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Macro Analytics - 10-20-12 MORAL HAZARD - Part II

The Federal Reserve and its Monetary Malpractice is at the core of the American Dream becoming a myth for the vast majority of Americans. Jobs, disposable income and financial security are all under pressure, as the Federal Reserve continues its historic monetary gamble on unproven policies of Quantitative Easing and ZIRP. They are clearly failing to achieve the Feds dual manadate as these same policies likewise failed Japan. John Rubino and Gordon T Long in this two part series discuss how these policies have led to Moral Hazard, which has lead to Unintended Consequences and in turn to Dysfunctional Markets. A broad range of examples for each is laid out for the listener to see how they are interwhined and how they all stem from Monetary Malpractice.

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Macro Analytics October 20th, 2012 MORAL HAZARD & UNINTENDED CONSEQUENCES Listen to the original podcast for this slide at www.GordonTLong.com/Macro_Analytics The content of this slide should not be considered investment advice of any sort, nor should it be used to make investment decisions. Use of this slide is considered to be your explicit acceptance of the Disclosure Statement and the Terms of Use found on the last page of this document.
Macro Analytics October 20th, 2012 MORAL HAZARD & UNINTENDED CONSEQUENCES Listen to the original podcast for this slide at www.GordonTLong.com/Macro_Analytics The content of this slide should not be considered investment advice of any sort, nor should it be used to make investment decisions. Use of this slide is considered to be your explicit acceptance of the Disclosure Statement and the Terms of Use found on the last page of this document.
Macro Analytics October 20th, 2012 MORAL HAZARD & UNINTENDED CONSEQUENCES Listen to the original podcast for this slide at www.GordonTLong.com/Macro_Analytics The content of this slide should not be considered investment advice of any sort, nor should it be used to make investment decisions. Use of this slide is considered to be your explicit acceptance of the Disclosure Statement and the Terms of Use found on the last page of this document.
Macro Analytics October 20th, 2012 MORAL HAZARD & UNINTENDED CONSEQUENCES Listen to the original podcast for this slide at www.GordonTLong.com/Macro_Analytics The content of this slide should not be considered investment advice of any sort, nor should it be used to make investment decisions. Use of this slide is considered to be your explicit acceptance of the Disclosure Statement and the Terms of Use found on the last page of this document.
Macro Analytics October 20th, 2012 MORAL HAZARD & UNINTENDED CONSEQUENCES Listen to the original podcast for this slide at www.GordonTLong.com/Macro_Analytics The content of this slide should not be considered investment advice of any sort, nor should it be used to make investment decisions. Use of this slide is considered to be your explicit acceptance of the Disclosure Statement and the Terms of Use found on the last page of this document.
Macro Analytics October 20th, 2012 MORAL HAZARD MORAL HAZARD In economic theory, a moral hazard is a situation where a party will have a tendency to take risks because the costs that could incur will not be felt by the party taking the risk. Moral Hazard > Mal-investment > Corruption  Bad bankers run good bankers (i.e. those reluctant to lend to bad credits) out of the business. Result: banks become hedge funds, predatory, corrupt.  Big banks use their too-big-to-fail status to borrow much cheaply than well-run smaller banks, and then proceed to push the latter out of mortgages and other lucrative business lines.  Big banks then accelerate their growth. Result: financial oligarchy in which the banks/government/military industrial complex merge into one organization. Bernanke, Jamie Diamond, Obama are division heads in this empire. FINAL RESULT: Police state in which the Bill of Rights is ignored and technology is used to suppress dissent while inflation siphons wealth from the 99% to the 1% Listen to the original podcast for this slide at www.GordonTLong.com/Macro_Analytics The content of this slide should not be considered investment advice of any sort, nor should it be used to make investment decisions. Use of this slide is considered to be your explicit acceptance of the Disclosure Statement and the Terms of Use found on the last page of this document.
Macro Analytics October 20th, 2012 MORAL HAZARD MORAL HAZARD  Real estate appraisers forced to meet the number. Result: Buyers end up underwater on day one.  Governments begin to lie about economic stats to obscure the impact of bad policy.  Businesses take excessive risks because borrowing is so easy and government stats paint a too-rosy picture. Result: Massive Mal-investment  Banks create unlimited amounts of derivatives and asset backed securities because financing is so easy and because they know that should the market fail governments will have no choice but to bail them out.  Individuals borrow excessively because credit is extremely easy to get. The market signals that they’re highly credit- worthy and that the future is brighter than it actually is.  Investors move further out on the risk spectrum because: 1) there’s no yield available in low-risk paper, 2) government stats paint a too-rosy picture, and 3) the conventional wisdom is that the government can’t let high-risk investment fail. Result: Extremely fragile national balance sheet, Result: Overexposure to stocks and junk bonds, Result: Retirees with capital at risk that might never be recovered. Listen to the original podcast for this slide at www.GordonTLong.com/Macro_Analytics The content of this slide should not be considered investment advice of any sort, nor should it be used to make investment decisions. Use of this slide is considered to be your explicit acceptance of the Disclosure Statement and the Terms of Use found on the last page of this document.
Macro Analytics October 20th, 2012 Listen to the original podcast for this slide at www.GordonTLong.com/Macro_Analytics The content of this slide should not be considered investment advice of any sort, nor should it be used to make investment decisions. Use of this slide is considered to be your explicit acceptance of the Disclosure Statement and the Terms of Use found on the last page of this document.
