a tech bubble comes from people who are looking for a bubble. That’s more overreaction to the pain of the ‘90s than it is good analysis. Antibubble type thinking is probably somewhat more true. In other words, it’s probably better to insist that everything is going to work and that people should buy houses and tech stocks than it is to claim that there’s a bubble. But we should resist that, too. For bubble and anti-bubble thinking are both wrong because they hold the truth is social. But if the herd isn’t thinking at all, being contrarian—doing the opposite of the herd—is just as random and useless. To understand businesses and startups in 2012, you have to do the truly contrarian thing: you have to think for yourself. The question of what is valuable is a much better question than debating bubble or no bubble. The value question gets better as it gets more specific: is company X valuable? Why? How should we figure that out? Those are the questions we need to ask.'

'...we’re all in showbiz now, walking on eggshells, relentlessly tending our customer base. We use social media to create a product — to create a brand — and the product is us. We treat ourselves like little businesses, something to be managed and promoted. The self today is an entrepreneurial self, a self that’s packaged to be sold. -- ...movements always have an economic substrate. The beatniks and hippies — love, ecstasy, transcendence, utopia — were products of the postwar boom. The punks and slackers and devotees of hip-hop — rage, angst, nihilism, withdrawal — arose within the long stagnation that lasted from the early ’70s to the early ’90s. The hipsters were born in the dot-com boom and flourished in the real estate bubble. Affability is a commercial virtue, but it is also the affect of people who feel themselves to be living in a fundamentally agreeable society.'

'It is fundamentally a problem of the politicians. They have their 'political philosophies, their 'causes', and their 'departmental interests', an eye on specific sectors of the electorate, and on top of this is simple inertia. That government must do x has become a state of mind, along with the belief that x is an absolute necessity for the government. ...they never do enough to address the problems of their reliance on borrowed money. As I have many times argued in this blog, it is a vicious cycle in which the more a country borrows, the more more the economy is structured to consume the resources of the borrowing, and the more dependent the economy is on ongoing borrowing. Increasing the borrowing sees further restructuring of the economy to service the debt, and reduction in borrowing sees the elements of the economy that are unable to survive without the borrowing exposed to the light of day. Then there is the positive feedback. The more borrowing in the economy, the more activity in the economy, the higher the GDP growth, and the greater the GDP growth, the greater the borrowing as the growth is taken to indicative of an ability to repay the borrowing. The greater the borrowing, the more the economy restructures to service the consumption that originates in the borrowing. And so it goes on.....and this is how we come to the current crisis.'

'On your territory, only you are permitted to produce money. But that is not sufficient. Because as long as money is a regular good that must be expensively produced, there is nothing in it for you except expenses. More importantly, then, you must use your monopoly position in order to lower the production cost and the quality of money as close as possible to zero. Instead of costly quality money such as gold or silver, you must see to it that worthless pieces of paper that can be produced at practically zero cost will become money. Because you can create paper money out of thin air, you can also create credit out of thin air. In fact, because you can create credit out of nothing (without any savings on your part), you can offer loans at cheaper rates than anyone else, even at an interest rate as low as zero (or even at a negative rate). With this ability, not only is your former dependency on banks and the banking industry eliminated; you can, moreover, make banks dependent on you, and you can forge a permanent alliance and complicity between banks and state. You don't even have to become involved in the business of investing the credit yourself. That task, and the risk involved in it, you can safely leave to commercial banks. What you, your central bank, need to do is only this: You create credit out of thin air and then loan this money, at below-market interest rates, to commercial banks. Instead of you paying interest to banks, banks now pay interest to you. And the banks in turn loan out your newly created easy credit to their business friends at somewhat higher but still submarket interest rates (to earn from the interest differential). In addition, to make the banks especially keen on working with you, you may permit the banks to create a certain amount of their own new credit (of checkbook money) in addition and on top of the credit that you have created (fractional-reserve banking).'

'Printing money from nothing is not just corrosive, it has significantly changed the face of modern society, and even the history of the world. It is difficult to imagine our lives without so much monetary stimulation. Probably there would be far fewer wars. And healthier food. And far less drug abuse. Far fewer people in jail and much less poverty. Far fewer dictators and much less torture. Fewer taxes and significantly less inflation. Regulatory authorities and their dictates would not be in vogue. Lawyers would not be in such significant demand. There would be fewer horrible depressions. And the fear-based promotions that the elites rely upon to push Western middle classes toward fuller global governance would not likely be available. Most importantly, the world would not be controlled, at least partially, by a tiny cabal of sociopathic central banking families.'

'Almost no modern advisers will admit that central banks fix the price of "money"... Central banking blows up economies regularly, and during economic contractions the middle class becomes increasingly unprosperous while more and more wealth is centralized in the hands of great Anglosphere banking families. These families then use their wealth to create dominant social themes – fear-based promotions featuring scarcity memes – that are intended to push Western middle classes into surrendering wealth and power to the globalist solutions (UN, IMF, WHO, etc.) that the familial elites have already prepared. One of the dominant social themes that was remarkable successful in America during the late 20th Century was the idea that various forces were conspiring to erode middle class wealth. The only way to address this potential ruination was through "investing" in a menu of pre-prepared investment solutions featuring rigid, fragile and highly controlled "public" money pools.'

'If you are a central banker in the destination country, it might be that the flood of carry-trade money could push inflation upwards. What is the central banker or policymaker to do? The ‘hot’ money flooding into their country might be causing an asset-price bubble, or inflation. Something must be done. The problem is this: if interest rates are increased, the incentive for the carry trade is likewise increased – and might even cause the inflow of even more ‘hot’ money. If the central bank targets low interest rates, then there is the possibility that this might end the carry trade, but at the cost of creating an internal stimulus to inflation. The strengthening of the destination country’s currency might, in turn, have a negative effect on the balance of trade and the export sector of the economy. Exports will fall... Despite this, assets in the destination will be going up, while the underlying performance of the economy will be going down (albeit disguised by the inflow of money).'

