Episode-756- Karl Denninger on the Coming Market Meltdown
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Karl Denninger of Market-Ticker.org
Karl Denninger is the former CEO of MCSNet, a regional Chicago area networking and Internet company that operated from 1987 to 1998. MCSNet was proud to offer several “firsts” in the Internet Service space, including integral customer-specified spam filtering for all customers and the first virtual web server available to the general public.
Mr. Denninger’s other accomplishments include the design and construction of regional and national IP-based networks and development of electronic conferencing software reaching back to the 1980s.
Karl has been a full-time trader since 1998, author of The Market Ticker (http://market-ticker.org), a daily market commentary, and operator of TickerForum, an online trading community, both since 2007. He received the 2008 Reed Irvine Accuracy In Media Award for Grassroots Journalism for his coverage of the 2008 market meltdown.
Karl was also a featured expert in the documentary “The Secret of Oz” which is a frank look at the history of US Monetary policy and winner of the “Biloit International Film Festival” Best Documentary of 2010. Today he joins us to discuss the impending market meltdown and how it will stem from factors such as the European Bank Crisis and the coming collapse of municipal debt all across the nation.
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My two favorite sites coming together!!!! LOVE IT
Thank you Karl and Thank you Jack. Glad I suggested Karl as a guest and he joined TSP!
I have to say even though I did enjoy the show I am left empty and confused. The question so what do you recommend that people can do was left unanswered in my mind. Get involved change the government is what I heard as the answer. Guess I was looking for more of a how.
As far as I see it I could spend 12 hours or more a day getting “involved” whatever that is suppose to mean (mail flyers make phone call go door to door vote for someone who will make the changes is that what get involved is suppose to mean or carry picket signs to DC ok so call me stupid on that if I don’t get it then I suspect others don’t either) ? So what do we do in the mean time?
Even if 75% of the people got “involved” no changes will happen by the end of next week. So what is the best way to protect ourselves in the mean time? The only things that I see that I can do and have done stop contributing to 401k and put that money to pay off my house. Built up a 6-9 month savings account. If I decrease our monthly out go as much as possible by providing my own food supplementing energy with sun and wood and become as thrifty as possible then maybe we can save even more or at least stretch the ER fund. Will that lessen the blow that is coming? Isn’t there more that one can do? So very tempted to cash out the 401k and invest it in food & energy production along with total debit elimination. But once that is spent it is gone. Being 50 yrs of age it is a scary sobering thought.
I guess in short I feel like I am sliding down a deep hole I did not create and the only thing left to do is bend over and kiss it good bye. I have never felt so depressed or helpless after listening to a show.
However I am going to combine all the info from the last few shows along with this one and see if I can develop a plan that fits for us. I have to be able to look forward to something other wise whats the point? Sorry to ramble but I just couldn’t walk around all day saying “what the hell?!”
I understand how you feel, cause I felt the same way….However we are all in this together..Some people are better off than you and some worse. Just be thankful for what you do have and sometimes all you can do is have hope and thats it! prepare, but understand there is really no way to even come close to eliminating all the vunerabilities we face in this collapse. All we have is today and for that I am greatful! God Bless!
@roundabouts, I spend 75% of my time on the air telling you what you can do. Karl came on to tell us what he sees coming. I didn’t agree with some of his answers but I spend plenty of time on the subject, I bring guests on to hear what they have to say, not to argue with their opinions.
If you listen to TSP then you know what to do. Karl doesn’t have a good answer for what to do, but he isn’t a prepper, he is a financial analyst and a stock/commodities trader.
You do a fine job of giving us good info and creative ways of dealing with things. Love your can do creative spirit. That helps inspire me to keep going. You also did a fine job of listening! Thank you.
Wow, great show as usual Jack. The emphasis on community really got me thinking on how this website could further the building of local relationships. I was wondering if there could be a section on the forums that would facilitate people meeting each other from local areas. For example, by state, I would like to have contact information and build relationships with others in my area. Any ideas on how the website could help that cause? Thanks for what you do Jack!
Rob have you checked out the regional board on the forum? People there are always setting up meet and greet outings
I see it now. I wasn’t logged in. It pays to be a forum member 🙂 My mistake! Thanks for your patient advice.