Macro Analytics October 20th, 2012 MORAL HAZARD MORAL HAZARD In economic theory, a moral hazard is a situation where a party will have a tendency to take risks because the costs that could incur will not be felt by the party taking the risk. Moral Hazard > Mal-investment > Corruption  Bad bankers run good bankers (i.e. those reluctant to lend to bad credits) out of the business. Result: banks become hedge funds, predatory, corrupt.  Big banks use their too-big-to-fail status to borrow much cheaply than well-run smaller banks, and then proceed to push the latter out of mortgages and other lucrative business lines.  Big banks then accelerate their growth. Result: financial oligarchy in which the banks/government/military industrial complex merge into one organization. Bernanke, Jamie Diamond, Obama are division heads in this empire. FINAL RESULT: Police state in which the Bill of Rights is ignored and technology is used to suppress dissent while inflation siphons wealth from the 99% to the 1% Listen to the original podcast for this slide at www.GordonTLong.com/Macro_Analytics The content of this slide should not be considered investment advice of any sort, nor should it be used to make investment decisions. Use of this slide is considered to be your explicit acceptance of the Disclosure Statement and the Terms of Use found on the last page of this document.
Macro Analytics October 20th, 2012 MORAL HAZARD & UNINTENDED CONSEQUENCES Listen to the original podcast for this slide at www.GordonTLong.com/Macro_Analytics The content of this slide should not be considered investment advice of any sort, nor should it be used to make investment decisions. Use of this slide is considered to be your explicit acceptance of the Disclosure Statement and the Terms of Use found on the last page of this document.
Macro Analytics October 20th, 2012 MORAL HAZARD Economic Schools of Thought Listen to the original podcast for this slide at www.GordonTLong.com/Macro_Analytics The content of this slide should not be considered investment advice of any sort, nor should it be used to make investment decisions. Use of this slide is considered to be your explicit acceptance of the Disclosure Statement and the Terms of Use found on the last page of this document.
Macro Analytics October 20th, 2012 Listen to the original podcast for this slide at www.GordonTLong.com/Macro_Analytics The content of this slide should not be considered investment advice of any sort, nor should it be used to make investment decisions. Use of this slide is considered to be your explicit acceptance of the Disclosure Statement and the Terms of Use found on the last page of this document.
Macro Analytics October 20th, 2012 MORAL HAZARD Sherman Act – Combines Act – Monopolies - Cartels Listen to the original podcast for this slide at www.GordonTLong.com/Macro_Analytics The content of this slide should not be considered investment advice of any sort, nor should it be used to make investment decisions. Use of this slide is considered to be your explicit acceptance of the Disclosure Statement and the Terms of Use found on the last page of this document.
Macro Analytics October 20th, 2012 US Canadian MORAL HAZARD Sherman Act – Combines Act – Monopolies - Cartels Listen to the original podcast for this slide at www.GordonTLong.com/Macro_Analytics The content of this slide should not be considered investment advice of any sort, nor should it be used to make investment decisions. Use of this slide is considered to be your explicit acceptance of the Disclosure Statement and the Terms of Use found on the last page of this document.
INVESTING IN THE BOTTOM LINE (THE “RONA MENTALITY”) Not Happening! Off Balance Sheet Securitized Debt as an ASSET Bottom Line ONLY Orientation Leverage Debt for Best RONA Listen to the original podcast for this slide at www.GordonTLong.com/Macro_Analytics The content of this slide should not be considered investment advice of any sort, nor should it be used to make investment decisions. Use of this slide is considered to be your explicit acceptance of the Disclosure Statement and the Terms of Use found on the last page of this document.
Macro Analytics October 20th, 2012 MORAL HAZARD & UNINTENDED CONSEQUENCES GOLDMAN SACHS Listen to the original podcast for this slide at www.GordonTLong.com/Macro_Analytics The content of this slide should not be considered investment advice of any sort, nor should it be used to make investment decisions. Use of this slide is considered to be your explicit acceptance of the Disclosure Statement and the Terms of Use found on the last page of this document.
Macro Analytics October 20th, 2012 MORAL HAZARD & UNINTENDED CONSEQUENCES JP MORGAN Listen to the original podcast for this slide at www.GordonTLong.com/Macro_Analytics The content of this slide should not be considered investment advice of any sort, nor should it be used to make investment decisions. Use of this slide is considered to be your explicit acceptance of the Disclosure Statement and the Terms of Use found on the last page of this document.
Macro Analytics October 20th, 2012 MORAL HAZARD & UNINTENDED CONSEQUENCES BANK OF AMERICA Listen to the original podcast for this slide at www.GordonTLong.com/Macro_Analytics The content of this slide should not be considered investment advice of any sort, nor should it be used to make investment decisions. Use of this slide is considered to be your explicit acceptance of the Disclosure Statement and the Terms of Use found on the last page of this document.
Macro Analytics October 20th, 2012 MORAL HAZARD SHORT TERM INCENTIVES ONLY Listen to the original podcast for this slide at www.GordonTLong.com/Macro_Analytics The content of this slide should not be considered investment advice of any sort, nor should it be used to make investment decisions. Use of this slide is considered to be your explicit acceptance of the Disclosure Statement and the Terms of Use found on the last page of this document.
