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Guest Post: Why Growth Is Dead

Tyler Durden's picture


Submitted by Chris Martenson

Why Growth Is Dead

The end of the second round of quantitative easing (QE II) is going to be a complete disaster for the paper markets -- specifically commodities, stocks, and then finally bonds, in that order, with losses of 20% to 50% by the end of October. The only thing that will arrest the plunge will be QE III, although we should remain alert to the likelihood that it will be named something else in an attempt to obscure what it really is. Perhaps it will be known as the "Muni Asset Trust Term Liquidity Facility" or the "American Prime Purchase Program," but whatever it is called, it will involve hundreds of billions of thin-air dollars being printed and dumped into the financial system.  

A Premature Victory Lap

Bernanke recently stood at a lectern and announced to the assembled audience that the Fed's recent policies could be credited with elevated stock prices and an improved employment statistic while somehow keeping inflation low. 

It was his own version of a 'mission accomplished' speech, just like the one GW Bush gave. And similarly, it does not mark the end of significant difficulties, but the probable beginning of a very long period of treacherous economic and financial disruption.

Here's one recent version of how the Fed's actions are being interpreted, courtesy of Bloomberg:

Bernanke’s QE2 Averts Deflation, Spurs Rally, Expands Credit

Ben S. Bernanke’s $600 billion strike against deflation is paying off, as stock and debt markets rise, bank lending grows and economists forecast faster growth.

The Standard & Poor’s 500 Index has gained 13.5 percent since the Federal Reserve chairman announced on Nov. 3 the plan to buy Treasuries through its so-called quantitative easing policy. Government bond yields show investors expect consumer prices to rise in line with historical averages. The riskiest companies are obtaining credit at the cheapest borrowing costs ever and Fed data show that commercial and industrial loans outstanding are rising for the first time since 2008.

“Looking at market indicators, you have to be convinced it’s been a success,” said Bradley Tank, chief investment officer for fixed-income in Chicago at Neuberger Berman Fixed Income LLC, which oversees about $83 billion. “When you get into periods of aggressive central bank easing, and we’re clearly in the most aggressive period of easing that we’ve ever seen, the markets tend to lead the real economy.”

A rising stock market, low inflation expectations, and lots and lots of cheap credit for even the riskiest companies. What's not to like?

The main problem is that this is all an illusion. If it were truly possible to print one's way to prosperity, history would have already proven that to be possible, yet such efforts have always failed. The reason is simple enough: Money is not wealth; it is a commodity that we use as a temporary store of wealth. Real wealth is the products and services that are made possible by an initial balance of high-quality resources that can be transformed by human effort and ingenuity.

For some reason, however, this basic concept has managed to elude the high priests and priestesses of the money temples throughout time. Somehow it always seems compelling to give money printing a try, maybe because this time seems different. But it never is. And it's not different this time, either.

Even as the markets are beginning to correct in anticipation of the end of QE II (which I predicted in my newsletters as early as March 8, 2011), we should note that the Fed is still pumping an average of $89 billion per month into the markets.

When we compare the $370 billion that the Fed has printed and placed into the financial system year-to-date against the levels of money flows going into and out of mutual funds, exchange-traded funds (ETFs), and money market funds, we observe that the Fed's actions swamp those flows by a factor of roughly 2:1. That is, the amount the Fed is putting in is quite significant, and its disappearance from the markets is something that needs to be carefully considered.

On the plus side, we can all be thankful for the one thing that money printing can do, and has done, which is buying a little more time for everyone. As I consistently advocate, such time should be used, at least in part, to ready oneself for a future of less and to become more resilient against whatever shocks are yet to come.

While money printing can so some wondrous things in the short term - (Hey, give me $2 trillion to spend and I'll throw a nice party, too!) - it cannot fix the predicament of fundamental insolvency. The United States has lived beyond its means for a couple of decades and promised itself a future that it forgot to adequately fund. The choice that remains is between accepting an unpleasant but relatively steady period of austerity leading to a new lower standard of living -- and a final catastrophe for the dollar. The former is akin to walking down around the side of a cliff, and the latter is jumping off.

Too Little Debt! (or, One Chart That Explains Everything)

If I were to be given just one chart, by which I had to explain everything about why Bernanke's printed efforts have so far failed to really cure anything and why I am pessimistic that further efforts will fall short, it is this one:

There's a lot going on in this deceptively simple chart so let's take it one step at a time. First, "Total Credit Market Debt" covers everything - financial sector debt, government debt (fed, state, local), household debt, and corporate debt - and is represented by the bold red line (data from the Federal Reserve). 

Next, if we start in January 1970 and ask the question, "How long before that debt doubled and then doubled again?" we find that debt has doubled five times in four decades (blue triangles).  

Then if we perform an exponential curve fit (blue line), we find a nearly perfect fit with an R2 of 0.99 when we round up. That means that debt has been growing in a nearly perfect exponential fashion through the 1970's, the 1980's, the 1990's and the 2000's. In order for the 2010 decade to mirror, match, or in any way resemble the prior four decades, credit market debt will need to double again from $52 trillion to $104 trillion. 

Finally, note that the most serious departure between the idealized exponential curve fit and the data occurred beginning in 2008 -- and it has not yet even remotely begun to return to its former trajectory.

This explains everything.

It explains why Bernanke's $2 trillion has not created a spectacular party in anything other than a few select areas (banking, corporate profits) which were positioned to directly benefit from the money. It explains why things don't feel right, or the same, and why most people are still feeling quite queasy about the state of the economy. It explains why the massive disconnect between government pensions and promises, all developed and doled out during the prior four decades, cannot be met by current budget realities.

