Guest Post: The Opposite Of Apocalypse

Tyler Durden's picture

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Ned Zeppelin's picture

The only apocalypse imminent in the fall of 2008 was the loss of immense amounts of money on bad casino bets by the Wall Street super-rich.  That's all it was. The balance of the American economy would have easily survived the loss of the likes of Goldman, Citi and BAC. If we had let it clean out then and there, we'd be a whole lot better off. But the decision to do otherwise was never in doubt, as the decision-makers were complicit, bought and paid for. 

Them's the facts. 

Malcolm Tucker's picture

Algeria might be the next domino to fall because of Bernanke and company. Here are videos of the riots and even the hacking group Anonymous is getting in on the action!

Dr. Sandi's picture

The hacking groups with computers don't make me half as nervous as the hacking groups with machetes.

snowball777's picture

Even if its only the former that know where you live?

whatz that smell's picture

hilarious!...  Hotel 1984 has a room awaiting you..... "Room 101"

Joe Sixpack's picture

Here's what I was thinking then:

It's not the Forclosures- it's the deivatives; It is actually related

papaswamp's picture

Iceland proved your theory.

westboundnup's picture

Let's keep it real because I'm keeping it real.

TruthInSunshine's picture

Hank Paulson, bagman for and ex-CEO of The Goldman Sachs, went to Congress and told some whoppers, and he had help from The Bernank, The Geithner & even The Buffet, in scaring up a blank check for his boys on Wall Street - aka torture of the taxpayers.

Implicit simplicit's picture

True That. Gladman sucks along with the other banksters make Madoff look like a peeny candy thief.

Billy Shears's picture

But isn't the premise of this nonsense that "insurance" is a legitimate way to hedge risk? But isn't all insurance really a form of Ponzi...i.e. if everyone had to collect at the same time illiquidity would rule and insolvency would not be far behind. Sure, I own car insurance and other types but, if a black swan-type of event way can their be enough collateral available to satisfy all claims. Insurance is a bullshit scam...swim at your own risk!

Seasmoke's picture

Insurance is great (until you need it) the fine print

jm's picture

I'm not saying CDS is insurance per se.  There is an insurance motive, but CDS is much more than that, including expressing speculative views on credit risk of a name.

For example, I can't easily buy a Latvian cash bond, so I do the synthetic alternative... sell the CDS.

As far as insurance being a Ponzi, it's been around 4ever and serves an needed economic purpose, so who cares how you classify it?

Joe Sixpack's picture

CDS is somewhat of a fraud in that it is used to skirt insurance regulations that make insurance somewhat sure. CDS is not insurance, it is a derivatives contract. maybe the clearinghouse will make it more legit, but it is still not insurance.

jm's picture

I didn't say it was insurance, Joe.  I said there was an insurance motive in it and much more.

chumbawamba's picture

JM, another fine article, but along these lines, I'm reading this description of the way Goldman used the CDS and all that as just mental masturbation.  The whole practice itself is really just a form of mental masturbation with a vibrator in the ass and some midget porn.  It's all just manipulation and arrangement of dollar figures, like a life-sized board game.  I'm not sure if you were just explaining the new system or glorifying its sheer beauty, like a crazed inventor who can never finish an invention, always finding one more way to improve it, yet only adding complexity ad infinitum.  What you describe is madness.  These complex finance systems are complete crap.  The whole idea of finance has been lost.  It's all just a stupid game.

I am Chumbawamba.

DoChenRollingBearing's picture

Ahh, Chumba, great to write with you again.  I hope you got to see Cog Dis's nice piece today about veterans of Zero Hedge, your name came up favorably several times.  It is good to have you back.

I have become more and more a fan of simplicity, or perhaps better said, transparency.  I am still a fan(atic) of gold.  Simple and transparent (as long as it is not tungsten).  The incredible complexity of our financial system will lead to its destruction...  But, who benefits, cui bono...?

I would imagine that you would agree with my contention that NONE of our financial problems have been solved.  The SHTF scenarios are still in play...  Myself, as before, I am trying to prepare and accumulate actual products of value, in case (I would guess probably) things go bad...


It is either (for me) to flee to Peru when TSHTF, or fight it out here with weapons ready and stocked.  Which way will the Bearing go?  Maybe it depends on how much capital I can get to Peru...  But, if stuck here, watch out Fascist Goons, some of us await you, and you will not like (or even live) through the experience.

jm's picture

Another thing.  Much of the collateral needed to cover is posted as the spreads widen before the default event.

Central clearing mitigates the jump to default losses.  You have a point, but I think it unlikely.

Seasmoke's picture

i for one do NOT believe any one here would have been all that badly hurt and if we were , it probably would have been a good cleansing that we all needed anyway (even if done by a fire hose)

docj's picture

Thread winner, right out of the gate.

Well done, Sir Ned.

Lord Koos's picture

As outlined in "Disaster Capitalism" by Naomi Wolf

spinone's picture

Don't let them convince you that your interests are aligned with theirs.  I am all for libertarianism for individuals, and strict regulation of corporations.  banks are utilities, and must be regulated as such.

jm's picture

Banks shoudl have been forced to pay the piper.  If they couldn't settled up, they should have been nationalize with shareholders and bondholders wiped out.  Recapitalize then IPO them to cover a part/all of the cost.