Macro Analytics October 20th, 2012 MORAL HAZARD Listen to the original podcast for this slide at www.GordonTLong.com/Macro_Analytics The content of this slide should not be considered investment advice of any sort, nor should it be used to make investment decisions. Use of this slide is considered to be your explicit acceptance of the Disclosure Statement and the Terms of Use found on the last page of this document.
Macro Analytics October 20th, 2012 MORAL HAZARD Listen to the original podcast for this slide at www.GordonTLong.com/Macro_Analytics The content of this slide should not be considered investment advice of any sort, nor should it be used to make investment decisions. Use of this slide is considered to be your explicit acceptance of the Disclosure Statement and the Terms of Use found on the last page of this document.
Macro Analytics October 20th, 2012 MORAL HAZARD Listen to the original podcast for this slide at www.GordonTLong.com/Macro_Analytics The content of this slide should not be considered investment advice of any sort, nor should it be used to make investment decisions. Use of this slide is considered to be your explicit acceptance of the Disclosure Statement and the Terms of Use found on the last page of this document.
Macro Analytics October 20th, 2012 MORAL HAZARD & UNINTENDED CONSEQUENCES Listen to the original podcast for this slide at www.GordonTLong.com/Macro_Analytics The content of this slide should not be considered investment advice of any sort, nor should it be used to make investment decisions. Use of this slide is considered to be your explicit acceptance of the Disclosure Statement and the Terms of Use found on the last page of this document.
Macro Analytics October 20th, 2012 UNINTENDED CONSEQUENCES UNINTENDED CONSEQUENCES Unintended consequences (sometimes unanticipated consequences or unforeseen consequences) are outcomes that are not the ones intended by a purposeful action. Unintended Consequences > Dysfunctional Markets > Instability Destabilization of smaller countries  Switzerland  Brazil Geopolitical Instability Countries with financial problems look for external enemies to distract populace. Not a surprise that there are minor wars springing up everywhere  China/Japan  Middle East  US/Israel/Iran False flag coming??? Listen to the original podcast for this slide at www.GordonTLong.com/Macro_Analytics The content of this slide should not be considered investment advice of any sort, nor should it be used to make investment decisions. Use of this slide is considered to be your explicit acceptance of the Disclosure Statement and the Terms of Use found on the last page of this document.
Macro Analytics October 20th, 2012 MORAL HAZARD Listen to the original podcast for this slide at www.GordonTLong.com/Macro_Analytics The content of this slide should not be considered investment advice of any sort, nor should it be used to make investment decisions. Use of this slide is considered to be your explicit acceptance of the Disclosure Statement and the Terms of Use found on the last page of this document.
Macro Analytics October 20th, 2012 SWITZERLAND Listen to the original podcast for this slide at www.GordonTLong.com/Macro_Analytics The content of this slide should not be considered investment advice of any sort, nor should it be used to make investment decisions. Use of this slide is considered to be your explicit acceptance of the Disclosure Statement and the Terms of Use found on the last page of this document.
Macro Analytics October 20th, 2012 MORAL HAZARD & UNINTENDED CONSEQUENCES Listen to the original podcast for this slide at www.GordonTLong.com/Macro_Analytics The content of this slide should not be considered investment advice of any sort, nor should it be used to make investment decisions. Use of this slide is considered to be your explicit acceptance of the Disclosure Statement and the Terms of Use found on the last page of this document.
Macro Analytics October 20th, 2012 MORAL HAZARD & UNINTENDED CONSEQUENCES Listen to the original podcast for this slide at www.GordonTLong.com/Macro_Analytics The content of this slide should not be considered investment advice of any sort, nor should it be used to make investment decisions. Use of this slide is considered to be your explicit acceptance of the Disclosure Statement and the Terms of Use found on the last page of this document.
Macro Analytics October 20th, 2012 MONETARY MALPRACTICE MONETARY MALPRACTIVE – Regional EUROPE MALPRACTICE: Instead of allowing excessive peripheral country debt to be wiped out, ECB is guaranteeing it. RESULT: investors buying bonds they wouldn’t otherwise buy, and Spain and Greece continuing to build up debt US MALPRACTICE: Low interest rates lead to a vast oversupply of houses. But instead of letting prices fall to market clearing levels, the Fed lowered rates even further and is now buying mortgage bonds as part of QE3. RESULT: Mortgage rates are at near-record lows and home building is rising again, even though we still have too many houses (malinvestment), flipping is back (moral hazard), first-time home buyers are being priced out of starter homes (unintended consequence), mortgage debt is beginning to rise again (moral hazard). Important to understand that homes are not productive assets. They eat capital and the more big houses we have the less productive we are as a society (unintended consequence). MALPRCTICE: Low interest rates are pushing pension funds and individuals into riskier assets. RESULT: 1. They were forced to buy equities and junk bonds to achieve decent yields. 2. Now the yields on those two classes have been lowered to the point where they don’t work, so pension funds are moving back into collateralized loan obligations, or CLOs, securities created from pools of corporate loans. 3. JP Morgan forecast three times as many CLOs will be created this year as in 2011. Listen to the original podcast for this slide at www.GordonTLong.com/Macro_Analytics The content of this slide should not be considered investment advice of any sort, nor should it be used to make investment decisions. Use of this slide is considered to be your explicit acceptance of the Disclosure Statement and the Terms of Use found on the last page of this document.
Macro Analytics October 20th, 2012 MONETARY MALPRACTICE Listen to the original podcast for this slide at www.GordonTLong.com/Macro_Analytics The content of this slide should not be considered investment advice of any sort, nor should it be used to make investment decisions. Use of this slide is considered to be your explicit acceptance of the Disclosure Statement and the Terms of Use found on the last page of this document.
