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Never Mind Volatility: Systemic Risk Is Rising
Never Mind Volatility: Systemic Risk Is Rising
So who’s holding the hot potato of systemic risk now? Everyone.
One of the greatest con jobs of the past 9 years is the status quo’s equivalence of risk and volatility: risk = volatility: so if volatility is low, then risk is low. Wrong: volatility once reflected specific short-term aspects of risk, but measures of volatility such as the VIX have been hijacked to generate the illusion that risk is low.
But even an unmanipulated VIX doesn’t reflect the true measure of systemic risk, a topic Gordon Long and I discuss in our latest program, The Game of Risk Transfer.
The financial industry has reaped enormous “guaranteed” gains by betting against volatility. As volatility steadily declined over the past two years, billions of dollars were reaped by constantly betting that volatility would continue declining.
Other “guaranteed” trades have been corporate buybacks funded by cheap credit and passive index funds Central bank policies–near-zero interest rates and “we’ve got your back” asset purchases that made buying every dip a no-brainer trading strategy–have changed as banks attempt to dial back their stimulus and near-zero rates, and as a result volatility cannot continue declining in a nice straight line heading toward zero.
Higher interest rates have introduced a measure of uncertainty in another “guaranteed gains” trade–betting that interest rates would continue declining. All of these trades were “guaranteed” by central bank stimulus and intervention. In effect, price discovery has been reduced to betting that central banks will continue their current policies–‘don’t fight the Fed.”
Now that central banks have to change course, certainty has morphed into uncertainty, and risk is rising, regardless of what the VIX index does on a daily basis.
…click on the above link to read the rest of the article…
Gold Price Will Explode When System Breaks – Gordon Long
Gold Price Will Explode When System Breaks – Gordon Long
Private investor Gordon Long contends the price of gold will shock the world when it revalues to reflect the massive amount of currency that has been printed globally. Long explains, “That is correct, and it won’t be something that is gradual, it will be very abrupt. The system will break . . . and the financial markets will freeze up. When they come out of the other end of that freeze, and it may be a number of weeks because the next crisis will be global and much more complex than 2008. We could control that with the Federal Reserve . . . and this one you cannot do because you cannot get agreement with all those countries. Never mind understanding the complexity. So, when we come out on the other side . . . there will be a massive revaluation in the U.S. dollar. . . . Gold could jump to $5,000 or $10,000 an ounce or something like that. . . . It will be massive. They will have to put some stability in the monetary system, and the only way they can do it is having something they cannot print. This is what has gotten us into this problem. We have to get back to sound money. It will have to be gold. What percentage of backing will determine what the value the gold will be.”
On the value of the U.S. dollar, Long contends, “Personally, I think the revaluation of the U.S. dollar will be well over 70% devaluation. It doesn’t mean the world is coming to an end. It just means you have to go through this to reset. Those who prepare and understand why this is happening and watch for the signals, there’s going to be fortunes transferred. They are being transferred right now, frankly. One other big caveat on gold prices going way up, expect the government to tax it like you have never seen before.”
…click on the above link to read the rest of the article…
Top-Down “Solutions” = Institutionalized Serfdom, Bottom-Up Solutions = Reviving Opportunity
Top-Down “Solutions” = Institutionalized Serfdom, Bottom-Up Solutions = Reviving Opportunity
If the “solution” doesn’t enable the accumulation of capital in all its forms by individuals and households, it isn’t a real solution–it’s just another top-down scheme that institutionalizes subsistence serfdom.
Phrases like reviving the American Dream emit the lingering stench of empty political rhetoric mouthed by bought-and-paid-for candidates. But if we wave aside this foul smell, we’re left with a very profound topic: reviving broad-based opportunity.
Longtime collaborator Gordon T. Long and I discuss what it will take to revive opportunity in a new 27-minute video Reviving the American Dream.
The status quo “solution” to the decline of opportunities for meaningful work is predictably top-down: guaranteed income for all, a.k.a. “welfare for all.” This is of course a re-hash of the Keynesian Cargo Cult’s 1930 fix for the Great Depression, except on a far grander scale.
There are three completely unsupported assumptions in every proposed “welfare for all” scheme:
1. The trillions of dollars/ euros/ yen etc. required to fund “welfare for all” can be raised from taxing profits and wages. Yet wages and profits are both set to decline sharply in the near-term as the global recession tightens its grip and longer term from the unstoppable forces of automation.
2. Paying people to do nothing will free people to become artists, entrepreneurs, etc. This is a noble ideal, but if we look at communities that have become dependent on top-down central-state welfare, we find despair, social depression and the collapse of real community.
“Welfare for all” debilitates the community by stripping away the sources of meaningful work and positive social roles. I explain this further in my book A Radically Beneficial World: Automation, Technology and Creating Jobs for All.
…click on the above link to read the rest of the article…