No worries glad for once I could help
Hey Jack-
Wow. Man, that show today brought me over on my run this morning. I don’t even feel good about my silver anymore! I felt the same way as roundabouts after the show. I thought Karl’s advice to “get involved” as a solution was just not sufficient. But, I suppose he is not a modern survivalist and didn’t really understand what you were asking him. That’s all I can guess.
This did bring up a conversation between me and my wife. One thing she said is that these “financial gurus” always leave out one important factor. That factor is the resiliency and creativity of the American people. I think he was right that people will not act until the fire trucks start showing up 30 minutes late and the police can’t control the riots. But America has faced these challenges in the past and come out of the other end better than we were before. World War II comes to mind. The authorities here in Texas literally had to turn away those of us who wanted risk our own lives to help fight the fires in Bastrop even though we were not all trained.
Again, your threat probability matrix is the answer to the question, “what do we do?”. Prepare in that order and you will doing what you need to do.
Great show. Folks, don’t let this get you down!!
@Gregg Yows, you nailed it when you said, “these “financial gurus” always leave out one important factor. That factor is the resiliency and creativity of the American people.” and hell I would say just people in general not just Americans. People rebuild, that is what we do, Rome may have fallen but the world didn’t end as an example.
Karl is featured frequently on the following website (in addition to market-ticker dot com)..
http://www.fedupusa.org/
I hope that helps give people a start as far as which direction to go if they want to contribute to some sort of political action. I recommend drilling some of the numbers (Karl mentioned in the interview)so that you know them forward and back and taking that knowledge with you wherever you go, esp. townhalls that worship at the altar Paul-Ryanism, or Nancy-Pelosism. Letters to the editor in your local newspapers cant hurt either.
The tea parties wake people up from the slumber of bad partisan politics, but Denninger wakes people up to the “full” reality of our economic condition . ..and does not allow Democrats, Republicans, or the main stream tea parties to blow smoke.
Great show. Favorite episode in a long time.
Small question: if the currency collapses and a person has a chunk of their money in cash, as Karl sort of recommends, then what is the result?
And a small answer: To my view and for what it’s worth, there’s nothing that can be done. This thing is irreversible. So: keep prepping. And read about the French Revolution, which is possibly the closest analog in history to what’s going on right now. (Though admittedly it is a terribly imperfect analog.)
@Zeno Izen, My view is the currency won’t “collapse” as in Germany after WWI it will collapse in the style it has collapsed and be defaulted on in the past. If you have 100,000 dollars in the bank before the collapse you will still have 100,000 dollars the day after it, what it will buy is the big thing. The inflation will probably be in the neighborhood of 40-50% in the first year. Anyone who thinks that isn’t bad enough, needs to read the book Aftermath.
Jack, who is the author of that novel? I looked, but there are 30 novels called Aftermath.
@Shaunypoo, it isn’t Aftermath it is Aftershock though I probably said it wrong on the air. Sorry about that, here is the link to it, http://www.amazon.com/Aftershock-Protect-Yourself-Financial-Meltdown/dp/0470918144/ref=sr_1_1?ie=UTF8&qid=1317846004&sr=8-1
I get plastered with this ad for a “free” version (it’s free with $4.95 S&H and a free trial to some of their subscriptions). It includes a chapter that the amazon version doesn’t. I’d been meaning to order it. This just reminded me, so it’s on order now.
http://w3.newsmax.com/a/aftershockb/video.cfm
Oh, that’s bad enough.
I think that’s the best argument for PMs. To preserve purchasing power. Denninger suggests we’ll have to wait decades to liquidate our metals, but I don’t think he can necessarily prove that’s a certainty. Plus, if the purchasing power of the dollar drops to half, 40 years of illiquidity is a reasonable price to pay for some protection against that. The grandkids could appreciate it.
Thanks Jack for another informative show. I hope we are all wrong about this, but unfortunately it doesn’t look like it. I work and live about 30 miles outside of D.C. and 99% of my business is with the ass clown’s the are running our country into the ground. Would it be a smart move to dump my IRA take the penalty and by rural land in southern virginia before I can’t buy any thing with my money. Just like most of your listeners i have most of the basics covered but am still unsure how to protect every thing I have worked so hard for.