Macro Analytics October 20th, 2012 MONETARY MALPRACTICE MONETARY MALPRACTIVE – Regional US …. Continued MALPRACTICE: The Fed’s willingness to monetize debt prevents the US from living within its means. RESULT: Without a printing press we would have to prioritize and limit spending. But with a printing press we don’t. The US can run a global military empire and a cradle to grave welfare state and simply print the money it needs (moral hazard). An ongoing, accelerating debt buildup (unintended consequence) that: 1. Makes it harder to live within our means because we first have to pay interest on this rising debt and 2. Increases the odds of a catastrophic meltdown as rising debt makes the system more unstable (unintended consequence). Listen to the original podcast for this slide at www.GordonTLong.com/Macro_Analytics The content of this slide should not be considered investment advice of any sort, nor should it be used to make investment decisions. Use of this slide is considered to be your explicit acceptance of the Disclosure Statement and the Terms of Use found on the last page of this document.
Macro Analytics October 20th, 2012 MORAL HAZARD & UNINTENDED CONSEQUENCES Listen to the original podcast for this slide at www.GordonTLong.com/Macro_Analytics The content of this slide should not be considered investment advice of any sort, nor should it be used to make investment decisions. Use of this slide is considered to be your explicit acceptance of the Disclosure Statement and the Terms of Use found on the last page of this document.
Macro Analytics October 20th, 2012 MORAL HAZARD & UNINTENDED CONSEQUENCES Listen to the original podcast for this slide at www.GordonTLong.com/Macro_Analytics The content of this slide should not be considered investment advice of any sort, nor should it be used to make investment decisions. Use of this slide is considered to be your explicit acceptance of the Disclosure Statement and the Terms of Use found on the last page of this document.
Macro Analytics October 20th, 2012 MONETARY MALPRACTICE MONETARY MALPRACTIVE BOTTOM LINE  Low interest rates and massive transfers of capital from Fed to banks allows banks to become hedge funds, making most of their money through proprietary trading and the creation of ever-more exotic instruments (moral hazard), leading to a merger of the banks, government and military/industrial complex into one entity (unintended consequence) that is not focused on expanding its power rather than serving its original constituents.  Low interest rates and easy money lead to massive concentrations of wealth as bankers and corporate CEOs take ever-greater risks, keeping the profits and handing the losses off to taxpayers (moral hazard). Wealth disparities explode (unintended consequences) creating, in effect an aristocracy – and a disaffected majority. Political instability rises (unintended consequence) leading the government to build a police state apparatus. The coming confrontation will look like Greece, with the addition of advanced technology on all sides (very unintended consequence) Listen to the original podcast for this slide at www.GordonTLong.com/Macro_Analytics The content of this slide should not be considered investment advice of any sort, nor should it be used to make investment decisions. Use of this slide is considered to be your explicit acceptance of the Disclosure Statement and the Terms of Use found on the last page of this document.
Macro Analytics October 20th, 2012 JAPAN THE BIGGEST FUNDER OF US DEBT?? Listen to the original podcast for this slide at www.GordonTLong.com/Macro_Analytics The content of this slide should not be considered investment advice of any sort, nor should it be used to make investment decisions. Use of this slide is considered to be your explicit acceptance of the Disclosure Statement and the Terms of Use found on the last page of this document.
Macro Analytics October 20th, 2012 MORAL HAZARD & UNINTENDED CONSEQUENCES Listen to the original podcast for this slide at www.GordonTLong.com/Macro_Analytics The content of this slide should not be considered investment advice of any sort, nor should it be used to make investment decisions. Use of this slide is considered to be your explicit acceptance of the Disclosure Statement and the Terms of Use found on the last page of this document.
DISCLOSURE STATEMENT AND TERMS OF USE THE CONTENT OF THIS SLIDE PRESENTATION AND ITS ACCOMPANYING RECORDED AUDIO DISCUSSION ARE INTENDED FOR EDUCATIONAL PURPOSES ONLY. This slide presentation and its accompanying recorded audio discussion are not a solicitation to trade or invest, and any analysis is the opinion of the author and is not to be used or relied upon as investment advice. Trading and investing can involve substantial risk of loss. Past performance is no guarantee of future returns/results. Commentary is only the opinions of the authors and should not to be used for investment decisions. You must carefully examine the risks associated with investing of any sort and whether investment programs are suitable for you. You should never invest or consider investments without a complete set of disclosure documents, and should consider the risks prior to investing. This slide presentation and its accompanying recorded audio discussion are not in any way a substitution for disclosure. Suitability of investing decisions rests solely with the investor. Your acknowledgement of this Disclosure and Term of Use Statement is a condition of access to it. Furthermore, any investments you may make are your sole responsibility. THERE IS RISK OF LOSS IN TRADING AND INVESTING OF ANY KIND. PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS. Listen to the original podcast for this slide at www.GordonTLong.com/Macro_Analytics

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Macro Analytics - 10-20-12 MORAL HAZARD - Part II

  • 1.
    Macro Analytics October 20th, 2012 MORAL HAZARD & UNINTENDED CONSEQUENCES Listen to the original podcast for this slide at www.GordonTLong.com/Macro_Analytics The content of this slide should not be considered investment advice of any sort, nor should it be used to make investment decisions. Use of this slide is considered to be your explicit acceptance of the Disclosure Statement and the Terms of Use found on the last page of this document.
