Four Financial Farces… All of Which Will End in Disaster

Phoenix Capital Research's picture

 At this
point the news out of the financial world is more insane than… well, anything.


Farce #1: Japan Can Bail Out… Anything.


First off,
Japan, which has a debt to GDP ratio of 200%, is bailing out Europe, which has
a smaller, but equally disturbing debt problem. Yes, one broke country (Japan)
is now trying to bail out an entire economic union, despite the fact that it
HASN’T succeeded in managing its OWN finances or economy in over 20 years.


Indeed, the
idea that Japan could bail out ANYONE when it’s failed to create any
substantial economic growth despite spending TRILLIONS of Yen should give you
an idea of just how out of control the entire financial system has become. We
are literally in the end game now. Unless martians come down and start bailing
out Earth, the great Sovereign Default will be in full effect within the next
six months.


Farce #2: Inflation is at 1%


Ben Bernanke claims that inflation in the US is 1%. President Obama has to
maintain that this is a fact with a straight face next week when he meets with
French President Nicolas Sarkozy who is witnessing food riots in Algeria due to
soaring food prices.


The Fed has
claimed inflation is under control for months now, proving that its members
must not eat food, drive cars, OR know how to read. Indeed, in order to ignore
rising prices in the US, you would literally have to not shop for groceries,
not pump gas in your car, not read the newspaper, and not have access to the Internet
or any financial news outlet.


I sincerely
hope that the Fed is not run by folks who fit this description, but after
reading the next farce, I’m not so sure.


Farce #3: QE is Working


Various Fed
officials have stepped forward to claim that its Quantitative Easing program
has worked. Correct me if I’m wrong, but I thought the whole purpose of QE was
to lower interest rates.


How then do
you explain the following?



As you can
see, interest rates have soared since the Fed implemented QE 2. It’s not like
QE has helped the US economy either: food stamp usage has hit new records since
it began.


And yet, the
Fed claims that QE is not only working but we need more of it. However, even
that farce pales compared to the next and final financial farce of today’s


Farce #4: The Folks Managing the Fed’s QE
Efforts Have NO Investing Experience


Then of
course, there’s the recent revelation that the Fed’s monetary policies
involving the purchasing of TRILLIONS of US Treasuries is in the hands of folks
aged 26, 29, and 34, NONE of whom have any investing experience what-so-ever.


And they’re
in charge of buying up TRILLIONS in US Debt.


Here’s a pic
of them at work. Warning, the following image, when coupled with the
significance of these folks’ responsibilities, may cause a severe mental



If, at this
point, it’s not clear that the entire financial system is not a disaster
waiting to happen, then I don’t know what else to say. Indeed, our entire
system is built on fraud and managed by folks who don’t know what they’re
doing. And if you think they’ll get us steer us to safety, consider that around
the globe we’re already beginning to see signs of systemic collapse.






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gmak's picture

Farce #2:

Supply and demand affects various areas of the economy. Unless the total price of all goods and services rises faster than the goods and services, there is no inflation - by definition.

In other words, if I spend $500 per month on food, and prices rise  - if I continue to spend just $500 on food then there is NO inflation. If I increase my food purchases in $ to maintain the volume of purchase but reduce my spending in other areas, then there is NO inflation. If I borrow to maintain the volume of purchases AND keep my other spending constant - there there is INFLATION.

Some prices going up is not inflation - even if it is painful.

walküre's picture

You spend $500 a month now and eat properly.

In 2 years $500 only gets you half the nutritional value.

Twinkies will always be cheap though.

OutLookingIn's picture



gmak's picture

Farce #1:


I am reminded of the time-honoured hedge-fund tradition of hedge-fund #1 investing in hedge fund #2 which then invests that money back in hedge-fund #1.

Rinse and repeat.

The ghosts of the keiretsu are laughing.

walküre's picture

S&P rally is a propaganda tool. Buy it if you will at your own peril.

This is a rich man's game. You may get a taste of it, maybe feel lucky for a bit and even get to participate for a while if you happen to cash in at the top.

Or you could just understand what ZH is exposing, get informed and prepare for the financial nuclear winter that is coming. Make no mistake, it is coming!

Buy the dips in precious metals. Accumulate on a weekly or monthly basis. Stop spending on frivolous items, don't indulge in the fast food lifestyle. If you have family, if you are concerned about their future then exchange money for tangible wealth and store it.