I don’t think you are the only one contemplating doing that. It’s a hard question to answer. Every time I ask my self that I come up with a different answer. One thing I am pretty sure about is that good land “deals” will always be around (if you have cash) just may be harder to find. If I tap all that cash now I wont have it later should I really need it or find that great deal. I have put all mine into the “safe group” with a given interest rate. I have also stopped contributing to it regularly and put that money instead into paying the principle on our home. I am watching to see what kind of crap ball the government will throw at those with retirement accounts. First wind of something I will yank as much as I can. I have been in contact with our tax person and she is keeping me informed of new laws. Also what the burden would be of pulling it all. She recommended that if it were to be pulled it would be better to pull smaller amounts at a time to avoid a higher tax rate.
I know one thing for sure I won’t pull any of it if the underlying issues and decision to do so is fear based (no matter how cleaver that voice in my head is). My experience says for me I always make the wrong choice in a panic / fearful mode.
Awesome, awesome show.
Mr. Denninger has really put the current situation into perspective, probably even more so than Jack. Thanks again to both.
-Oleg
Toronto,Ontario
I will pay any of my sheeple friends $5 to sit down for one hour and listen to this podcast!!! Great interview. Chilling information….
SW
Quite possibly the best interview I have heard this century, on any medium. Thanks for getting Karl on the podcast.
Probably too far out of scope for a Podcoast, but it might be interesting at some point if you have the opportunity to get a scholar of American monetary policy and banking history, someone like George Selgin would be great. A great book for reference would be “A History of Money and Banking in the United States: The Colonial Era to World War II” – Murray Rothbard.
There’s a lot that often gets thrown around about 19th century money and banking that’s at the level of Wikpedia mixed half-facts. One of the most stable periods of banking was during the Jacksonian (roughly 1840-1860) period, the closest we’ve ever been to full private free banking and hard money, which incidentally followed paying off the debt in full (only time it’s been done) and closing the 2nd National Bank. Jackson was an SOB to the Indians, but pretty solid on money.
The mega swing often sited later in the century was a function of interventionist policies following on the heals of the Civil War and reconstruction, the long deflationary period that came a bit later was a GOOD deflation as it was a function of a stable currency and increasing production effeciency manifesting in increased REAL wages. None other the Christina Romer in her statistical analyses of “Panics” of the 19th century found that on closer look using modern statistical methodolgy, the view of the 19th century as wild and uncontrolled is just not the case, in fact, depending on how you want to look at it (depth and duration vs. frequency), NOT as bad as after the Fed in 1913. It wasn’t perfect by any means, but nothing as typically portrayed.
The primary function of “hard” money (doesn’t matter if it’s gold or other commodity, or even basket of commodities and even other currenies particularly) is simply to take the arbitrary control of money supply out of the hands of governments and for prices to move wherever to perform the function of allocating scarce resources to structures of production that meet current consumer preferences. See Hayek “Prices and Production”. For this to work optimally however, there needs to be a separation of money from any single government if at all possible. See “Denationalisation of Money.”
Jack, of all the economist types you’ve had on the show, I liked this guy the best. He summed up how I feel about the federal reserve, it’s not so much that it’s debt based but that it debases the currency .. I understand the debt based part, but I am not sure what to make of it and felt like it must have some complications ..
As far as the medicare thing, if some people pay into it but die before they reach old age, some other people can get their money .. but also the health care system is costly for other reasons such as inflated drug costs and perhaps drugs in general. I don’t think I could ever see myself taking all the pills that some seniors take I think I just would not do it .. maybe a couple, but I would look into herbal medicine more likely ..
good stuff on tax money going to schools. In my mother’s town they just tore down a perfectly good high school building years ago and built a whole new building and the same thing happens everywhere in other towns and with libraries ..
I know it is slightly off topic, but the idea that pharmaceuticals are inflated is absolutely false class warfarism. There is a huge gap between market price and manufacturing cost, but that is to recoup the R&D, clinical and regulatory hurdles that go on before the drug gets to market. The price gap is set in anticipation of what it will cost to support the next drug that will be needed for the company’s survival once they hit the 10 year mark, and generics get to take over. If that price gap were to be eliminated (either through private industry stupidity, or by government meddling) you would not see a single new drug ever come out of the private industry again.