Our entire system of money, and by extension our sense of entitlement and expectations of future growth, were formed in response to and are utterly dependent on exponential credit growth.   Of course, as you know, money is loaned into existence and is therefore really just the other side of the credit coin. This is why Bernanke can print a few trillion and not really accomplish all that much. It's because the main engine of growth is expecting, requiring, and otherwise dependent on credit doubling over the next decade.

To put that into perspective, a doubling will take us from $52 to $104 trillion, requiring close to $5 trillion in new credit creation during each year of that decade. Nearly three years have passed without any appreciable increase in total credit market debt, which puts us roughly $15 trillion behind the curve.

What will happen when credit cannot grow exponentially? We already have our answer, because that's been the reality for the past three years. Debts cannot be serviced, the weaker and more highly leveraged participants get clobbered first (Lehman, Greece, Las Vegas housing, etc.) and the dominoes topple from the outside in towards the center. Money is piled on, but traction is weak. What begins as a temporary program of providing liquidity becomes a permanent program of printing money, which the system becomes dependent on in order to even function.

In addressing these questions in Part II of this report: Positioning for the Coming Rout, I have become increasingly confident that the Fed's efforts to exit quantitative easing will lead to a substantial market rout that will roil all asset classes this year. That's just the short-term outlook. Continued and eventually greater turbulence will result from the government's subsequent response.

Click here to access Part II (free executive summary; paid enrollment required to access) for specific predictions on what to expect in the months ahead as well as recommendations for protecting your wealth.


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Thu, 05/12/2011 - 14:38 | 1268839 LawsofPhysics
LawsofPhysics's picture

Ah, the delta function is finally catching up with us.  hedge accordingly.

Thu, 05/12/2011 - 14:42 | 1268870 Cash_is_Trash
Cash_is_Trash's picture

...but, but, Ben, Tim and Barry assured we were growing!

Thu, 05/12/2011 - 14:56 | 1268930 Hard1
Hard1's picture

Yes, let's just find a new buyer of UST's to substitute China, now we only need 2 Trlln.  I've heard there are some aliens in an outer galaxy interested on exporting stuff to the USA in exchange for IOUs.

Thu, 05/12/2011 - 16:01 | 1269263 Slash
Slash's picture

the fed's got some tricks up their sleeve. "everyone" knows markets will tank with the end of QE 2....which means they won't. Maybe a hiccup or two, but it's too critical for the kleptocracy to keep the illusion of prosperity alive. I would think stocks will somehow levitate while commodities correct hard as that is obviously what the psychopaths want.

Thu, 05/12/2011 - 16:16 | 1269335 Coast Watcher
Coast Watcher's picture

Agree. No way the markets tank going into an election year.

Thu, 05/12/2011 - 16:24 | 1269378 Slash
Slash's picture

We'll probably see mysterious bidding at treasury auctions (once the grandstanding is done and ceiling is rasied) from money centers/offshore havens all over the world. The game of buy the bond flip back to the fed isn't over by a long shot. I wonder if the fed's balance sheet will show anything in terms of increasing asset purchases though.....



Thu, 05/12/2011 - 17:10 | 1269551 Robslob
Robslob's picture

Election Year is 2012...not 2011.

Thu, 05/12/2011 - 19:58 | 1270109 Bicycle Repairman
Bicycle Repairman's picture

What kind of year was 2008?  It doesn't matter who gets to play puppet.

Fri, 05/13/2011 - 00:16 | 1270793 CIABS
CIABS's picture

re: Coast Watcher

stocks will tank before an election if it will affect the outcome in the desired way, as happened in 2008.

Fri, 05/13/2011 - 09:28 | 1271361 blindfaith
blindfaith's picture

spot on.......and behind the scenes the vote manipulation has been is high gear for months.  Who will win, the corporations or the financials?  And, we thought it was all about blue and red, and the constitution, apple pie, and prayer.

Thu, 05/12/2011 - 17:06 | 1269544 hbjork1
hbjork1's picture

Folks, the artificial "growth" of easy money may be dead but real growth is not dead.  In between ZH postings, I am scanning trade magazines of various sorts.  The one in front of me right now is "Test and Measurement World.  The editorial title is "Game changers in test-part 2" 

Change is upon us all. 

I felt relieved by the performance of Seal Team 6.  Our country didn't "screw up" that at least.  But those TEAM members were the best of the best and they all paid a considerable personal price to be in that condition of readiness. 

I have to contrast this training level (for an assassination) with the financial lights setting policy for the entire country.  Greenspan has become a joke.  And the financial educators (including Merton), until this decade at least, realized that standard statistics that were for random events, could not be reliably applied to human decision processes. 

A couple of weeks ago I had dinner with a friend who was an early worker in computer modeling of chemical reactions.  A few decades ago, he had published a book, "Methods in molecular orbital theory".  Because I had been interested in what kind of math might be applied for a closer approach to better financial analysis, I had once ask him about his book.  It's a little book, shouldn't take too long to get a picture of the math with some bedside reading. 

He brought me his copy. 

I am still working on the "Schrödinger Equation" (bottom of page 1).   

Anyone reading this that thinks you could make a contribution in this area should check out his methodology.

Thu, 05/12/2011 - 19:57 | 1270118 Bicycle Repairman
Bicycle Repairman's picture

Dude, that was one giant non sequitur.

Thu, 05/12/2011 - 14:48 | 1268884 NewThor
NewThor's picture

Ben Bernanke says "I am Shiva destroyer of worlds. Pain and 

suffering are my drugs of choice. I will overdose on pleasure

as the world collapses into a chaotic black hole of currency collapse."