You may not feel rich(er) or that you've participated or that you've lucked out immediately but in the near term you will realize that there was only this one decision to make at the time. There is no alternative to precious metals in terms of wealth preservation. Those that hold paper will get wiped out and join the ranks of the common beggars.

Simple as that. Think squirrel.

i.knoknot's picture

"think squirrel" with bullets and a good pair of hiking boots. heh.

nicely put. it may all be flavors kool-aid, but yours is the one i'll happily drink.

i 'see' the path of MSM perception, and i grope blindly for the reality underneath it all.

with bloody knuckles, i'm certain the intended perception is a farce. the math doesn't lie.

be well.


tony bonn's picture

ye shall know the truth and the truth shall you free....i always feel free after reading graham....and also sick knowing that 3 little fucktards are making foolish investment decisions. the fed's "securities" are like so many homes under water. the fed must pursue qe ad infinitum to tread water. qe is a fucktard's solution to economic problems - except.....that it is designed to destroy america. thus it moves out of the realm of fucktardedness into pure evil.

walküre's picture

Things will deteriorate quickly but only if you're willing to look.

On the surface all will look fantastic! The word fantastic is a derivative of "fantasy".

But the reality is that people will be poorer by the day and hardships will get even harder.

There is little money trickling down and what little does come into the system is being absorbed quickly by inflation.

The elite and their circle jerk of politics and finance in the last two years will not go unpunished!

Freedom will prevail.

treemagnet's picture

The picture is clearly showing two fine young men learning all about what women want and like.  In other words, porn - and plently of it.  Keep it comin.

Pseudo Anonym's picture

our entire system is built on fraud and managed by folks who don’t know what they’re doing.

fraud, yes. managed by ignoramuses? No. While you, Graham, are distracted by the 20-some puppets (and eventually scapegoats), their handlers know what they're doing. Again, why waste time with reports on the kabuki theater instead of those who produce the show? That's what I want to know.

TradingJoe's picture

"The Big Momma" Of All Big MotherFucking Black Swans is Upon (US) and the Rest of What's Left Of What We Knew to be "The World"! If you don't own what you need to, you're F U C K E D! Good Luck EVERYONE!

Logans_Run's picture

"The Fed has claimed inflation is under control for months now, proving that its members must not eat food, drive cars, OR know how to read. Indeed, in order to ignore rising prices in the US, you would literally have to not shop for groceries, not pump gas in your car, not read the newspaper, and not have access to the Internet or any financial news outlet."


But, but, but...the price of online porn hasn't increased!

asteroids's picture

America used to be the greatest nation on earth. It is now degenerating into a kleptocracy.

simonsito's picture

i would like to know whats in that great report that the author is advertising in all of his posts, something that is annoying me more and more.

In fact it gives me a bad feeling about the author and his intentions, and about the motives for TD to promote this guy.. Why does he hide his "report" behing some stupid registration? whats the reason for this, considering the very drastic language used to underline the urgence to read this report?!? It appears to me that guy is trying to scare some sheeple....and that has never been an honest business as far as I know....

Nobody has a problem with that????

bronzie's picture

"Nobody has a problem with that????"

I don't have a problem with it but it gets old when everybody with three brain cells and a keyboard is trying to sell you a newsletter, get you to visit their blog, etc

fear and greed are some of the strongest human emotions so a lot of the marketing efforts in the financial world focus on them - subscribe to my newsletter so you won't be financially destroyed - subscribe to my newsletter so you can get rich - blah, blah, blah

oddjob's picture

C'mon, I fit ball thru circle for half my have to subscribe.

bronzie's picture

"whats in that great report that the author is advertising in all of his posts"

that's one of the ways of marketing on the internet - the idea is to sell information in whatever form - you're supposed to be so impressed with the author's info that you will shell out money for a regular subscription and/or access to his website - free registration is just the first step in the marketing process - after that they have your email address and can send you periodic marketing pieces

I like the way George Ure (urban describes the world: "Everything is a business model"

using this philosophy it is easier to navigate through the many choices we are faced with - when somebody offers something for free, just understand that "free" is part of their business model and somehow / someway they are going to attempt to extract some $$$ from your pocket

zhandax's picture

Did you guys forget what it felt like to be twenty something on wall street?  You are actually, finally there, with the masters of the universe.  They stop to chat with the senior partner you are walking with down Broadway.  Maybe they will remember your face.  You don't have to do anything but avoid pissing them off; they will make sure they don't loose any real money if you fuck up and you are encouraged to learn and experiment.   

