volatility

The Spiral: ‘History Repeats Itself And The Price Is Higher Each Time’

"Spiraling leverage cannot continue indefinitely. At some point, the bubble becomes too big and cannot be subsumed by a bigger bubble – the damage of its burst would become irreparable."

"Spiraling leverage cannot continue indefinitely. At some point, the bubble becomes too big and cannot be subsumed by a bigger bubble – the damage of its burst would become irreparable."
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12 comments on “The Spiral: ‘History Repeats Itself And The Price Is Higher Each Time’

  1. Journeyman

    Very intruiging article. The only piece with which I take umbrage is the Deutsche Bank chart detailing the frequency of financial crises; specifically, the frequency and duration of financial crises in the past appears wildly under reported and skews the entire graphic making fiat currency systems appear to be the only cause of financial instability.

    My own reading of European history, notably Peter Wilson’s “Holy Roman Empire: 1000 years of Europe’s history” leads me to believe that rolling financial crises stemming from mismanagement of specie were the rule rather than the exception.

    It’s also worth pointing out that Niall Ferguson goes into great detail in his biographies on the Rothschild family to point out the ridiculousness of the specie regimes that existed and were only made functional by an international banking cartel that just so happened to help avoid a few complete annihilations of the monetary system and also helped hasten a few others.

    None of this negates the point made above about the nature of the coiling effect of monetary bailouts in fiat systems, but it does make me wonder how much worse things would be under a specie system. I’d guess that we may not have as horrific of crashes with specie but the capital formation process would be more slow and we’d all be living in a less dynamic world. Damned if you do damned if you don’t.

    The next question becomes, for the “haves” in the fiat system, how do you protect against the next un-coiling? Or do you even need to if the implicit belief is that those in power will do whatever is necessary to inflate the next bubble when the present one bursts?

  2. “a yellow metal which is itself naturally worth less”
    You keep pushing this argument which is completely baseless. It was stated long time ago that a piece of paper or a coin is worthless in itself i. e. a coin is only worth the metal it is made of. But in case of gold it’s a precious metals of which you can make jewelry – for just an example – which is highly precious. Gold was used from pre-historic times. You can understand if you compare gold to iron, is iron useless? Because you cannot eat iron or burn it? Obviously not, many things can be made from it.
    In the French hyperinflation at the time of the “Great” Revolution the arable land (not gold) was used for backing the new money. So probably we should buy land as another hedge because we can eat (the crop) of the land. It has a value in itself.

    • well, the great thing about having your own popular platform is that you can “push” whatever you want. that’s how it works.

      and no, it doesn’t have any actual value. the comparison to iron is a false equivalence for obvious reasons.

      • Wonder what those obvious reasons could be. Let’s suppose you use the iron and make an axe and using the axe (and wood), make a fence. Now is that fence more valuable or has more inherent value than a golden ring for a woman, for example?
        A golden ring is a product, an axe or a fence is only a product also.
        By the way gold is used in electronic devices also.

        • yes, when the barbarians are coming, the fence has a lot more utility than the ring, unless of course you can bribe the barbarians with the ring, but depending on how strong the fence is, that wouldn’t be necessary. additionally, you could in theory fight off the barbarians with the axe. if the blade falls off you could use the wooden handle as a barbarian bat. of course then again, depending on your arm strength, the ring could be an effective projectile, so you may have a point.

  3. Wake me up when Bitcoin hits $10K

    • Wake everyone up when it hits $0. Because it’s worthless and stupid and only being used by speculators or Chinese expatriating their money out of their ruthless country.

  4. So I guess these scenarios don’t include the one where this new push upward of the indexes are really the beginning of the next great bull market that some wish to suggest. too bad….

  5. Figure 10 hit me like a freight train. It’s been intuitive for some time that our current course would lead to higher highs and lower lows, but I have not seen a visual that sums it up so completely.

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  8. Anonymous

    Does DB internally have a calculated spiral trajectory economy by a economy? It seems that good leverage calculations are central.

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