  • 2.
    Macro Analytics October 20th, 2012 MORAL HAZARD & UNINTENDED CONSEQUENCES Listen to the original podcast for this slide at www.GordonTLong.com/Macro_Analytics The content of this slide should not be considered investment advice of any sort, nor should it be used to make investment decisions. Use of this slide is considered to be your explicit acceptance of the Disclosure Statement and the Terms of Use found on the last page of this document.
  • 3.
    Macro Analytics October 20th, 2012 MORAL HAZARD & UNINTENDED CONSEQUENCES Listen to the original podcast for this slide at www.GordonTLong.com/Macro_Analytics The content of this slide should not be considered investment advice of any sort, nor should it be used to make investment decisions. Use of this slide is considered to be your explicit acceptance of the Disclosure Statement and the Terms of Use found on the last page of this document.
  • 4.
    Macro Analytics October 20th, 2012 MORAL HAZARD & UNINTENDED CONSEQUENCES Listen to the original podcast for this slide at www.GordonTLong.com/Macro_Analytics The content of this slide should not be considered investment advice of any sort, nor should it be used to make investment decisions. Use of this slide is considered to be your explicit acceptance of the Disclosure Statement and the Terms of Use found on the last page of this document.
  • 5.
    Macro Analytics October 20th, 2012 MORAL HAZARD & UNINTENDED CONSEQUENCES Listen to the original podcast for this slide at www.GordonTLong.com/Macro_Analytics The content of this slide should not be considered investment advice of any sort, nor should it be used to make investment decisions. Use of this slide is considered to be your explicit acceptance of the Disclosure Statement and the Terms of Use found on the last page of this document.
  • 6.
    Macro Analytics October 20th, 2012 MORAL HAZARD MORAL HAZARD In economic theory, a moral hazard is a situation where a party will have a tendency to take risks because the costs that could incur will not be felt by the party taking the risk. Moral Hazard > Mal-investment > Corruption  Bad bankers run good bankers (i.e. those reluctant to lend to bad credits) out of the business. Result: banks become hedge funds, predatory, corrupt.  Big banks use their too-big-to-fail status to borrow much cheaply than well-run smaller banks, and then proceed to push the latter out of mortgages and other lucrative business lines.  Big banks then accelerate their growth. Result: financial oligarchy in which the banks/government/military industrial complex merge into one organization. Bernanke, Jamie Diamond, Obama are division heads in this empire. FINAL RESULT: Police state in which the Bill of Rights is ignored and technology is used to suppress dissent while inflation siphons wealth from the 99% to the 1% Listen to the original podcast for this slide at www.GordonTLong.com/Macro_Analytics The content of this slide should not be considered investment advice of any sort, nor should it be used to make investment decisions. Use of this slide is considered to be your explicit acceptance of the Disclosure Statement and the Terms of Use found on the last page of this document.
  • 7.
    Macro Analytics October 20th, 2012 MORAL HAZARD MORAL HAZARD  Real estate appraisers forced to meet the number. Result: Buyers end up underwater on day one.  Governments begin to lie about economic stats to obscure the impact of bad policy.  Businesses take excessive risks because borrowing is so easy and government stats paint a too-rosy picture. Result: Massive Mal-investment  Banks create unlimited amounts of derivatives and asset backed securities because financing is so easy and because they know that should the market fail governments will have no choice but to bail them out.  Individuals borrow excessively because credit is extremely easy to get. The market signals that they’re highly credit- worthy and that the future is brighter than it actually is.  Investors move further out on the risk spectrum because: 1) there’s no yield available in low-risk paper, 2) government stats paint a too-rosy picture, and 3) the conventional wisdom is that the government can’t let high-risk investment fail. Result: Extremely fragile national balance sheet, Result: Overexposure to stocks and junk bonds, Result: Retirees with capital at risk that might never be recovered. Listen to the original podcast for this slide at www.GordonTLong.com/Macro_Analytics The content of this slide should not be considered investment advice of any sort, nor should it be used to make investment decisions. Use of this slide is considered to be your explicit acceptance of the Disclosure Statement and the Terms of Use found on the last page of this document.
  • 8.
    Macro Analytics October 20th, 2012 Listen to the original podcast for this slide at www.GordonTLong.com/Macro_Analytics The content of this slide should not be considered investment advice of any sort, nor should it be used to make investment decisions. Use of this slide is considered to be your explicit acceptance of the Disclosure Statement and the Terms of Use found on the last page of this document.
  • 9.
    Macro Analytics October 20th, 2012 MORAL HAZARD MORAL HAZARD In economic theory, a moral hazard is a situation where a party will have a tendency to take risks because the costs that could incur will not be felt by the party taking the risk. Moral Hazard > Mal-investment > Corruption  Bad bankers run good bankers (i.e. those reluctant to lend to bad credits) out of the business. Result: banks become hedge funds, predatory, corrupt.  Big banks use their too-big-to-fail status to borrow much cheaply than well-run smaller banks, and then proceed to push the latter out of mortgages and other lucrative business lines.  Big banks then accelerate their growth. Result: financial oligarchy in which the banks/government/military industrial complex merge into one organization. Bernanke, Jamie Diamond, Obama are division heads in this empire. FINAL RESULT: Police state in which the Bill of Rights is ignored and technology is used to suppress dissent while inflation siphons wealth from the 99% to the 1% Listen to the original podcast for this slide at www.GordonTLong.com/Macro_Analytics The content of this slide should not be considered investment advice of any sort, nor should it be used to make investment decisions. Use of this slide is considered to be your explicit acceptance of the Disclosure Statement and the Terms of Use found on the last page of this document.