'Mike Maloney is the author of the world's best selling book on precious metals investing. Since 2003 he has been advocating gold and silver as the ultimate means of protecting wealth from the games played by our governments and banking sector. In this 90 minute presentation he lays down his 'most likely' scenario for the global economy over the next decade... short term deflation, followed by big or even hyperinflation. Here you will learn the true definitions of inflation/deflation, the difference between currency and money, price vs value, 'Wealth Cycles', gold and silver accounting for the expansion of fiat currency, gold and silver supply and demand, the differences between the today's bull market and that of the 1970s, The Debt Collapse, and more.' -- "Voodoo, hocus-pocus scheme."

'If there are no more dustbins of history, this is because History itself has become a dustbin.' -- Jean Baudrillard

'Henceforth, it is the map that precedes the territory – precession of simulacra ...' -- Jean Baudrillard

'The system of central banking has created perhaps the most monumental bubble ever seen. There are literally thousands of major banks and bank branches all over the world. The downtowns of every major city in the developed world and the developing world are littered with them. People are so conditioned as to their ubiquity that they don't even notice it. Imagine if banks were actually ... tire manufacturers. Now imagine entering a strange city and seeing the entire downtown was FILLED with skyscrapers, each one representing a different, competing brand. Imagine the city and the countryside was full of branches, all selling tires. It wouldn't make any sense. Nor does it make any sense to have so many banks. But they are protected by central banks; they are appurtenances of central banking. ...the Anglosphere elites behind them will never discard a large bank. They may MERGE the bank, but they will never wish to lose it.'

'Nor are wars begun mainly in periods of economic distress as is often claimed. Goldstein’s study of economic cycles and war found a strong and consistent correlation between the severity of war and economic upswings. Although developed democracies do not go to war with each other, they nevertheless go to war against non-democratic nations do even more often than other nations, since they must act out the emotional distance between their Progressive and Reactionary classes... -- Depressions therefore are periodically experienced when nations feel they are too successful, growing too fast, and then engage in hyper-risky behavior, like the unregulated borrowing that the world engaged in during the past two decades. Like gambling addicts, they were not being “greedy” but were self-destructive, causing grandiose internal sacrifices costing many billions of dollars each time they occur, even though each time the risks taken are excused as “This time is different.”'

'The Chinese people are still in the phase, thanks to Western monetary stimulation, where they believe that everything that has happened to them is due to their industriousness and native intelligence. ...after the Chinese economy crashes as it must inevitably (unless they manage to pull off the proverbial soft-landing). What will be revealed by the wreckage is the full panoply of central banking deceit. The scales will fall from the eyes. The stock market will be revealed as manipulated; the companies as inept monopolies; the ChiComs themselves as the hands-on managers of their wrecked enterprises. In the near-term, the great cities and skyscrapers will go unfilled; the 10-lane highways shall remain untraveled. A billion people, newly wealthy will find that their condos are not sellable, that food is not available at almost any price and that their jobs were merely the extended froth of the most powerful central-banking bubble that the world has ever known.'

'Land is a creation of nature, not human action, and its value comes from natural features and the population, commerce, and public works of the community. Land rent is a pure surplus that mother nature offers to us as a gift by which to finance the public goods provided by government. But you have rejected mama’s natural offer. Instead, you, by voting for the status quo governmental chiefs, you attack the earnings of labor, and with that loot, you provide public goods that pump up land rent and land value. Yes, you, the voter! What happens then is that rent absorbs much of the gain from economic expansion and progress. Speculators jump in to leverage profit from the land-value rise. Landowners buy land with borrowed funds, so they engage their partners, the banks and other financiers. Speculation raises land values to peaks unaffordable for actual use, and then land values plunge, and the leveraged mortgages and derivatives crash. That is the source of panics and depressions.'

'There is a structure of capital goods from rapid turnover such as inventory to slowly maturing such as shopping centers. When interest rates are low, there is more investment in the slowly maturing capital goods. An expansion of money temporarily reduces interest rates, leading to more construction and other long-lasting investments, but rising prices later make these turn out to be bad investments. Land speculation sets in to take advantage of rising land prices. High prices and rising interest rates reduce profits, so investment slows down, leading to a recession. To reduce poverty, promote growth and efficiency, and eliminate depressions, eliminate taxation and generate public revenue from land rent and pollution charges. Switch from central banking and government fiat money to gold or private currency, with free-market banking. Free banking and the public collection of rent are the macroeconomic policies that promote smooth growth, full employment, and economic justice.'

'Even little countries like Panama and Uruguay have banks springing up like palm trees on every corner. The Anglo-American banking establishment doesn't want you to know this, dear reader. Citizens of major Western countries are used to seeing lots of banks in their downtowns. They figure it's because these cities are "major financial centers." Nothing could be further from the truth. The WHOLE WORLD looks like that. It's a bubble. A bank bubble. The world right now is run by central banks and central banks simply will not let their distribution chains contract. Central banks don't need banks for currency distribution. They could just as easily provide currency directly to people's individual accounts. Of course central banks would never do such a thing! It would create "inflation" (price inflation is what they mean). People can't be trusted with "fresh" central bank money. Only banks can. The mercantilist Ponzi scheme needs an ever-increasing base of new demand.' -- I want my corners.

'By treating the current, fallacious system as a kind of "gold standard" that cannot be taken down without an attack, one enshrines what is injurious. The conversation moves beyond remedies from reconfiguration to strategic necessities intended to defend what is evidently and obviously the Western economic system. Only it is not. The central bank economic system that has been put in place by the Anglo-American elite is far from a free-market system. It begins by printing money-from-nothing and as this fiat-currency circulates, it begins to inflate various markets, certainly the stock market. It also fools entrepreneurs into thinking times are better than they really are – and thus firms begin to over expand while other companies create trivial or non-essential products that would not have been successful in a less simulative environment. Eventually, the economy, stuffed with paper money, reaches a breaking point... People begin to wake from their Dreamtime at this point...'