Fri, 05/13/2011 - 09:23 | 1271337 blindfaith
blindfaith's picture

Guilt is a miserable ghost to have haunt you.  Ben is a Narcissus, they have no such ghosts.

Thu, 05/12/2011 - 14:40 | 1268848 Sudden Debt
Sudden Debt's picture

If it worked....






Fri, 05/13/2011 - 01:10 | 1270858 dalkrin
dalkrin's picture

All that surge in credit with its jump-off point in the early 70's.  Hmm, what happened back then?  Oh yeah, Nixon severed the gold-tether, and away we floated like a balloon.

Thu, 05/12/2011 - 14:37 | 1268850 besodemuerte
besodemuerte's picture

So should we expect 20% and 50% gains by October then?  Because we all know Benny Bucks won't let us crash.

Thu, 05/12/2011 - 14:41 | 1268851 zeek
zeek's picture

Isn't China trying to make our 'gyrations' irrelevant in the commodities arena, or am I just reading too much into the HKMEX offering contracts in yuan?

Thu, 05/12/2011 - 14:40 | 1268865 LawsofPhysics
LawsofPhysics's picture

I saw that, fast learners aren't they?  Now about that "deliverable gold", you will accept these yuan instead.

Thu, 05/12/2011 - 14:38 | 1268852 j.darkness
j.darkness's picture

Commodity Relief Assistance Program, aka C.R.A.P.

Thu, 05/12/2011 - 14:53 | 1268917 Missiondweller
Missiondweller's picture

LOL! That was great!

Thu, 05/12/2011 - 14:56 | 1268933 Trillax
Trillax's picture

+100 :)

Thu, 05/12/2011 - 15:07 | 1268973 TheGoodDoctor
TheGoodDoctor's picture

+some two ply. We are going to need it.

Thu, 05/12/2011 - 15:13 | 1269009 dexter_morgan
dexter_morgan's picture


Thu, 05/12/2011 - 15:25 | 1269059 Eally Ucked
Eally Ucked's picture

You my friend are a bit of the sinc, I would say, your economy depends on them even to produce nail polish! What you have to offer to the whole world? Your services? Good luck!

Thu, 05/12/2011 - 15:30 | 1269086 Dr. Richard Head
Dr. Richard Head's picture

Speculator Halting Initiative Transactions

Thu, 05/12/2011 - 16:10 | 1269289 NotApplicable
NotApplicable's picture

I've got it on good authority that they're considering calling it the

Financial Asset Security Clearing Inventory Sustainability Method.

Thu, 05/12/2011 - 16:35 | 1269424 j.darkness
j.darkness's picture

++ to you and Dr. Head, thanks for playing! 

Thu, 05/12/2011 - 14:40 | 1268863 Tic tock
Tic tock's picture

Oh you fuckin wish,

Thu, 05/12/2011 - 14:41 | 1268867 falak pema
falak pema's picture

growth is not dead in DC, 'cos negative growth is very much there!

Thu, 05/12/2011 - 14:44 | 1268878 buzzsaw99
buzzsaw99's picture

qe infinity bitchez

Thu, 05/12/2011 - 14:45 | 1268881 SheepDog-One
SheepDog-One's picture

Its not early 2008 anymore, the exuberance that 'this TARP thing hmmm it really might work!' and subsequent QE's is now seen as bailing out bankers only, no benefit for anyone else in a collapsed economy. Another round of it, no matter what they try to name it, will likely just cause a total wipeout. Last days of the empire here.

Thu, 05/12/2011 - 14:48 | 1268890 trav7777
trav7777's picture peaked at the same time as oil production did

Thu, 05/12/2011 - 14:51 | 1268902 Flakmeister
Flakmeister's picture

No shit, eh?

Fri, 05/13/2011 - 23:53 | 1273741 nmewn
nmewn's picture

You guys run in pairs...that is interesting.

Thu, 05/12/2011 - 15:15 | 1269022 CrashisOptimistic
CrashisOptimistic's picture

It is astonishing how people cannot figure it out.

Thu, 05/12/2011 - 16:35 | 1269413 NotApplicable
NotApplicable's picture

Ever try to explain to someone how our money is nothing but our own debt? Instant eye glaze. Honestly, I'm astonished that so many have figured it out.

To the masses money = money is about as in depth as the logic gets, because the next step is no better, and with the circular logic, the spiral of wealth transfer over time goes unseen. Here's the whole conversation.

Q: "What's a dollar?"

A: "It's a promise to pay."


Q: "Pay what?"

A: "A dollar."


Q: *drools*

Fri, 05/13/2011 - 05:02 | 1271020 John Skookum
John Skookum's picture

The real fun will come when BernankeBux are no longer accepted in payment of taxes.  Specie, foreign hard currency, or in-kind only, thank you. 

Fri, 05/13/2011 - 06:37 | 1271069 equity_momo
equity_momo's picture

+ logic

Thu, 05/12/2011 - 14:49 | 1268894 NotAllowed
NotAllowed's picture

Perhaps they want a system implosion.  How else will they be able to not pay any SS, Medicare, and Medicaid benefits.  I'm thinking this is an engineered collapse, if not than QE has to happen.

Thu, 05/12/2011 - 17:18 | 1269605 Ying-Yang
Ying-Yang's picture

Not Allowed... I've been thinking the same thing but then we would be called conspiracy theorists.


System fail and PTB restart NWO the way they please.