It took us 30 years to realize the grand illusion behind the old European banker's plan and that the masters of the universe bathe themselves in disdain and bile before leaving for the trading desk each day.

Don't necessarily hold it against the trading team at 33 Liberty.  Although I would not stop any soul from impaling the whole lot on poles, they think this is the way the world works and they were lucky to finally run with the big dogs.

YHC-FTSE's picture

Farce #1

"Unless martians come down and start bailing out Earth, the great Sovereign Default will be in full effect within the next six months."

Not martians, but I reckon the equally other-worldly IMF (Controlled by a rigged weighted voting system by, who else? USA) will come to the "rescue" to extend the pain a little longer.


Farce #2

This is truly frightening - so much so, one can only grin to avoid blubbering. It's not just food either, inflation and FX are combined to force manufacturing into bankruptcy. I heard yesterday that a major bike manufacturer's raw material costs (in the UK) are up by 40%, yet that company has no choice but to absorb some of the cost increase to stay competitive - a typical story. Higher retail price, lower orders, lower profit. That can't last forever.


Farce #3 & 4

QE. Farce, Fraud, and Fart (damp). Anyone who has knowledge of accounting and finance will know that a lot of concepts are counter-intuitive, so I've been careful to map the different potential consequences of QE giving full benefit of doubt to those in charge. After all, they are supposed to be terribly clever people? But however I look at this, in a climate of low base interest, easy credit, high government debt, and outlandish cash thrown at a select cartel of banks to go on spending sprees, the entire economy is geared up to benefit the banks - both retail and investment - and NOBODY ELSE. Curiously, for a nation that purports to be free and independent people, Americans have a love affair with the top-down model of governance and the money they represent. If they hope that the financial elites will one day deign to throw a few crumbs down to their level, they have a very long wait. If an entire nation is geared up to worshipping money, what else do you expect to happen? The sad thing is, in a global economy, we're all doing it now. 

Temporalist's picture

I think another farce is China.  ZH has done a good job of pointing this out but their fraud is just getting started.  The U.S./China reach-around is infecting the globe with monetizing debt, inefficient govt. spending and outright corporate and political embezzelment and ponzi, counterfeiting, real estate and "development", and if that weren't enough reverse mergers are all the rage:


The whole world is trying to partake in this mirage orgy but only the politicians, banksters, corporations and PhDs get the happy ending...everyone else gets the Dirty Sanchez.

killben's picture

"Indeed, our entire system is built on fraud"

Absoultely .. FRAUD AND ONLY FRAUD. Need to look no further than the "mark-to-fantsay" accounting..

"and managed by folks who don’t know what they’re doing."

I would disagree. They know what they are doing .. bailing out the TBTF banks!


And led by a wimp of a leader. OMG, What a combo .... Fed, Treasury, Congress and Obama .. please help us!!






AnAnonymous's picture

Too much affirmation. Indeed farce but are they going to end badly?

bunkermeatheadprogeny's picture

CPI has been flawed ever since the microchip was invented.

The doubling of processing speeds every few years causes technology costs to go down.

Depreciation in computers, ipods, cell phones, xboxes, and TVs are supposed to depreciate, and will continue to depreciate no matter what the Fed does.

Depreciation in housing is a bogus indicator because it is only realized by first time homeowners and renters, which leaves out current homeowners who are still making the same mortgage payment every month.



kaiserhoff's picture

Health care premiums in Cali - up 69%

Taxes in Ill  -  up 66%

Who are you going to believe, the genius Ben or your lying eyes?

Interesting point on housing.  The depression in housing should be dragging all prices down, but rents and asking prices are still at record levels.  Until the Fed lets rates adjust to reality, I would expect more of the same, and of course real estate taxes and fees are going straight to the moon.  What minor god did we piss off to deserve this?

Bringin It's picture

the great Sovereign Default will be in full effect within the next six months.

I say Bring it on.  Let's get this waiting bs over with.

ebworthen's picture

The computer on the desk in the background is a Dell Optiplex circa ~ 2001!

My God, I wouldn't trust most seasoned 50 year old's with 30 years of experience to practice this kind of voodoo blood-letting quackery.

Besides, whatever they do is likely intercepted by the TBTF and acted upon before the markets even see the effect.

We've gone mad!

Adults - literal and figurative - are not in charge!

The Captain and Crew are in the lifeboats but the passengers are in the lounge as the band plays on...happy days!

Dr. Sandi's picture

You guys don't really think those controls are hooked to anything do you?