'Dominant Social Theme: Invest wisely and well. – Let's try to put this long-running power elite promotion into perspective. We don't agree with the LA Time's perspective (see article excerpt above). It's not nest-egg versus Social Security (which the US cannot afford, especially because there are no SS funds, only fancy IOUs). There is a third way, which is to get rid of central banking entirely and let tortured Western economies gradually deflate. As economies undistort without the endless goad of monetary stimulation, people would gradually begin to be self-sufficient again. Nuclear families would collapse and extended families would reappear; this is the logical solution to old age, not frantic investing leading to the selection of an old-age home where one is likely to be abused before dying. ...the dollar-reserve system died in 2008, along with the popular belief that one could count on "investing" for retirement. It was never a reality; it was fiction.'

'Dominant Social Theme: Find a job, invest, save and then retire. -- The unraveling of American prosperity has to be regarded as the single most significant event that most American citizens young or old will face in their lifetime. In Europe, the comfortable myths about socialism have given way to the harsh realities of modern austerity. Meanwhile, the American Dream is unraveling "across the pond." The idea that municipalities would be able to continue to provide an endless array of upscale social and professional services – education, housing, civil services – is being exposed as a chimera. The whole issue of money creation was off-limits in the 20th century (how long ago that seems) and the result was a mythos that people grew up believing regarding their "prosperity" because they had no way of determining the truth. The Internet has provided an unexpected education. Elite media continue to play the beguiling tunes of 20th century Dreamtime, but for many the music has stopped.'

'The banking industry simply remains cocooned inside the world's biggest bubble. Central banking itself is a bubble though people don't think of it that way, but those who print the money decide which industries expand—and no self-respecting central banker is going to let the central-bank distribution system (commercial banks) deflate. And so the banking business just gets bigger and bigger. There is no reason for such a big banking industry. In fact, banks, at root, are nothing but money-warehouses; during the industrial revolution, funding for businesses often came locally, from extended families and partnerships. But that is not how our modern economy works. Central banks have created a massive, Western banking infrastructure and they use it to fund massive multinational companies – and this results in a kind of Anglosphere brand imperialism. The world may not need Coca-Cola, but the powerful dollar reserve system has made Coke's ubiquitiousness possible.'

'The banking industry simply remains cocooned inside the world's biggest bubble. Central banking itself is a bubble though people don't think of it that way, but those who print the money decide which industries expand—and no self-respecting central banker is going to let the central-bank distribution system (commercial banks) deflate. And so the banking business just gets bigger and bigger. There is no reason for such a big banking industry. In fact, banks, at root, are nothing but money-warehouses; during the industrial revolution, funding for businesses often came locally, from extended families and partnerships. But that is not how our modern economy works. Central banks have created a massive, Western banking infrastructure and they use it to fund massive multinational companies – and this results in a kind of Anglosphere brand imperialism. The world may not need Coca-Cola, but the powerful dollar reserve system has made Coke's ubiquitiousness possible.'

'Nations engage in manic economic and political projects to get a "dopamine rush" that counters the depression and guilt about their success. Political paranoia and slow ego disintegration are seen in conspiratorial group-fantasies, fears of femininity [countered by persecution of homosexuals], imaginary humiliations by other nations [countered by a search for external enemies as grandiosity fails and Poison Alerts and sacrificial group-fantasies proliferate] [and Purity Crusades multiply as anti-modern and anti-child (Bad Boy) movements]. These are countered in the economic sphere by manic overinvestment, risky ventures, excess money supply growth, soaring debt and stock market speculations, and in the political sphere by jingoistic nationalism, expansionist ventures, military buildups and belligerent, insulting foreign affair behavior. As in drug addiction, each dopamine rush leaves a dopamine hangover that requires an even larger manic activity to overcome the resulting depression.'

'That depressions are self-inflicted wounds and not just the results of "mysteriously wrongheaded monetary policies" is still not admitted by most economists. The task of controlling growth panic by depressions is given to central banks, which first flood the nation with low interest liquidity to encourage overinvestment, excess borrowing, inflation and stock market bubbles, and then, when the expansion becomes too sinful for the national psyche, reverse the monetary expansion by increasing interest rates and reducing liquidity ("Taking away the punch bowl when the party gets going.") Depressions come because really people become depressed, reducing their spending and investment, and feel hopeless. ...nations enter into depressions because they feel persecuted for their prosperity and individuation by what Jungians have termed the "Dragon Mother" – the needy, "devouring mother of infancy who cannot let her children go because she needs them for her own psychic survival."

Pay-walled. Recommended. -- When a pyramid scheme nears its inevitable end... "...the public insist on being handed the empty bag because they think they're going to make money, they want in on the game, everyone else has been making money, they feel left out so they insist on buying these things at the peak, and they are the ones who lose everything."

'Doug Casey: Well interest rates are suppressed all over the world by these governments who think that they need low interest rates to stimulate their economies. People want to save, but they're afraid to save in the form of paper currency. So they get into stocks and real estate. The stock market fluctuates erratically in an environment like that, and stocks are really just paper, at least fro one point of view. So many people are more comfortable with real estate, in that it has use value. As a result there's been massive construction in China, financed heavily with bank loans, and that's going to be a disaster. The consequences for these banks and the Chinese national currency can't be good. The two trillion dollars in foreign exchange reserves that they have could dry up and blow away if the government tries to bailout the real estate market. Assuming they're not inflated out of existence by the US first...'