Fri, 05/13/2011 - 02:06 | 1270916 FlyPaper
FlyPaper's picture

Have talked this over with several people.  If you wanted to fix the US Economy (and Obama knows what is happening) - why would you jump in with a budget-busting entitlement like Health-care?  Why would you run 1.6t deficits?  Why would you stop new oil drilling in the gulf?  Why would you pass "finance reform" and fail to reign in taxpayer-insured entities like the too-big-to-fails?  

Either the big O is brain-dead (he's not) or he has another agenda.  Perhaps: Hope and Chains?

Thu, 05/12/2011 - 15:10 | 1268911 SheepDog-One
SheepDog-One's picture

For everyone convinced we just 'QE to infinity', do not forget the obvious fake 'Bin Laden assasination' setup for the terrorist attacks on major US cities the govt is presently warning us about. Theres a LOT of other things going on in the world other than just printing money to pump up stocks. Stock markets are not the end game, just a diversion from the REAL game.

Thu, 05/12/2011 - 16:42 | 1269436 aerojet
aerojet's picture

You got two junks, but the whole Bin Laden thing stinks to high heaven.  They killed the  actor who played Bin Laden and CIAQaeda even made a press statement to corroborate it, which to me was the tip-off.  Al Qaeda is not real.  The people fighting the US in Afghanistan are an insurgency, but they are not Al Qaeda.  It's our own tax dollars on both sides.

Thu, 05/12/2011 - 17:08 | 1269539 Abitdodgie
Abitdodgie's picture

Dirty bomb before June 10th major US city.

Thu, 05/12/2011 - 18:57 | 1269943 j.darkness
j.darkness's picture

I agree, definite set up for false counterstrike.  I think also nuclear, but where?  wont be LA cuz we need hollywood to manufacture consent.  Probably not san fran cuz wiping out silicon valley is bad for the MIC.  Atlanta?  Also has to be a credible target, houston?  where was that FEMA exercise a couple of years back where 7000 people were evacuated?  BTW lets hope FEMA NLE 2011 is just an exercise!

Thu, 05/12/2011 - 18:39 | 1269894 smlbizman
smlbizman's picture

and it will be blamed on iran than we will invade, blah blah...they just dont care about appearance at all 

Thu, 05/12/2011 - 14:50 | 1268912 unclebill
unclebill's picture


Thu, 05/12/2011 - 14:57 | 1268925 LawsofPhysics
LawsofPhysics's picture

No, Zimbabwe x100,000,000,000



Thu, 05/12/2011 - 15:51 | 1269195 SokPOTUS
SokPOTUS's picture

+ ZIM$ 1.00

Thu, 05/12/2011 - 14:54 | 1268922 Magnix
Magnix's picture


Thu, 05/12/2011 - 15:21 | 1269056 theopco
theopco's picture


Thu, 05/12/2011 - 16:01 | 1269264 CH1
CH1's picture

LOL... Yes, buy bonds, they are back by the full faith and credit in the US guv!

But ignore people who talk about math - they are obviously crazy and dangerous!

Thu, 05/12/2011 - 16:17 | 1269331 Dr. Richard Head
Dr. Richard Head's picture

People that can add are so tin foil.

Thu, 05/12/2011 - 16:35 | 1269422 NotApplicable
NotApplicable's picture

Why any patriotic American would be buying bonds, on margin!




Thu, 05/12/2011 - 14:54 | 1268924 Hedgetard55
Hedgetard55's picture

In the Odyssey, Odysseus and a bunch of his men are captured by Cyclops. Odysseus hatches a plan to escape, and offers Cyclops his strong wine to drink. Cyclops accepts and as a reward for Odysseus, promises that he will eat Odysseus last.

I wonder if Bubbles Ben is hoping that he will be the last CB to be eaten when the whole shithouse collapses.

Thu, 05/12/2011 - 15:08 | 1268938 tahoebumsmith
tahoebumsmith's picture

Lets not forget this started with 787 billion in tarp. Then we had the stimulus of 1.107 Trillion, Oh and Hamp, then AIG, GM, Fannie& Freddie bailout ect..ect., oh then the 80 billion in taxpayer CDS payout from AIG,then the sneaky FED hid 1.2 Trillion in Toxic MBS somewhere in a filing cabinet,  the FED then distributed another 3.2 TRILLION in loans to everyone from Micky D's to the Libyan Government, next they rolled out QEI, followed by QE lite, then QE2??? Get my drift? Bottom line is that a monkey with a note could have achieved the same results. How hard is it to print and hand out money to play economies for dreamers. What we are left with is an additional 13.5 trillion spent on spackle and paint, an additional 6 trillion lost in housing wealth, real unemployment still at 14%, inflation threating to run rampant, a dollar that is being tisked all over the globe, a 1.6 TRILLION dollar deficit and an economy that has eaten it all up and produced nothing but a terd. Face the facts, we don't have another 30T to blow, so just wave the fricken white flag already and let the chips fall where they may, until then we will continue to live in neverland where everything is tommorow's problem and reality doesn't matter. To think it all started with a song only 2 short years ago?

Thu, 05/12/2011 - 15:32 | 1269097 Dr. Richard Head
Dr. Richard Head's picture

Wonderful capturing of the entirity of the Fed's shit.  My friend the honeydipper would be proud. 

Thu, 05/12/2011 - 16:37 | 1269430 NotApplicable
NotApplicable's picture

White flag?

False flag, more likely.

Thu, 05/12/2011 - 17:24 | 1269645 Ying-Yang
Ying-Yang's picture

tahobumsmith... maybe we all will be issued shirts that say "We Blew 30 Trillion and all I got was this crappy Chinese $2 shirt.