  • 10.
    Macro Analytics October 20th, 2012 MORAL HAZARD & UNINTENDED CONSEQUENCES Listen to the original podcast for this slide at www.GordonTLong.com/Macro_Analytics The content of this slide should not be considered investment advice of any sort, nor should it be used to make investment decisions. Use of this slide is considered to be your explicit acceptance of the Disclosure Statement and the Terms of Use found on the last page of this document.
  • 11.
    Macro Analytics October 20th, 2012 MORAL HAZARD Economic Schools of Thought Listen to the original podcast for this slide at www.GordonTLong.com/Macro_Analytics The content of this slide should not be considered investment advice of any sort, nor should it be used to make investment decisions. Use of this slide is considered to be your explicit acceptance of the Disclosure Statement and the Terms of Use found on the last page of this document.
  • 12.
    Macro Analytics October 20th, 2012 Listen to the original podcast for this slide at www.GordonTLong.com/Macro_Analytics The content of this slide should not be considered investment advice of any sort, nor should it be used to make investment decisions. Use of this slide is considered to be your explicit acceptance of the Disclosure Statement and the Terms of Use found on the last page of this document.
  • 13.
    Macro Analytics October 20th, 2012 MORAL HAZARD Sherman Act – Combines Act – Monopolies - Cartels Listen to the original podcast for this slide at www.GordonTLong.com/Macro_Analytics The content of this slide should not be considered investment advice of any sort, nor should it be used to make investment decisions. Use of this slide is considered to be your explicit acceptance of the Disclosure Statement and the Terms of Use found on the last page of this document.
  • 14.
    Macro Analytics October 20th, 2012 US Canadian MORAL HAZARD Sherman Act – Combines Act – Monopolies - Cartels Listen to the original podcast for this slide at www.GordonTLong.com/Macro_Analytics The content of this slide should not be considered investment advice of any sort, nor should it be used to make investment decisions. Use of this slide is considered to be your explicit acceptance of the Disclosure Statement and the Terms of Use found on the last page of this document.
  • 15.
    INVESTING IN THEBOTTOM LINE (THE “RONA MENTALITY”) Not Happening! Off Balance Sheet Securitized Debt as an ASSET Bottom Line ONLY Orientation Leverage Debt for Best RONA Listen to the original podcast for this slide at www.GordonTLong.com/Macro_Analytics The content of this slide should not be considered investment advice of any sort, nor should it be used to make investment decisions. Use of this slide is considered to be your explicit acceptance of the Disclosure Statement and the Terms of Use found on the last page of this document.
  • 16.
    Macro Analytics October 20th, 2012 MORAL HAZARD & UNINTENDED CONSEQUENCES GOLDMAN SACHS Listen to the original podcast for this slide at www.GordonTLong.com/Macro_Analytics The content of this slide should not be considered investment advice of any sort, nor should it be used to make investment decisions. Use of this slide is considered to be your explicit acceptance of the Disclosure Statement and the Terms of Use found on the last page of this document.
  • 17.
    Macro Analytics October 20th, 2012 MORAL HAZARD & UNINTENDED CONSEQUENCES JP MORGAN Listen to the original podcast for this slide at www.GordonTLong.com/Macro_Analytics The content of this slide should not be considered investment advice of any sort, nor should it be used to make investment decisions. Use of this slide is considered to be your explicit acceptance of the Disclosure Statement and the Terms of Use found on the last page of this document.
  • 18.
    Macro Analytics October 20th, 2012 MORAL HAZARD & UNINTENDED CONSEQUENCES BANK OF AMERICA Listen to the original podcast for this slide at www.GordonTLong.com/Macro_Analytics The content of this slide should not be considered investment advice of any sort, nor should it be used to make investment decisions. Use of this slide is considered to be your explicit acceptance of the Disclosure Statement and the Terms of Use found on the last page of this document.
  • 19.
    Macro Analytics October 20th, 2012 MORAL HAZARD SHORT TERM INCENTIVES ONLY Listen to the original podcast for this slide at www.GordonTLong.com/Macro_Analytics The content of this slide should not be considered investment advice of any sort, nor should it be used to make investment decisions. Use of this slide is considered to be your explicit acceptance of the Disclosure Statement and the Terms of Use found on the last page of this document.
  • 20.
    Macro Analytics October 20th, 2012 MORAL HAZARD Listen to the original podcast for this slide at www.GordonTLong.com/Macro_Analytics The content of this slide should not be considered investment advice of any sort, nor should it be used to make investment decisions. Use of this slide is considered to be your explicit acceptance of the Disclosure Statement and the Terms of Use found on the last page of this document.
  • 21.
    Macro Analytics October 20th, 2012 MORAL HAZARD Listen to the original podcast for this slide at www.GordonTLong.com/Macro_Analytics The content of this slide should not be considered investment advice of any sort, nor should it be used to make investment decisions. Use of this slide is considered to be your explicit acceptance of the Disclosure Statement and the Terms of Use found on the last page of this document.
  • 22.