'... the Chinese [free-market] economy is mostly operative at the level of the bazaar. The larger industrial and financial institutions are still in grasp of a centralized command-and-control environment with the Chinese communist party and, to a lesser extent, the Chinese military at the top. The economic distortions of the real-estate market must run all the way up the foodchain. Chinese leaders want the Chinese population itself to fill the purchasing vacuum left by Western collapse. We frankly wonder if this feasible. We don't see the communists as able to turn China into an American-style consumer society overnight. If they cannot, then the unwinding may happen sooner rather than later. Once the country enters into an industrial downturn, all the rest of the distortions – especially in banking and other Western-style emergent enterprises such as various Chinese stock markets – shall be revealed.'

'Paul Krugman is upset. :'-( ...like many Keynesians, Krugman is worried that lower prices will feed a credit crunch. He is worried that if money becomes worth MORE it will only aggravate people's over-leveraged positions. He is an inflationist, as are most people in a central banking economy, because people's buying decisions are usually based on an expectation of gradual inflation. ...what Krugman et. al are dealing with though they will not admit it is a generalized crack-up boom. The West's economies need a massive unwinding. The problem at this point is banking itself. Banking (and the financial industry generally) is the biggest bubble of all. Because the elite depends on the financial industry for monetary control, banks and other such institutions have been artificially cultivated and consolidated for 100 years. The amount of distortion, excess and waste in the Western financial system is beyond measure. It is like a metastized cancer that is poisoning the entire body politic.'

'...incessant credit stimulation has so distorted Western economies that even after two years, these economies have not yet returned to a point where banks and other investors can tell the difference between a legitimate opportunity and one that has been kept alive by various forms of governmental chicanery. This is why "stimulus" and "bailouts" are ultimately so counter-productive. They actually retard economic recovery. For monetarists – and other types of non-free-market economic-oriented journalists inhabiting the mainstream media the inability of banks to lend and the subsequent shrinkage of the money supply is cause for alarm. It is actually the most natural thing in the world. What many economists and financial journalists are calling for in the midst of a downturn is for the printing presses to reignite and for yet more faux-money to enter the economy in order to reinflate.'

'...how do you fix America's and the West's financial system? Get rid of central banks and allow the economy to purge itself of inefficient investment and commercial financial entities. This would take a year or so and then the pain—rather than lingering as it does now—would dissipate and the economic distortions (which rob the West of millions of jobs and their productive wealth) would be alleviated. Regulation is a dominant social theme—a promotion, in that regulation can never be anything but a distortive price fix. If one is looking to reduce business initiatives and centralize industrial power in the fewest hands, one could not do better than design the West's current financial structure. The financial disaster has taken place, whipping out much of the West's business vitality. Now the regulatory shoe seems set to drop, tightening credit and reducing the ability of lending institutions to take even reasonable risks.'

“I hated discussing ideas with investors,” he said, “because I then become a Defender of the Idea, and that influences your thought process." Once you became an idea’s defender, you had a harder time changing your mind about it. -- [Being diagnosed with Aspergers Syndrome] explained an awful lot about what he did for a living, and how he did it: his obsessive acquisition of hard facts, his insistence on logic, his ability to plow quickly through reams of tedious financial statements. People with Asperger’s couldn’t control what they were interested in. It was a stroke of luck that his special interest was financial markets and not, say, collecting lawn-mower catalogues. When he thought of it that way, he realized that complex modern financial markets were as good as designed to reward a person with Asperger’s who took an interest in them. “Only someone who has Asperger’s would read a subprime-mortgage-bond prospectus,” he said.'

'The power elite that organized the current Western monetary system was successful back in the 1930s in creating a narrative that blamed the financial industry (Wall Street, etc.) for the crash and subsequent Depression. As books like the Creature From Jekyll Island have shown us, it was the formation of a modern central bank, in tandem with modern regulatory democracy that caused the monetary failures that led to the Great Depression. It was inevitable that the elite would again try to shape the narrative of the modern money crisis, and in the largest sense, we think the Goldman lawsuit is part of the process. We are not necessarily implying, by the way, that the powers-that-be sat down in a conference room and decided to blame Goldman for everything. But just as the Western mercantilist money system itself eventually yields up chaos, so the system, with its farcical and dysfunctional regulatory apparatus, eventually yields up culprits. And it has been designed that way.'

'I've said for a long time that one of the reasons our consumer spending numbers have been "reasonably good" the last six months or so - and have been improving - is that people haven't been paying their mortgages. We have a new bubble ladies and gentlemen, and this one is the alleged "consumer recovery" coupled with the alleged "banking system recovery." Both are bogus, yet both are also intertwined; banks not foreclosing for more than a year, allowing people to live free in a house, gives the consumer faux spending power and at the same time enables the bank to claim "assets values" that in fact don't exist. As with all such deceptions and the economic bubbles they produce this game will continue until either the outright fraud is stopped by regulators or a cash flow shortfall forces recognition of the deception. The damage when this unwinds, if it is not contained now by regulatory force, is going to be horrific.'

'Ah, the new terms—illegal land use and land hording! This is analogous in our opinion to the term "predatory lending" aimed especially at mortgage brokers in America who used high-pressure sales tactics to supposedly force individuals to buy expensive houses. The fault of course is with the monetary system itself, not the poor salespeople caught up in its inexorable tidal pull. But since the fiat-money/central banking mechanism that causes the problems in the first place cannot be mentioned, or identified as the culprit (for political reasons) the blame will [be passed on]. -- When one gets to a point where the only way to control price inflation is by banning purchases then it is probably already too late. One can, perhaps, puncture the boom psychology, but the result is then inevitably a bust. The power elite in the West, for a variety of reasons, has wanted to pretend that China is a "free-market" success story. But this dominant social theme is beginning to unravel.'

'...where the biases of individuals enter into market transactions, potentially changing the perception of fundamentals of the economy. -- A current example of reflexivity in modern financial markets is that of the debt and equity of housing markets. Lenders began to make more money available to more people in the 1990s to buy houses. More people bought houses with this larger amount of money, thus increasing the prices of these houses. Lenders looked at their balance sheets which not only showed that they had made more loans, but that their equity backing the loans—the value of the houses, had gone up (because more money was chasing the same amount of housing, relatively). Thus they lent out more money because their balance sheets looked good... This was further amplified by public policy. Many governments see home ownership as a positive outcome and so [grant first home owners with financial subsidies such as the exemption of a primary residence from capital gains taxation.]'