Thu, 05/12/2011 - 17:31 | 1269686 Manthong
Manthong's picture

Bank Asset Reinvestment Facility

Thu, 05/12/2011 - 15:01 | 1268947 angelsand
angelsand's picture

"...though we should remain alert to the likelihood that it will be named something else"


how about "Municipality Impediment Lifting Facility" or MILF

Thu, 05/12/2011 - 15:05 | 1268966 topcallingtroll
topcallingtroll's picture

MILF's are great!

Easy, friendly, no game playing.

Thu, 05/12/2011 - 15:01 | 1268948 slewie the pi-rat
slewie the pi-rat's picture

break-even's not too bad for the old economy, especially since the assholes seem hell-bent on destrying it

Thu, 05/12/2011 - 15:02 | 1268951 RobotTrader
RobotTrader's picture

Sorry, but the stock market is still pricing in "nirvana" for the retail sector.

Kohl's up 4%, breaking out of a "sound base" of over 18 months as the IBD Riverboaters will sure to chase it.

Thu, 05/12/2011 - 15:15 | 1268993 SheepDog-One
SheepDog-One's picture

'Nirvana for the retail sector' gee seems you already forgot retail sales fell off the cliff this morning.

RainbowTrader can I get 1 of your "I 'heart' The Pigmen" tshirts?

Thu, 05/12/2011 - 15:15 | 1269031 slewie the pi-rat
slewie the pi-rat's picture

slewie like to shop @ kohl's, RT!

i have found a place where they will put up with damned near anything i come up with.

Thu, 05/12/2011 - 15:23 | 1269061 SheepDog-One
SheepDog-One's picture

Kohl's is hillarious! You can go to your closet, pick a couple of old hoodies and bring them to Kohl's as an exchange worth about a couple hundred bucks...theyll do it!

Thu, 05/12/2011 - 15:03 | 1268955 topcallingtroll
topcallingtroll's picture

I guess i am larry kudlow because i believe in america and its long term prospects if we will follow economically enlightened policies that promote growth and efficiency.

The stock market probably needs to drop to reflect.fundamental value. Lets get on with the great reset. It has been delayed long enough.

Thu, 05/12/2011 - 15:16 | 1269019 samsara
samsara's picture

if we will follow economically enlightened policies that promote growth and efficiency.

We will not 'Return' to growth from this point.

If nothing else...

Peak Oil = End Of Growth



Thu, 05/12/2011 - 16:13 | 1269304 topcallingtroll
topcallingtroll's picture

I hope you are wrong!

Thu, 05/12/2011 - 19:56 | 1270114 samsara
samsara's picture

Largest Fields in the world

1. Ghawar(SA) has Peaked (obscured by trickery)

2. Bergen(Kuwait) has Peaked

3. Canterell(Mexico) has Peaked

USSR has pragmatically Peaked

North Sea has peaked

The US peaked (1970 as Hubbert predicted in 1956)

Shall I go on?

No field that could be discovered would replace the decline of the first 3. 

No Oil,  No Growth


Thu, 05/12/2011 - 15:03 | 1268956 Jim in MN
Jim in MN's picture







Thu, 05/12/2011 - 15:03 | 1268957 youngman
youngman's picture

I think PM´s will do well as people....Central banks, and Countries buy them out of things get wierd..people will go to the old standard....there will be more University of Texas deliveries....and it has to be said its the USA vs the rest of the world...our paper price of PM´s might go down because of rules and regulations here...but the rest of the world will buy and TAKE delivery of it...the regulators will transfer the real wealth of the USA elsewhere....

Thu, 05/12/2011 - 18:57 | 1269935 JimS
JimS's picture

A slight problem with the " University of Texas deliveries" of gold, as they have not really taken physical possession of said gold. It is sitting in New York and is being used by the same people who sold said gold to the Longhorns. "Physical possession" to me, means, I can go over to the pile of gold and actually touch it. Doesn't mean that it is held by a New York bank. Unless something has changed, U of Texas doesn't "really" have the gold in their hands.

Thu, 05/12/2011 - 15:09 | 1268990 John McCloy
John McCloy's picture

  Well only about another month until the economy or "The Printing Press" does a complete 180. Looks like we saw our first indicator of the fragility of those recent hires over the past 2 years as commodity costs went skying in the past few months. 

Well ladies and gents it is official. We no longer have an actual economy. We have only the supply the printing presses can create. As expected we saw the takedowns in metals and oil and now the cartel will try to close their eyes and hope they can move up the Russell and high betas without them noticing. 

  This is the first time it has worked since QE2 commenced so if the market continues levitating we should expect silver and oil to play catchup in a matter of weeks. 

Thu, 05/12/2011 - 15:11 | 1269000 RobotTrader
RobotTrader's picture

Gasoline prices are rolling over in Los Angeles, as seen on the attached "Gas Buddy Chart"...

This will spur yet another "boom" in consumer spending.  Any wonder why the XRT absolutely refuses to break?


Thu, 05/12/2011 - 15:13 | 1269023 SheepDog-One
SheepDog-One's picture

Yep retail spending went 'boom' this morning and fell.

Thu, 05/12/2011 - 15:22 | 1269048 tahoebumsmith
tahoebumsmith's picture

4 cents is rolling over??? Bawahahaha I'm rolling over with laughter. Need to get back under $3.00 before people will breath easier. I see the decline in the Cali economy everyday and so do you Robo...Stop kidding yourself...