More regulation is never the answer.  Market discipline is the answer.

Wynn's picture

But they didn't have to pay the piper. That's the point.

jm's picture

A reason for all of us to be pissed, yes.  But it has nothing do with the usefulness of CDS contracts.

DoctoRx's picture

Is it Goldman’s fault that Uncle Sugar and the Fed screwed the taxpayers for generations to come?

Since GS made it corporate strategy to insinuate itself into the government, "fault" is not the term to use.  Undue influence, perhaps?

jm's picture

It seems likely that Goldman had a man in the White House--Paulson.The question is to what extent did he exert influence to benefit Goldman and others.  I do not know.  The influence peddling appears to be getting worse.

But like I said, it is a separate issue from my central point.


alien-IQ's picture

"It seems likely that Goldman had a man in the White House--Paulson"

It "seems" likely? Are you joking?

DeeDeeTwo's picture

"Fear is where the power is" = Human Condition

Paulson played Fear like a violin. His brazen theft was the end of pretense of Rule of Law in America. It's been all downhill since. History will not be kind, baby.


Joe Sixpack's picture



Sorry, didn't mean to exaggerate

In Fed We Trust's picture

And it also seems that this man Paulson threatened Congress with words like Martial La w and Great Depression.

And is seems this man Paulson, executed a man named Lehman Bros in the back rooms of the White House.  

And the next day changed his mind with AIG.  

And this man Paulson didn;t see it coming, the real estate thing even though he was just CEO of Goldman for 8 years.  



jm's picture

Lehman executed themselves with their funding structure, combined with their clearing bank saying "I'm done with you."  This was their legal onus to do so.  Really Lehman is at fault for Lehman's demise.

The reason why AIG was bailed out I think is because TPTB saw the damage caused by a Lehman bankruptcy as miniscule compared to an AIG bankruptcy.

Panic?  Cronyism?  Not sure we'll ever know.

Joe Sixpack's picture

Wasn't a chunk of US Federal pension funds invested in AIG?


Also, Paulson had to be sure that GS got paid by AIG.

jm's picture

These very well could be the true motives.

snowball777's picture

It's been my understanding that AIG was rationalized as different because of the amount of international exposure to the name, whereas LameAss Repos would not cause "an international incident", if and when it souffled.

And Dick Fuld was (and most certainly is) a fucking asshole.

jm's picture

LOL.  the past part.

papaswamp's picture

Because the 'american' is lazy and apathetic..the screwing will continue. Not until a riot calling for heads will anything change...I don't see that happening anytime soon.

steveo's picture

Not just fault, direct planned knowingly criminal activity

Robslob's picture

I know fear sells better when idle minds (unemployed) have too much time on their hands.
Fear sells when people feel dependent not independent.
Fear sells when your gut tells you...I am being lied too.
Fear sells when control is lost.
Fear sells when confidence is lost.

I would rather fight for freedom with the uncertainty of obtaining it than not fight at all in a complacent life....

papaswamp's picture

little past that point now aren't we? Freedom was lost a while ago. As long as the masses had 'things' (ex big plasma screen tv, mcnasty's) they are placated. 

snowball777's picture

Fear sells only when you buy into it.

RockyRacoon's picture

Yes.  But if I am not buying in and 20 million others are, what good does my resistance do?

TeMpTeK's picture

The Apocalypse is still dormant on bank balance sheets..




Kreditanstalt's picture

What's he trying to say??

jm's picture

Can a company be shorted to death? No.  So stop talking nonsense, people.

CDS weren't the issue, CDS may have mad the situation easier to take.

Central clearing substantially makes the financial system more stable.

We need to drop the self-pity, things have been bad before. 

Try some contructive approaches to relating to our situation instead of relying on outdated or incorrect information.

Joe Sixpack's picture

CDS themselves are not the issue. The entire shadow banking complex/derivatives are. CDS are part of  this- maybe the more benign and useful part.


TimmyM's picture

I have not heard anybody talk about a shorting death spiral in ages. Why bring it up? Only idiots ever talked about it. The SEC used it as an ineffective temporary ploy.
CDS were an enabler of the credit bubble. They were and are a part of the shadow banking system. Their social utility is questionable. They have no place on the balance sheet of the still TBTFs. Socializing losses is bad policy. Collateral be damned, markets are not continuous.
Central clearing is the spreading of risk becoming the concentration of risk. Sounds like a security blanket used to justify excessive leverage until we socialize losses again.
Breaking out of self-pity I agree with. Destroying the wasteful financial culture and replacing it with a manufacturing base sounds like a good constructive place to start.

jm's picture

Hey Timmy.  Good to see you.  I just saw that short to death business mentioned last friday here on ZH. 

Was it CDS that enabled the credit bubble?  Or was it epic low interest rates that soaked the world in cheap money and moral hazard that made banks use CDS and just about everything else in an overly risky way?

If CDS can't stand the test of time in a non-cheap money, lower moral hazard environment then we'll know I was wrong.  If that ever happens.

I agree that central clearing concentrates the risk, but the incentive structure it puts in place is powerful.  It makes exposures clear, so buyer won't buy from crazies with too much risk.  It also creates incentives for market makers to police each other to some extent because they are on the hook for each other to some extent.