Gisted -- Harrison breaks the cycle down into 5 phases: #1 RECOVERY (7 yrs): After the previous crash, optimism returns. #2 MINI-RECESSION (A few months): Will typically bring calls for lower rates and tax cuts. #3 EXPLOSIVE (7 yrs): Low rates, mortgage tax breaks and loose lending terms combine to fuel speculation. Greed eventually overwhelms fear of being left off the property ladder. People con themselves into believing houses are an 'investment' rather than just a place to live. #4 WINNERS CURSE (The last 2 yrs): Wild enthusiasm for capital gains. Property must be acquired at any price cursing everyone with unsustainably high valuations. #5 CORRECTION (3–5 yrs): Mortgages default. Risk is perceived again. Banks tighten up; liquidity/credit/money dries up. Banks sell repossessed inventory at low prices. Prices are driven down. Mortgage holders who bought during the bubble now expect capital losses. Renters switch from renting into buying setting the stage for the next recovery.

"How does Harrison do it? Well, he uses an 18 year cycle. He has traced and verified the length of this cycle going all the way back to 1700. For Harrison, the length of the cycle arises partly from how homes are financed. He points out that 5% has been a normal mortgage interest rate for much of Britain's past and that 5% compounded will double in almost exactly 14 years. After a period of 14 years, property prices reach a level where prices are too high and rental yields are too low. When banks have exhausted all their tricks in finding ways to make prices look affordable, the high valuations choke off demand and once the peak is in place, the 3–5 year slide begins which brings prices back down to earth. The timeframe for the downturn is shorter because it operates on fear rather than greed. After the turn, increasing fear and bank tightening of lending terms destroys excessive valuations faster than greed built them up."

'So many know the pattern by now. Pound billions into the stock market and trust the mainstream media to "talk up" a recovery until one finally occurs at least to some degree. In the meantime, ignore the larger collapse of industry and the increased polarization of jobs and wages. Eventually you arrive at a South American style recovery in which even people with advanced degrees are driving taxis because that's the only solid work available. We've traveled in these places. Inevitably, they are overbanked and a handful of wealthy families and individuals own most of the industrial and financial services that count. Everybody else is on the street selling phones, operating cabs or hustling short-order food. These are not pleasant economies to live in for the most part. As they spiral downwards, as they do sooner or later, politics inevitably takes an ugly turn toward populism. A new growth industry emerges: security and military affairs.'

'Eventually a whole lot of people stopped and said, "What the fuck are we doing?" and the bubble burst.' -- Any day now.

'...we fail to teach the fact that any time two or more exponents are in play, one of them always "runs away" from the other. We fail to teach the fundamental truth that you can never let this happen. Anywhere. Because if you do, it is simply a matter of time before wherever you let that happen with comes to ruin. -- ...[they] do not teach our children that such a pattern in the growth of government, in the growth of money, in the growth of energy consumption, in the growth of population - all will eventually lead to the same ruin and for the same reason. Why do they fail in this regard? I'll tell you why. Because if they didn't our teens - our high school graduates - might literally be rioting in the streets and burning those school boards and governments to the ground. They would raise hell, and in doing so would be both justified and appropriate in their actions.' -- "Pull it."

'Public interest is inevitably stimulated by the great amounts of money that can be made during an inflationary fiat-money boom, and this is one of the reasons that stock markets have flourished. But just because people invest in equity markets and reap gains during certain parts of the business cycle does not mean that stock markets are in any sense a mechanism that can predictably provide for one's retirement. ...buy and hold strategies are merely massaged, numerical promotions intended to fool people into thinking markets are something they are not. In the 21st century, we believe that business cycle investing - to the degree that it ever worked for the private investor - is going to be increasingly problematic. This is because the entire mercantilistic central banking economy is beginning to break down. The Internet itself is putting tremendous pressure on central banking as a dominant social theme and as a result, the predictable ebb and surge of equity markets may be disrupted.'

“Bubbles are best identified by credit excesses, not valuation excesses. And there’s no bigger credit excess than in China.” -- Most economists and governments expect Chinese growth momentum to continue this year, buoyed by what remains of a $586 billion government stimulus program that began last year, meant to lift exports and consumption among Chinese consumers. -- ...betting against China will not be easy. Because foreigners are restricted from investing in stocks listed inside China, Mr. Chanos has said he is searching for other ways to make his [short sale] bets, including focusing on construction- and infrastructure-related companies that sell cement, coal, steel and iron ore. -- ...many analysts now say that money, along with huge foreign inflows of “speculative capital,” has been funneled into the stock and real estate markets.' -- Government spending = malinvestment = asset bubble(s) = inevitable correction = obvious short sale. This isn't rocket science.

'Cities that shelled out big bucks to learn Richard Florida's prescription for vibrant urbanism are now hearing they may be beyond help. -- "There was a tremendous money-generating aspect to Richard's work," Frantz [Florida's former tour manager] says. "We did it in a grand way. We traveled in style. We stayed in boutique hotels in most of the places we were working." But it is wrong, he says, to see any conflict in Florida's dire pronouncements on the places that bankrolled this success, because he hadn't promised prosperity in the first place. "He wasn't really making prescriptions," Frantz says. "This wasn't Jesus Christ throwing the money men out of the temple; this was an academic. He was a fucking college professor, and you're hoping to resurrect Canton, Ohio? Yeah, good luck with that."' -- Land/real estate pump and dumping 'dressed up' as sustainable/"creative" economic redevelopment.

'Max Keiser talks to Stacy Herbert about Dubai's debt and the British real estate disease' -- Speculation, speculation, speculation.