Thu, 05/12/2011 - 17:14 | 1269579 Temporalist
Temporalist's picture

Here is a pic of RoflBastard in his high mileage gas saver in LA:

Thu, 05/12/2011 - 15:10 | 1269005 NOTW777
NOTW777's picture

this is bs.  no pomo so gold and silver become worthless?

theres an entire world out there beyond bernank and pomo

Thu, 05/12/2011 - 15:15 | 1269020 dexter_morgan
dexter_morgan's picture

ah, somebody not accepting their little box of reality - kudo's

Thu, 05/12/2011 - 15:18 | 1269032 SheepDog-One
SheepDog-One's picture

We're still left with debt thats now mathematically impossible to ever repay. $30 trillion just over the last few years. Yea its BS this idea if theres no more QE, suddenly gold and silver are worthless? I swear all this has turned a lot of peoples brains into shit.

Thu, 05/12/2011 - 15:37 | 1269123 Dr. Richard Head
Dr. Richard Head's picture

Wouldn't an equity rout force commodity liquidation to meet margin calls - ala 2008?

Did I just put together a string of words that I don't understand fully?  Quite possibly...

Thu, 05/12/2011 - 15:46 | 1269180 LawsofPhysics
LawsofPhysics's picture

yep, long pot and booze.

Thu, 05/12/2011 - 15:52 | 1269204 Dr. Richard Head
Dr. Richard Head's picture

Winner winner chicken dinner.  Talk about a liquid asset. 

Thu, 05/12/2011 - 15:16 | 1269038 NOTW777
NOTW777's picture

and selling crap to boot

Click here to access Part II (free executive summary; paid enrollment required to access) for specific predictions on what to expect in the months ahead as well as recommendations for protecting your wealth.

Thu, 05/12/2011 - 15:15 | 1269017 Silver Bug
Silver Bug's picture

We won't be going back to the old levels, it was built on pixie dust (credit) and its not coming back.

Thu, 05/12/2011 - 15:14 | 1269025 RobotTrader
RobotTrader's picture

XRT now printing a new world record, lifetime high.

Gerald Celente must be kicking himself, or crying.......

He made yet another fantastic error of judgement, counting out the U.S. consumer.

Thu, 05/12/2011 - 15:22 | 1269047 SheepDog-One
SheepDog-One's picture

Hey can you print us a chart of your last weeks favorite momofader stock TZOO for us please? Thaaaaaanks.

Thu, 05/12/2011 - 15:25 | 1269069 RobotTrader
RobotTrader's picture

No more charts or photos.  Tyler doesn't want me clogging up the threads.

You'll have to look it up yourself, sorry......

Thu, 05/12/2011 - 15:30 | 1269092 SheepDog-One
SheepDog-One's picture

Oh ok, hmmm well seems your last weeks darling pumper TZOO in down $5 just to let you know. I know it was never in your portfolio anyway, just like none of the other crap you pump.

Thu, 05/12/2011 - 17:32 | 1269690 Ying-Yang
Ying-Yang's picture

I miss your TA-TA photos... come on Tyler let RT post TA-TAs

Thu, 05/12/2011 - 15:23 | 1269039 benburnyanki
benburnyanki's picture

dude, this is excellent and goes to show what I always said:

The bloody debt based fiat currency is a anchor chain tied round our necks maties. It is a fookin pyramid scheme sheep wake up:

These AIC's (aholes in charge) ALL HAVE EXIT STRATEGIES TO CASH THEIR MILLION DOLLARS INTO GOLD BARS. Then even if we vote in Ron Paul and he fires all their fookin lazy worthless overpaid government workin' asses, they have serious assets in swiss bank vaults to bail on and leave us holding the same kind of bag as the Greeks are currently sportin maties!!!@!

I am bloddy f(*&ing mad now.

Learn how Sharia Law Bank Rules in Swedish Jak Bank has no billion dollar CEO running it but gives fokes a square deal with no fast talking armani dressing pinko commie that swears to god he is a capitalist but beats everyone up financially into pulp so they have to live like commie refugees.

Thu, 05/12/2011 - 15:19 | 1269040 Navigator
Navigator's picture

Growth is dead because we've passed peak oil production and there can be no growth without increasing energy.  TPTB understand this which is why we're seeing open grabs for all assets by those with huge amounts of capital.






Thu, 05/12/2011 - 15:29 | 1269088 Caviar Emptor
Caviar Emptor's picture

Alaska pipeline now running at only 40% capacity, creating new logistical problems. 

Thu, 05/12/2011 - 16:53 | 1269476 aerojet
aerojet's picture

Wait a minute.  Is it running at 40% because demand is low or because nothing is left to pump?

Thu, 05/12/2011 - 17:35 | 1269678 CrashisOptimistic
CrashisOptimistic's picture

This is the classic MSM speak issue.

If I tell you demand is low, the spin will be "the transition to electric cars and hybrids is making itself felt in the oil numbers, and this is good news for all of us."  Never mind that about 600 electric cars out of 12 million per year are sold.  The future must be bright!

If demand was down, then we would not be importing 8 million barrels per day and the 40% in the Alyeska pipeline wouldn't matter, would it?

It's down 40%, Rufus, because there's only 40% going in the opening up north, because that's all that is available there.  Demand more, go ahead, all you'll get is that 40%.


Thu, 05/12/2011 - 23:05 | 1270632 blunderdog
blunderdog's picture

Some guy here says it's down because the prices are too low.  As soon as oil's like...I dunno...maybe $600/ will skyrocket.  That's what I read somewhere.

Fri, 05/13/2011 - 06:37 | 1271066 DrunkenMonkey
DrunkenMonkey's picture

Classic enron tactics !

You can't say the oil producers aren't learning ..