When you're at the supermarket and you see those shopping carts that have a little car built in for the kid. They always have a steering wheel.

That computer is the "adult" equivalent of that steering wheel. Those kids are about as much in charge of QE with their computer as I am with mine.

i.knoknot's picture

there's a WB7 image in there somewhere.

LOL - brilliant.

CitizenZeus's picture

These guys are incompetent when accountability comes calling ("I know nothing,"  "Who could have foreseen that economic train would have crashed when it drove off a cliff? I thought the laws of gravity were suspended in the 'new era'.") and hypercompetent when the profit and bonuses come rolling in.  Since so much of finance law seems to involve "intent" to... defraud, etc. then one only has to maintain complete idiocy to avoid criminal prosecution.  

nohweh's picture

In case I was misunderstood, what I mean by the Fed knowing what it is doing, is that it is setting up the mother of all crashes.

bronzie's picture

"the Fed knowing what it is doing, is that it is setting up the mother of all crashes"

if history is any indicator, we will get a massive war or false-flag event to go along with the crash

the war / false-flag serves as a distraction for the sheep and allows those in power to blame the crash on the 'enemy'

Sutton's picture

Who is the President of China?

Misean's picture

Naturally. But I don't know is still on third.

Lord Koos's picture

"in order to ignore rising prices in the US, you would literally have to not shop for groceries, not pump gas in your car"

Does anyone actually believe that the elite actually do these kinds of things for themselves?

DeltaDawn's picture

Since you know their ages you must know their names...

afriend2u's picture

The purpose of QE2 was not to lower interest rates (as advertised). It was to scare side-lined cash into equities (and other more risky assets) ... and so far it has worked.

YHC-FTSE's picture


About time somebody mentioned this on the thread. It's also giving breathing room to the investment banks with trillions of toxic assets off their books. 

simonsito's picture

do you really believe that "cash-on-the-sidelines" went into US stocks?
Have you ever heard of a company called TrimTabs ????? apparently not....

YHC-FTSE's picture

Don't know why you're addressing this to me, but is this what you're talking about? Read: Long-Short Equity Funds.

Misean's picture

Oh come on how hard can it be to run QE2 for Brian Suck and his buddy Fister? You take a call from Goldman Sucks, and buy what they tell you to buy, UNLESS Mr. Suck is getting press for buying the most expensive just sold toilet paper from Timmah's! sand box...then you appologize profusely and obsequiously to the Goldman Sucks errand boy and tell them anything you want to sell us BUT these sorry, so sorry...PLEASE!!!!! don't put that on my file I REEEEEAAAAAALLLLY want a job there when my contract is up here....PLEASE!!!!!

Don't need anyone with more than an average 95 IQ to do that.  Absolutely no morals or ethics though...but that's easy to find in people who've spent 12 years in government youth indoctrination prison camps.

Cleanclog's picture

And one more financial farce - that new workers will pay for the retiring workers!  Even worse, the big boys at the Fed etal are still trying to push equities higher and rates lower despite the fact that the stream of contributions for Baby Boomers that began to flow into retirement plans 35 years ago, and then surged as more Boomers entered the work force and rose the ranks.  Where will additional growth in investor monies come from to buy the securities and keep values moving up?  Has the stream changed direction?

As retirees start taking income distributions from pension plans, 401Ks, IRAs, annuities, etc . . . who will those entities sell their assets to?  Especially given the many underfunded plans.  As of 2011 - an average of 10,000/day for the next 14 years are expected to begin to claim or access their retirement set asides once they reach 65.  Are there enough new workers to offset this in the US?  Not today, and not for the forseeable near term. 

Robert Neville's picture

Meet the 401K, a better sort of ponzi. Hindsight being 20/20 I wish I knew in 1980 what I know today. I would have bought stocks instead of beer. But all good ponzis come to end.

lawrence1's picture

Black swan ... the FED really is considering some role for gold ... hey, Zoelnick of the BIS and the dude of the St. Louis Fed.  Ron Paul for president!!

More_sellers_than_buyers's picture

OK I agree...but having thought this and waiting patiently and then finally acting on my knowledge in early December, I am almost completly busted now. In a short month and a half this ponzi has bled me to bring on the apocolypse you thieving bastards, you can't hurt me now!

JimboJammer's picture

Intrest  rates  are  going  up..... slowly...

one  more  Domino  ....

JimboJammer's picture

Good  Story.... Good  Job.  Thanks  ...