Neo-liberal financialization as neo-feudalism: Explains how people have been fooled by bankster-infected government and think-tank propaganda into voting against property/land taxes.

No one looked at the bubble in land prices.

'Part three in The Renegade Economist investigative documentary series uncovering the people and practices behind the global financial crisis.'

'At this moment in time, would you want to be lending into the US economy? For all of the talk about recovery, the banks know that the economic crisis has a long way yet to run. They do know something that 'the rest of don't', and that there is no realistic prospect of a real recovery in the US economy. Despite this, the media, government organisations, and politicians continue to talk up the economy. -- Something is wrong in this picture. It looks very much like many people will be losing a considerable amount of money on the US stock market in the near future.'

By the grace of taxpayer bailouts, artificially low interest rates, and middleclass wannabe house price ponzi schemers: '...these children of Gordon Gekko are not just blinded by greed, unable to see themselves as others see them. They genuinely believe that they are performing a vital service for the nation, creating jobs and boosting the coffers. They argue that if they move their operations to Geneva, Britain will become a stagnant backwater and are hurt that their philanthropy has gone unnoticed.' -- The #European Banker: “The British are insane. Their Empire has gone, their industries are dying and the City is now their greatest asset, yet they insist on trashing it. The City fuelled Cool Britannia; the ripple effect was huge." -- No mate, all you've done by staying here is encourage glad-handing bureaucrats to keep interest rates low so that you can feed your gambling addiction and trick the masses into thinking that access to cheap debt/'credit' somehow makes them 'prosperous'.

'The British people are living in a fool's paradise and have yet to understand the gravity of the economic crisis, according a former head of the Financial Services Authority. What is disturbing is that the British people seem unwilling to face minimal belt-tightening. Even professors in higher education are balloting to strike, demanding a continuation of boom-time pay raises. "You have the best minds in the country planning to go on strike for 8pc. People are miles away from understanding what is needed." Polling data shows that 48pc of the public are against any spending cuts and only 20pc see the need for retrenchment. Britons appear to assume that the "fantastic growth in public spending" over the last decade has become an entitlement.' -- I see dead people.

'[The] movement toward abstraction has important advantages for complex societies, because abstractions can be deployed with a much smaller investment of resources than it takes to mobilize the concrete realities that back them up. ...economic abstractions keep functioning only so long as actual goods and services exist to be bought and sold, and it’s only in the pipe dreams of economists that the abstractions guarantee the presence of the goods and services. Vico argued that this trap is a central driving force behind the decline and fall of civilizations; the movement toward abstraction goes so far that the concrete realities are neglected. In the end the realities trickle away unnoticed, until a shock of some kind strikes the tower of abstractions built atop the void the realities once filled, and the whole structure tumbles to the ground. -- An economy of hallucinated wealth depends utterly on the willingness of all participants to pretend that the hallucinations have real value.'

'It’s literally amazing to me that our press corps hasn’t yet managed to draw a distinction between good news on Wall Street for companies like Goldman, and good news in reality. I watched carefully the reporting of the Dow breaking 10,000 the other day and not anywhere did I see a major news organization include a paragraph of the “On the other hand, so fucking what?” sort, one that might point out that unemployment is still at a staggering high, foreclosures are racing along at a terrifying clip, and real people are struggling more than ever. In fact the dichotomy between the economic health of ordinary people and the traditional “market indicators” is not merely a non-story, it is a sort of taboo — unmentionable in major news coverage.' -- We're from the TV and we're here to sell you.

'On a real basis (not nominal) the Dow at 10,000 ten years ago is equivalent to 7,537 today! In other words, not only have we had a lost decade for all those who focus on the absolute flatness of the DJIA, but it is also a decade where the US Consumer has lost 25% of purchasing power from the perspective of stocks! You won't hear this fact on the MSM. -- And if you want to be really scared, here is the comparable representation for the DJIA in ounces of gold. It cost about 30 ounces to buy the 10,000 Dow last time. Now it costs less than 10.' -- Hehe. Dollar-tinted glasses.

I ACCIDENTALLY A SUCKERS RALLY. WHEN SHOULD I SELL?

'Robin Angus, a director of the £200m Edinburgh-based Personal Assets Trust, said: “Quantitative easing is a phrase which bears the same relationship to ‘printing money’ as ‘terminological inexactitude’ does to ‘lie’. “It is a dishonest name for a dishonest activity. Some have even called it state-sponsored theft. “It has temporarily made the financial markets drunk on hopes of an economic recovery, but I can’t see how such a recovery can possibly be anything other than faltering, fragile [and] fraudulent. “Sometimes, [Ben] Bernanke, [Mervyn] King and their ilk seem like pushers of a miracle drug that can defer hangovers forever. The trouble is that we get hangovers for a good reason. If we didn’t get them, we might keep on drinking and drinking until we poisoned ourselves.”'

Faber slams Benanke, Krugman, and other pseudo-economists. Predicts the ultimate collapse.

'It still blows me away that David’s talk at Startup School 2008 was met with such enthusiasm (I know David was surprised too). The talk was simple. Come up with a product, charge money for it, make more money than it costs to run it, and you turn a profit! This is the formula that’s been in place since business began. Yet in front of a group of new tech entrepreneurs it seemed like a revelation, a brand new story never told before. David said people were coming up to him in droves after the speech thanking him for opening their eyes. Who closed them?' -- CAN HAZ MUNETIZASHUN L8R PLOX?

'In a phenomenal demonstration of frankness and true economic assessment, the head of the China Investment Council, Lou Jiwei, who controls China's $298 billion sovereign wealth fund, admits the ponzi nature of today's markets: "Both China and America are addressing bubbles by creating more bubbles and we're just taking advantage of that. So we can't lose." It doesn't get any simpler than that folks. Keep in mind Madoff was thrown in jail for a few hundred years for much less: what's $55 billion when you are dealing with a $20 trillion+ global equity market Ponzi scheme. And yet both China and the US continue their struggle to perpetuate a Ponzi, with the full implicit backing of all financial, regulatory and legal authorities. The system is now officially broken, even ignoring the conspiratorial ramblings of fringe bloggers.' -- So the whole world is taking advice from Paul Krugman and The Onion?? http://www.theonion.com/content/news/recession_plagued_nation_demands

A rant worth 100 economics text books.