    Macro Analytics October 20th, 2012 MORAL HAZARD Listen to the original podcast for this slide at www.GordonTLong.com/Macro_Analytics The content of this slide should not be considered investment advice of any sort, nor should it be used to make investment decisions. Use of this slide is considered to be your explicit acceptance of the Disclosure Statement and the Terms of Use found on the last page of this document.
  • 23.
    Macro Analytics October 20th, 2012 MORAL HAZARD & UNINTENDED CONSEQUENCES Listen to the original podcast for this slide at www.GordonTLong.com/Macro_Analytics The content of this slide should not be considered investment advice of any sort, nor should it be used to make investment decisions. Use of this slide is considered to be your explicit acceptance of the Disclosure Statement and the Terms of Use found on the last page of this document.
  • 24.
    Macro Analytics October 20th, 2012 UNINTENDED CONSEQUENCES UNINTENDED CONSEQUENCES Unintended consequences (sometimes unanticipated consequences or unforeseen consequences) are outcomes that are not the ones intended by a purposeful action. Unintended Consequences > Dysfunctional Markets > Instability Destabilization of smaller countries  Switzerland  Brazil Geopolitical Instability Countries with financial problems look for external enemies to distract populace. Not a surprise that there are minor wars springing up everywhere  China/Japan  Middle East  US/Israel/Iran False flag coming??? Listen to the original podcast for this slide at www.GordonTLong.com/Macro_Analytics The content of this slide should not be considered investment advice of any sort, nor should it be used to make investment decisions. Use of this slide is considered to be your explicit acceptance of the Disclosure Statement and the Terms of Use found on the last page of this document.
  • 25.
    Macro Analytics October 20th, 2012 MORAL HAZARD Listen to the original podcast for this slide at www.GordonTLong.com/Macro_Analytics The content of this slide should not be considered investment advice of any sort, nor should it be used to make investment decisions. Use of this slide is considered to be your explicit acceptance of the Disclosure Statement and the Terms of Use found on the last page of this document.
  • 26.
    Macro Analytics October 20th, 2012 SWITZERLAND Listen to the original podcast for this slide at www.GordonTLong.com/Macro_Analytics The content of this slide should not be considered investment advice of any sort, nor should it be used to make investment decisions. Use of this slide is considered to be your explicit acceptance of the Disclosure Statement and the Terms of Use found on the last page of this document.
  • 27.
    Macro Analytics October 20th, 2012 MORAL HAZARD & UNINTENDED CONSEQUENCES Listen to the original podcast for this slide at www.GordonTLong.com/Macro_Analytics The content of this slide should not be considered investment advice of any sort, nor should it be used to make investment decisions. Use of this slide is considered to be your explicit acceptance of the Disclosure Statement and the Terms of Use found on the last page of this document.
  • 28.
    Macro Analytics October 20th, 2012 MORAL HAZARD & UNINTENDED CONSEQUENCES Listen to the original podcast for this slide at www.GordonTLong.com/Macro_Analytics The content of this slide should not be considered investment advice of any sort, nor should it be used to make investment decisions. Use of this slide is considered to be your explicit acceptance of the Disclosure Statement and the Terms of Use found on the last page of this document.
  • 29.
    Macro Analytics October 20th, 2012 MONETARY MALPRACTICE MONETARY MALPRACTIVE – Regional EUROPE MALPRACTICE: Instead of allowing excessive peripheral country debt to be wiped out, ECB is guaranteeing it. RESULT: investors buying bonds they wouldn’t otherwise buy, and Spain and Greece continuing to build up debt US MALPRACTICE: Low interest rates lead to a vast oversupply of houses. But instead of letting prices fall to market clearing levels, the Fed lowered rates even further and is now buying mortgage bonds as part of QE3. RESULT: Mortgage rates are at near-record lows and home building is rising again, even though we still have too many houses (malinvestment), flipping is back (moral hazard), first-time home buyers are being priced out of starter homes (unintended consequence), mortgage debt is beginning to rise again (moral hazard). Important to understand that homes are not productive assets. They eat capital and the more big houses we have the less productive we are as a society (unintended consequence). MALPRCTICE: Low interest rates are pushing pension funds and individuals into riskier assets. RESULT: 1. They were forced to buy equities and junk bonds to achieve decent yields. 2. Now the yields on those two classes have been lowered to the point where they don’t work, so pension funds are moving back into collateralized loan obligations, or CLOs, securities created from pools of corporate loans. 3. JP Morgan forecast three times as many CLOs will be created this year as in 2011. Listen to the original podcast for this slide at www.GordonTLong.com/Macro_Analytics The content of this slide should not be considered investment advice of any sort, nor should it be used to make investment decisions. Use of this slide is considered to be your explicit acceptance of the Disclosure Statement and the Terms of Use found on the last page of this document.
  • 30.
    Macro Analytics October 20th, 2012 MONETARY MALPRACTICE Listen to the original podcast for this slide at www.GordonTLong.com/Macro_Analytics The content of this slide should not be considered investment advice of any sort, nor should it be used to make investment decisions. Use of this slide is considered to be your explicit acceptance of the Disclosure Statement and the Terms of Use found on the last page of this document.
  • 31.