Thu, 05/12/2011 - 15:20 | 1269052 jacksmedullaobl...
jacksmedullaoblongata's picture

I still don't get how anyone says we will have deflation and also gold will go up.  I read this guy's website, and I see the talk of deflation.  I only assume he recommends buying gold due to the gold ads on the site.

Thu, 05/12/2011 - 15:28 | 1269081 SheepDog-One
SheepDog-One's picture

Way I see it, theyve now got everyone just where they want them, absolutely no clue whats next.

Thu, 05/12/2011 - 15:40 | 1269140 Dr. Richard Head
Dr. Richard Head's picture

I know exactly what is going to happen next - I will drink as much as I can till I throw up or medics have to pump my stomach.

Thu, 05/12/2011 - 15:42 | 1269087 benburnyanki
benburnyanki's picture


Precious Metals Rule Book:

Rule number 1

Never buy gold if you have to ask how much it costs. Only big boys should buy gold and silver as investments.

Rule number 2

See rule number 1

Rule number 3

If you are a smart ass and skipped rule number 2, then you have an IQ exceeding your height in centemeters and can follow this additional rule: Don't be a tard and forget that the fookin Rothschilds have .3 + Quadrillion USD in assets worldwide if you combine their Oil shares, Banking Shares, Pharma, etc. and if they want to, they can just sell a few hundred 400 ounce gold bars or silver bars in a heartbeat and run down the price of silver or gold. DON'T FUK WITH METALS UNLESS YOU CAN AFFORD TO LOOSE A CHUNK OF IT AND NEVER BUY METALS ON MARGIN. EVER FUKIN EVER.


Big Boy: someone who has 1 mil. in fairly liquid assets and that not include kegs of buried spanish pieces of eight under a tree on a south sea island matey.

Thu, 05/12/2011 - 15:24 | 1269057 Seacap81
Seacap81's picture

We need an expert, say maybe Jim Rogers, to tell us how this Parabolic Chart fixes itself.

Thu, 05/12/2011 - 15:26 | 1269064 RobotTrader
RobotTrader's picture

TJ Maxx, Men's Wearhouse, and Polo Ralph Lauren making fresh, new, 52-week highs.

Sure sign that we are heading into a depression.

Most gold stock investors betting on "gloom and doom" probably wish they had never been born.


Thu, 05/12/2011 - 15:26 | 1269076 SheepDog-One
SheepDog-One's picture

How 'bout that TZOO chart, you know the one you were pumping all last week can we see it today?

Thu, 05/12/2011 - 15:34 | 1269093 Caviar Emptor
Caviar Emptor's picture

Still confusing stocks and the economy, like confusing movies with reality. In movies you can do just about anything

Thu, 05/12/2011 - 15:34 | 1269105 lieutenantjohnchard
lieutenantjohnchard's picture

then buy them big mouth. please also remind the board that you own an ira full of gold stocks and silver coins. so count yourself among those who wish they weren't born.

as for us physical holders of silver the eagles are around $40 after the carnage. i would say that's fairly nice for those of us who bought years ago.

poor old robo trader wannabe. still scared to death he'll lose his seed capital holding a 30% invested position of widows and orphans stocks which have done nothing.

Thu, 05/12/2011 - 15:58 | 1269228 SheepDog-One
SheepDog-One's picture

Robo Trader just 'cntrl alt del's' his past statements that he owns a ton of gold stocks in the days they were going up.

Thu, 05/12/2011 - 15:28 | 1269070 gillimus
gillimus's picture

Great title.  "HELOC Nation" would have worked as well.  If we -- locally and globally -- can't afford to pay our debt then we have to contract.  Or default.

Deflation will take more of their money away (since they have more) so it will be the singular focus of the central bankers.  Cash and its equivalents remain king.

Thu, 05/12/2011 - 15:29 | 1269074 Gubbmint Cheese
Gubbmint Cheese's picture

Robo - better yet.. give us NEXT week's charts of what you are holding. Your end of day reporting is getting a little stale.

Thu, 05/12/2011 - 15:29 | 1269075 Caviar Emptor
Caviar Emptor's picture

Instead of a market rout which the author is predicting, we could get a glorious slump all the way into the end of the year. Mirroring the Slouching and slumping economy and to let the air out of the imbalances created by Fed money. Never a crack up or a crack down, just a steady losing streak punctuated by a few good days but ending up with substantial cumulative losses

Lotsa Luck

Thu, 05/12/2011 - 15:28 | 1269082 nah
nah's picture

current problem is we invest in the world to make a better place to blow up

Thu, 05/12/2011 - 15:34 | 1269094 schizo321437
schizo321437's picture

Push the `reset` button.

Thu, 05/12/2011 - 15:33 | 1269102 taketheredpill
taketheredpill's picture

This may be a little too long-term for most people but...

A 2% - 3% Real GDP rate means that over the next 20-25 years the global economy will consume as many resources as were consumed in all history up until today.

So not only will growth end at some point, given a finite supply of resources, it necessarily must end.

Just throwin it out there, since the subject of growth was raised.




Thu, 05/12/2011 - 15:38 | 1269122 Franken_Stein
Franken_Stein's picture


Right. The adherents of eternal growth have to be stopped.

They are mental and belong into the asylum.

Plus they are bad at maths.


Thu, 05/12/2011 - 15:35 | 1269108 Franken_Stein
Franken_Stein's picture


Can anybody please tell me why we need this globalist / zionist IMF and Worldbank ?

Looks like there's always a Jew at the helm.


Wolfowitz / Strauss-Kahn / Zoellick.


And these incompetent assclowns try to manage the world ?

They can't even manage their own fucking countries.

What a sad joke.