'Negative feedback loops of a very similar kind control the production of primary goods by the Earth’s natural systems. Every primary good from the water levels in a river and the fertility of a given patch of soil, to more specialized examples such as the pollination services provided by bees to agricultural crops, is regulated by delicately balanced processes of negative feedback working through some subset of the planetary biosphere. The parallel is close enough that ecologists have drawn on metaphors from economics to make sense of their field, and it’s quite possible that an ecological economics using natural systems as metaphors for the secondary economy could return the favor and create an economics that makes sense in the real world. It’s when we get to the tertiary economy of financial goods that things change, because the feedback loops governing tertiary goods are not negative but positive. -- ...it’s not unreasonable to call the tertiary economy a kind of anti-ecology.'

'The Internet crashed the economy. But that's also why the current crisis should be seen as a cause for celebration as well: the Internet actually did what it was supposed to by decentralizing our ability to create and exchange value. This was the real dream, after all. Not simply to pass messages back and forth, but to dis-intermediate our exchanges. To cut out the middleman, and let people engage and transact directly. If I can create an application... without borrowing a ton of cash from the bank, then I am also undermining America's biggest industry — finance. While we rightly mourn the collapse of a state's economy, as well as the many that are to follow, we must — at the very least — acknowledge the real culprit. For digital technology not only killed the speculative economy, but stands ready to build us a real one.' -- Would you like some free free with your free, sir?

'Cassano set out on a series of meetings with Morgan Stanley, Goldman Sachs and the rest—all of whom argued how unlikely it was for housing prices to fall all at once. "They all said the same thing," says one of the traders present. (The lone exception, he said, was Goldman Sachs. Two months after their meeting with the investment bank, one of the AIG FP traders bumped into the Goldman guy who had defended the bonds, who said, Between you and me, you're right. These things are going to blow up.) -- The problem with Joe Cassano wasn't that he knew he was wrong. It was that it was too important to him that he be right. More than anything, Joe Cassano wanted to be one of Wall Street's big shots. He wound up being its perfect customer.'

'There are just four people who control all of the U.S. markets through their use of dangerous and explosive DERIVATIVES. These gambling interventions by the "Four Financial Dictators" have successfully brought the markets back each time... despite the inflated financial realities that existed. The purchase of these gambling DERIVATIVES at a great loss have transformed each market crisis into a rally. By manipulating the markets in this way, they have further inflated the highly overvalued market indexes. Perhaps Americans can now understand why the major U.S. banks, such as JP Morgan, are holding TRILLIONS of gambling derivatives on their books as the PPT group of four use them to rig the markets. Sooner or later, these market "fixes" will no longer hold the bubble from bursting. Thus, we have witnessed the creation and growth of the financial bubble that is on the brink of explosion... and we know who rigs and controls the markets to create this inflated bubble of gambling debt.'

'In Rolling Stone Issue 1082-83, Matt Taibbi takes on "the Wall Street Bubble Mafia" — investment bank Goldman Sachs. The piece has generated controversy, with Goldman Sachs firing back that Taibbi's piece is "an hysterical compilation of conspiracy theories" and a spokesman adding, "We reject the assertion that we are inflators of bubbles and profiteers in busts, and we are painfully conscious of the importance in being a force for good." Taibbi shot back: "Goldman has its alumni pushing its views from the pulpit of the U.S. Treasury, the NYSE, the World Bank, and numerous other important posts; it also has former players fronting major TV shows. They have the ear of the president if they want it." Here, now, are excerpts from Matt Taibbi's piece and video of Taibbi exploring the key issues.'

Text version here: http://bit.ly/WnRd6 -- "If America is circling the drain, Goldman Sachs has found a way to be that drain - an extremely unfortunate loophole in the system of Western democratic capitalism, which never foresaw that in a society governed passively by free markets and free elections, organized greed always defeats disorganized democracy. The bank's unprecedented reach and power have enabled it to turn all of America into a giant pump-and-dump scam, manipulating whole economic sectors for years at a time... All that money that you're losing, it's going somewhere, and in both a literal and a figurative sense, Goldman Sachs is where it's going: The bank is a huge, highly sophisticated engine for converting the useful, deployed wealth of society into the least useful, most wasteful and insoluble substance on Earth - pure profit for rich individuals.'

"What is damning about these quotes is not that he necessarily caused anything. What is devastating about them is that they expose the intellectual bankruptcy of his economic principles. Those who look up to him like the second coming of Adam Smith should realize that the neo-Keynesian principles that lead him to advocate aggressive interest-rate cuts and mammoth public spending now, are the very same principles that led him to advocate inducing a housing bubble then. He would himself affirm that his economic principles haven't fundamentally changed since then. So the conclusions and policy prescriptions he infers from them are just as wildly wrong now as they were then."

42:50 On the Fed-sanctioned pyramiding of frb/credit-money to fuel asset booms.

(Title is an obvious troll btw) "Here is Paul Krugman from his blog trying to deny that he was a persistent advocate for the housing bubble and below there are quotes from him just prior to the bubble taking off." -- Krugman, 2001: "...let's give credit where credit is due: Mr. Greenspan has cut rates since then. And while some of us may have been urging him to move even faster, the Fed's four interest-rate cuts since the slowdown became apparent represent an unusually aggressive response by historical standards. It's still not clear that Mr. Greenspan has caught up with the curve -- let's have at least one more rate cut, please -- but the interest-rate cuts do, cross your fingers, seem to be having an effect." -- Our fingers are still crossed for 'growth', Dr Krugman.