    Macro Analytics October 20th, 2012 MONETARY MALPRACTICE MONETARY MALPRACTIVE – Regional US …. Continued MALPRACTICE: The Fed’s willingness to monetize debt prevents the US from living within its means. RESULT: Without a printing press we would have to prioritize and limit spending. But with a printing press we don’t. The US can run a global military empire and a cradle to grave welfare state and simply print the money it needs (moral hazard). An ongoing, accelerating debt buildup (unintended consequence) that: 1. Makes it harder to live within our means because we first have to pay interest on this rising debt and 2. Increases the odds of a catastrophic meltdown as rising debt makes the system more unstable (unintended consequence). Listen to the original podcast for this slide at www.GordonTLong.com/Macro_Analytics The content of this slide should not be considered investment advice of any sort, nor should it be used to make investment decisions. Use of this slide is considered to be your explicit acceptance of the Disclosure Statement and the Terms of Use found on the last page of this document.
  • 32.
    Macro Analytics October 20th, 2012 MORAL HAZARD & UNINTENDED CONSEQUENCES Listen to the original podcast for this slide at www.GordonTLong.com/Macro_Analytics The content of this slide should not be considered investment advice of any sort, nor should it be used to make investment decisions. Use of this slide is considered to be your explicit acceptance of the Disclosure Statement and the Terms of Use found on the last page of this document.
  • 33.
    Macro Analytics October 20th, 2012 MORAL HAZARD & UNINTENDED CONSEQUENCES Listen to the original podcast for this slide at www.GordonTLong.com/Macro_Analytics The content of this slide should not be considered investment advice of any sort, nor should it be used to make investment decisions. Use of this slide is considered to be your explicit acceptance of the Disclosure Statement and the Terms of Use found on the last page of this document.
  • 34.
    Macro Analytics October 20th, 2012 MONETARY MALPRACTICE MONETARY MALPRACTIVE BOTTOM LINE  Low interest rates and massive transfers of capital from Fed to banks allows banks to become hedge funds, making most of their money through proprietary trading and the creation of ever-more exotic instruments (moral hazard), leading to a merger of the banks, government and military/industrial complex into one entity (unintended consequence) that is not focused on expanding its power rather than serving its original constituents.  Low interest rates and easy money lead to massive concentrations of wealth as bankers and corporate CEOs take ever-greater risks, keeping the profits and handing the losses off to taxpayers (moral hazard). Wealth disparities explode (unintended consequences) creating, in effect an aristocracy – and a disaffected majority. Political instability rises (unintended consequence) leading the government to build a police state apparatus. The coming confrontation will look like Greece, with the addition of advanced technology on all sides (very unintended consequence) Listen to the original podcast for this slide at www.GordonTLong.com/Macro_Analytics The content of this slide should not be considered investment advice of any sort, nor should it be used to make investment decisions. Use of this slide is considered to be your explicit acceptance of the Disclosure Statement and the Terms of Use found on the last page of this document.
  • 35.
    Macro Analytics October 20th, 2012 JAPAN THE BIGGEST FUNDER OF US DEBT?? Listen to the original podcast for this slide at www.GordonTLong.com/Macro_Analytics The content of this slide should not be considered investment advice of any sort, nor should it be used to make investment decisions. Use of this slide is considered to be your explicit acceptance of the Disclosure Statement and the Terms of Use found on the last page of this document.
  • 36.
    Macro Analytics October 20th, 2012 MORAL HAZARD & UNINTENDED CONSEQUENCES Listen to the original podcast for this slide at www.GordonTLong.com/Macro_Analytics The content of this slide should not be considered investment advice of any sort, nor should it be used to make investment decisions. Use of this slide is considered to be your explicit acceptance of the Disclosure Statement and the Terms of Use found on the last page of this document.
  • 37.
    DISCLOSURE STATEMENT ANDTERMS OF USE THE CONTENT OF THIS SLIDE PRESENTATION AND ITS ACCOMPANYING RECORDED AUDIO DISCUSSION ARE INTENDED FOR EDUCATIONAL PURPOSES ONLY. This slide presentation and its accompanying recorded audio discussion are not a solicitation to trade or invest, and any analysis is the opinion of the author and is not to be used or relied upon as investment advice. Trading and investing can involve substantial risk of loss. Past performance is no guarantee of future returns/results. Commentary is only the opinions of the authors and should not to be used for investment decisions. You must carefully examine the risks associated with investing of any sort and whether investment programs are suitable for you. You should never invest or consider investments without a complete set of disclosure documents, and should consider the risks prior to investing. This slide presentation and its accompanying recorded audio discussion are not in any way a substitution for disclosure. Suitability of investing decisions rests solely with the investor. Your acknowledgement of this Disclosure and Term of Use Statement is a condition of access to it. Furthermore, any investments you may make are your sole responsibility. THERE IS RISK OF LOSS IN TRADING AND INVESTING OF ANY KIND. PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS. Listen to the original podcast for this slide at www.GordonTLong.com/Macro_Analytics

Editor's Notes

  • #13 Paper is POISON; you cannot store wealth in paper until the collapse has happened and reserve backed money comes back in some form.Bonds are the EPICENTER of the unfolding crisis, then it will move to fiat currencies as they are BONDS as well.G7* SOVEREIGN ALCHEMY WILL FAIL!Just as it has every single time in history, WITHOUT EXCEPTION. There are hundreds of examples never a different outcome. The worst of this depression lies ahead, plan properly and get rich.Insanity in individuals is something rare – but in groups, parties, nations and epochs, it is the rule.” -- Friedrich NietzcheNow let me conclude the economic portion of this presentation by informing you that You all live in the matrix and my name is NEO, now lets go to some of the solutions.**************************