That’s not to say I don’t have a laundry list of issues with things that go on between pharma and FDA, but the “profit” margins aren’t one of them.
The real medical cost issues have to deal with where the focus has shifted over the decades. The life expectancy for those living to the age of 30 hasn’t changed since the 1700’s (possibly earlier, but that is as far back as I looked). Up until relatively recently, virtually all medicine focused on infant and child mortality. IMO the late teen to 30 gap had to do with improved safety in general (not medical issues per say). About the time infant mortality and childhood illness was pretty much wiped out, older people started getting illnesses and diseases much earlier and in greater numbers. The last few decades has been a game of catch up with the late life impacts of piss poor health habits. Interestingly, infant mortality and childhood illness are increasing again only they are the same things that started catching up with old people.
In other words, you could play silly price cap games with the medical industry and screw it into oblivion, or you could fix the food supply, and obsolete the bulk of the medical industry. Seeing as the FDA is owned by the food and drug industry, the only direction I see things going is more regulation and higher costs. That is of course until it collapses.
Cool thing is you can control how that impacts you by controlling your own food supply so that you have the medical aspects that all but eliminated the stuff that traditionally killed young people, and the health that made late illness virtually a non issue.
Wow Jack! Powerful show. This is a real eye opener. Anytime I talk prepping with someone they always question why, well here is your reason!
This is one of those “listen to it 3 times” episodes. The basic agreement along with differences of opinion, different options to follow, different ways of looking at things, it’s all very rich stuff. I particularly liked Denninger’s remarks on “get involved politically.” I’ve been working/campaigning/voting for fiscal sanity in government my entire life, and getting involved isn’t going to work this time either. But we all have to be able to say that that, dammit, we tried! No point in stopping now.
The most interesting part was toward the end where Denninger said it looks like the unwinding’s beginning to happen now, re copper prices. Maybe it is the beginning of the end of this sour economic downturn – or at least the ending of the beginning. In a grim way, it’s almost hopeful news, as if perhaps the patient’s fever is going to break soon.
Great episode Jack, will listen to it again today on my commute, and again over the weekend.
Jack – just finished listening to this show, and am so glad I’ve been following yours and others advice about getting prepared. We moved back to semi-rural Minnesota about 3 1/2 years ago to be close to family and a community we’ve been part of for 30 years. One underlying reason for the move was to get to a place I knew would be a good one to live in when it all starts falling apart. We’re working to get out of debt, into gardening and raising chickens, and adding to our preps.
I will be letting some friends and family know about this show in particular, and hopfully it will get them motivatated to start making some changes.
Thanks for all you do!
One more comment. I have made Karl’s blog a quick-link favorite on my Firefox toolbar (and subscribed). This is one of the best articles on “Financialization” I have ever read.
http://market-ticker.org/akcs-www?post=195434
Thanks for turning me on to Karl, Jack!!
This is the fist show I listened to twice… scary, but necessary info.
First one I listened to twice, back to back.
This was a terrific show Jack – really love the financial ones. Have to say that I dsiagree with some of the folks saying he wasn’t helpful. As a prepper, this is yet more substance for motivation. Everyone wants the silver bullet. That’s two experts we’ve heard from saying get out of the market and that something really bad is coming. To hear from a financial guy that you should hold cash or buy guns and ammo is pretty straight forward if you ask me. Lets listen to them and Jack and just get ready. If we’re wrong and all that happens is inflation , then we’re out of debt, have cheap food in storage, and can save more of tohose worthless dollars because we can produce (at least to some extent) our own power, food, etc.
Hats off once again Jack,
Brandon
Enjoyed the show, but wow what a downer. There’s no silver lining for that guy.
This podcast really disturbed me. I hadn’t heard about the French steps on reportable transactions, and ho low it was set. It certainly smacks of something that PBO would try, especially by executive order and in light of his recent comments on “the rich” & the CEO’s” & by supporting the Occupy Wall Street crowd.. Why bother with the hassle of actual physical confiscation of gold/silver when you can just tax the crap out of it through mandatory disclosure reporting?