"Guys, read it again. It wasn’t a piece of policy advocacy, it was just economic analysis. What I said was that the only way the Fed could get traction would be if it could inflate a housing bubble." -- And your call for larger stimulus spending is just more benign economic 'analysis'?? America, aim pitchforks...

Ladies and Gentleman, I give you the noble prize-winning 'celebrity' economist, Dr Paul Krugman: "Alan Greenspan needs to create a housing bubble to replace the Nasdaq bubble." -- END THIS KEYNESIANIST FAGGOTRY NAO!

"... the governments of the Western world are seeking to sustain an economic 'shape' that was itself a product of an illusion. The change in the shape of the world economy has already taken place, and is just now become clear to see. As the illusion is dissipating, the world, the markets and individuals are starting to see the underlying reality. It is primarily the governments of the West that still seek to persuade us that we are in the illusory world that has already passed from existence, and seek to persuade us that it is still within reach. It is an illusion that flatters our dreams and aspirations, and is therefore an illusion that is aimed at a receptive audience. It is pushing at an open door.....we want to believe...."

"Here is the central problem for the Bank of England. The only way to justify QE is through the fear of deflation, but the only measure that is showing deflation is the RPI. The bank's remit does not extend to RPI so that it can not use the RPI as an excuse to print money. As such, they subtly conflated the measures, planted the idea of deflation in the mind of the media, and 'lo and behold', deflation has appeared. It now looks like, post hoc, that the Bank of England can justify the deflationary scare. Through smoke and mirrors, the media have accepted the deflationary argument and continue to accept QE. However, if the media were paying attention, they would note that the deflation is on RPI and, in part, due to the very policies that the Bank of England is actually pursuing. -- QE is simply a way of printing money to buy bonds and support the bond market. The policy is therefore really about printing money to support profligate government spending through printing money."

"The long economic expansion of the industrial age has fostered the massive growth of what old-fashioned Marxists used to call a rentier class – a class whose money makes money for them. Even among people who work for a living, the idea of joining the rentier class on retirement, and living comfortably off investments, has become very popular in recent years. The problem, of course, is that the age of industrial expansion is over; it was made possible in the first place only by exponentially increasing the use of fossil fuels and other natural resources; like all exponential growth curves, it faced an inevitable collision with the limits of its environment – and that collision is happening around us right now. We are thus entering a period of prolonged economic contraction – not a recession, or even a depression, but a change in the fundamental dynamic of the economy."

'... the US government and Federal Reserve are acting to reverse the loss of unsustainable consumer spending through massive expansion in money, and even greater fiscal deficits. They are making no serious attempts to reverse the deficits, and have no clear plan for how both the government and wider economy might move from deficit to surplus. For creditor nations such as China, it must increasingly look like the US is initiating the largest default in history - through the destruction of the value of the debts through inflation. If we then look at US GDP to gain an overview over recent months, the figures are quite simply dire. [GDP] is itself misleading as an indicator of economic health. For example, borrowed money creates activity, and this is included in the figures. As such, the GDP fall is taking place despite massive increases in government borrowing, which will have increased activity within the economy.'

'The great illusion created by the demographically-driven rise in asset prices was the notion that one could park excess money in some form of paper or housing asset and "get wealthy" over time. It is a cheap, temporary illusion. I am thinking that the next ten years will see the US's debt obligations shrink back to something less than 200% of GDP. Along with that, the portion of our GDP that was false, because it was inflated by excess deficit spending, will be shrinking. I think that $25 to $30 trillion of (current value) debt destruction lies along that path. In my estimation, this marks the beginning of a great leveling of expectations between what we promised ourselves and what reality can deliver. We are in the opening stages of a grand play with many acts and even more plot twists. For most people, most especially me, sawing at the rope that anchors our beliefs in the past is a slow process, with progress being measured by the breaking of each individual strand.'

"The crash has laid bare many unpleasant truths about the United States. One of the most alarming, says a former chief economist of the International Monetary Fund, is that the finance industry has effectively captured our government—a state of affairs that more typically describes emerging markets, and is at the center of many emerging-market crises. If the IMF’s staff could speak freely about the U.S., it would tell us what it tells all countries in this situation: recovery will fail unless we break the financial oligarchy that is blocking essential reform. And if we are to prevent a true depression, we’re running out of time. -- Squeezing the oligarchs, though, is seldom the strategy of choice among emerging-market governments. Under duress, generosity toward old friends takes many innovative forms. Meanwhile, needing to squeeze someone, most emerging-market governments look first to ordinary working folk—at least until the riots grow too large."

"The popular culture tried to warn us. For 20 years, we've had Homer Simpson's spot-on caricature of the quintessential American: childish, irresponsible, willfully oblivious, fat and happy. We knew, in our heart of hearts, that something had to give. The '80s spirit endured through the '90s and the 2000s, all the way until the fall of 2008, like an awesome winning streak in Vegas that went on and on and on. American-style capitalism triumphed, and thanks to FedEx and the Web, delayed gratification itself came to seem quaint and unnecessary. During the '80s and '90s, we were Wile E. Coyote racing heedlessly across the endless American landscape at maximum speed and then spent the beginning of the 21st century suspended in midair just past the end of the cliff; gravity reasserted itself, and we plummeted."

'... the UK and other countries have moved towards what has been described as ‘post-industrial’ economies. Countries such as the UK would provide the finance, design and marketing and so on, and people in the emerging economies could get on with the lower-value parts – making the products or providing the service. For the past ten years, the UK has laboured under the illusion that this ‘new paradigm’ was working. It is only in the past year or two that this illusion of success has been shattered. In 2007, I analysed the UK economy with a singular aim: to identify the source of its apparent strong growth, while seemingly stronger competitors were barely growing. Rather than look at GDP growth, I tried to examine what might be called the ‘root’ sources of wealth. The conclusion of this analysis was very worrying, but also confirmed my intuition.' -- Debt