Then as in with drug property confiscations, you institute forfeiture for felony “failure to disclose” on the premise that all property was obtained through illegal means and Boom! you’ve got instant “redistribution of the wealth”.
Jack,
Love your podcasts, but I have to agree that this guy made everything seem hopeless. I know you said you don’t argue with guests, but maybe a comment or two after the interview would’ve been good? The whole taxes on silver and gold thing and felony for bartering was just worst case scenario. I had been researching the Argentina collapse and reading about Ferfal’s experiences. That scarred me, but your guest painted an even scarrier picture. I think the best thing he said was go to church. Let’s pray the Lord comes soon and saves us from having to deal with these times.
The link below is to a post Karl has done on preperations. Has alot to keep up with and probably did not think of it. It is more in line with what to do from his point of view.
http://market-ticker.org/akcs-www?post=187887
@Patrick H, good stuff! Thanks for the link, I wish he had mentioned it when I asked but I know how that goes myself. Plenty of interviews I got off the air and thought, “doh why didn’t I say _____ when he asked me that”?
The rant against teachers was too much. I am a teacher. Just to set the facts straight, I work 200 days per year, I put in a 9 hour day at school, then I have an hour or two of correction and preparation to do at home most evenings, sometimes much more. It is a great job, but like any job it has its upsides and its downsides, and it is quite demanding.
Now while Jack joyously bashes teachers, he is against the protests against Wall Street bankers? Does he not frequently point out that the U.S. heavily leans towards fascism, with corporate interests and the government working together to further each other interests at the expense of the people? Should this not be protested?
I don’t necessarily think it was a teacher bashing as much as it was an administration bashing. When I was working as a teacher the things I saw things that I experienced first hand and the things that I was expected to do without question was BS. I was expected to spend my own money on supplies to work without breaks to name a few. Ride the bus with the students because it would look bad to have the bus driver call the police if a student was unsafe. I was not aloud to go to the local store and spend 1.99 on calculators because the school did not have an account there (which they did) parents would be upset if they thought the school was cutting corners (bull). Instead we spent 25.00 plus S&H for the exact same calculators. In the next breath we didn’t have money for books or supplies. The biggest problem I faced was when my students really started to learn. Each one scored higher on testing all grades went up. I was told that if that continued it would make the rest of the teachers and school look bad. Time and time again I have heard stories like these. Time and time again I was considered insubordinate because I stood up I called the cops on the kids I took breaks and worked hours according to my contract. Never once did I break the “rules”. The breaking point for me was when I saw first hand that another teacher was “playing keep away” with a students food. I personally heard another teacher calling a child and I quote “you are stupid and that is why you are in my class” . Each time I reported this type of incident I was the one who was reprimanded! Needless to say I left the field I just couldn’t take it any more. So if you are one of the good ones Thank you if not then shut the hell up and if you can’t stand the heat get out of the kitchen.
Great Guest!! I listen to Karl who is a frequent guest on The Ron Smith Show on wbal. I always feel like he gives me a firm slap across the face with reality. Put him on with Jack, and its likeg getting a slap to the face and one to the back of the head saying “wake up and pay attention!” Great show.
Hey Greg… I too have listened to Karl on Ron’s show for years… always a great guest. We need to get Jack on Ron’s show one day.. that could be entertaining!
That would make a great show. Ron Smith from WBAL is indirectly responsible for turning me on to TheSurvivalPodcast.
I know I’m way behind the curb commenting on this episode, but what a great guest! He told me about a lot of things I never even thought about. It’s really good to hear two intelligent, well informed people who don’t agree on some big issues, and have differing perspectives on the same problems discussing something respectfully and without trying to shout over each other.
Please invite him back.
It seems like Karl does not understand what Ron Paul is working for in the monetary world. He does not want to go back to a gold standard that can be manipulated by the government. He only wants to eliminate taxes on gold and silver and allow people to use it as money. Competing currencies is Ron Paul’s goal and I think it is a great idea.
Interesting show. 🙂 Always good to hear from a variety of guests.
Hey what is the 12% fake output the government uses that he mentions?