Thu, 05/12/2011 - 15:54 | 1269191 benburnyanki
benburnyanki's picture

Dude these assclowns are doing it all on purpose to control our minds, no lemme be a bit blunt here: they are mind fucking us sheep with the blairing TV mind kintrol day after day after day. They are so many jews in hollywood that 50% of the actors are either the producers kids or their cousins that I am starting to think a normal American should look jewish instead of Mexican or Black as whites are way too extinct to look normal on tv no mo.

Oh sorry, What I meant to say is yes the Men In Black suits pushing all the buttons are mysteriously friends with Mr. Trump who in this book Red Mafiya was fingered for helping hide Rusky Mobster Ivankof or Ivan something or another in Trump Towers to hide the Rusky from the FBI. Trump is such a money hungry Jew he regularly lets the Rusky Jewish Mafia gamble in his Taj Majal Trump Casino as Trump don't care if the money is driiiiiiiiping in blood. Trump is a typical Vampire Capitalist.

Yea thats the ticket. A new name for money junkies: Vampire Capitalism: If we can't steal it, extort it, racketeer it, Whore it, Pimp It or Gamble it, then we not worthy of blood sucking leach mafia Red Men.

Trump you fuck I hope you don't get elected to the local PTA club you homo.

Book Red Mafiya:

Thu, 05/12/2011 - 15:59 | 1269252 SheepDog-One
SheepDog-One's picture

Theyve got the general public so mindfuked they can now do whatever they want. Some morning soon the 401K's will be sucked up by Treasury, CNBC will say its good news, and no one will say or do shit about it!

Thu, 05/12/2011 - 16:38 | 1269433 dexter_morgan
dexter_morgan's picture

Yep, and the sheeple will rejoice, during commercials of DWTS or whatever crap is on.

Thu, 05/12/2011 - 16:12 | 1269311 benburnyanki
benburnyanki's picture

Oh and if you think I am joking, the Rothschilds had JFK shot just a few months after he issued Presidential Executive Order 111110 which forced the printing of USD Silver Certificate Dollar Bills outside of the Jewish Mafia that controls the world right now for the USA and EU government punks in charge (PIC)s that are really actually aided by the CIA, NSA, and EU Feds and Interpol. You see Israel Governmeent is actually compleetely intwined in the Red Mafiya and runs it from Tel Aviv. You think the Arabs have a headache, Israel has turned America into the New Palestine and us Amerexicans are fuked now. Read the Book Red Mafiya and then we will have a Q n A session for newbies.

Also see the Queen of UK is using the Red Mafiya Hit Men to try to kill folks like me who warn the poor sheep how they get fucked by assholes: Book Committee of 300 at

Thu, 05/12/2011 - 16:28 | 1269384 benburnyanki
benburnyanki's picture

In 1990 the clever Ruskies In Charge (RICe)s at the Kremlin in Moscow figured they would duplicate the kule move they pulled with the Marialitos from the Cuban Prisons who Ben Castro told the USA were just poor Cubans and sent to Miami 'a la Scarface'.  So the Kriminal Kremlin rounded up all the Meanest Nastiest Vors in Russian Prisons who were also Jewish and told the West they were letting some poor Jews free out of Russian Communism. What glorias days. Little did we know these were convicted convicts who yes, were also Jewish. They proceeded to take over the world. I seen three on a plane from Kiev to Paris with full neck and finger tatoos and they had no necks! Most of time Rusky Mafia hires ex boxers and big wig athletes so they can do hits 'real good'.

Fudk the Mafia if you ask my honest opinion maties.

See book Red Mafiya here:

Thu, 05/12/2011 - 15:39 | 1269135 Shell Game
Shell Game's picture

The choreography behind this market is like some cheap, street puppet show..

Thu, 05/12/2011 - 15:54 | 1269209 SokPOTUS
SokPOTUS's picture

GS as Miss Piggy...

Thu, 05/12/2011 - 15:44 | 1269147 He_Who Carried ...
He_Who Carried The Sun's picture

You Sir, sound like a junkey on the needle who is afraid of a turkey.

The end of QE2 is already priced in to the markets and

those who want to make a profit will fill the void. The whole thing will be much healthier and uf we go down a few hundred points, so be it!

Thu, 05/12/2011 - 16:00 | 1269237 SheepDog-One
SheepDog-One's picture

Few hundred points? Hell in a market overvalued by 70% thats nothing. I'd just love to see what happens with a simple interest rate rise from 0% to 2%. I say we'd be seeing DOW 6,500 in no time.

Thu, 05/12/2011 - 15:58 | 1269249 honestann
honestann's picture

contradiction:  QE2 is already priced into market versus a few hundred point drop to become healthy.

The fact is, virtually everyone believes Bernanke will step in and print trillions when the markets dive.  Therefore, the end of QE2 is most certainly not priced into the market.  Only the impression of a slight risk that QE3 will not be soon enough or large enough is priced in.

Thu, 05/12/2011 - 16:13 | 1269307 Clowns on Acid
Clowns on Acid's picture

+ 1

Thu, 05/12/2011 - 15:56 | 1269236 honestann
honestann's picture

DEBT is a disease.

Bernanke and the Federal Reserve are viruses that infect mankind with horrific disease and death.

Thu, 05/12/2011 - 16:10 | 1269302 Clowns on Acid
Clowns on Acid's picture
Endless money forms the sinews of war.
Cicero (106BC -43 BC), Philippics 
Thu, 05/12/2011 - 16:20 | 1269348 Miss Expectations
Miss Expectations's picture

The end of the second round of quantitative easing (QE II) is going to be a complete disaster for the paper markets -- specifically commodities, stocks, and then finally bonds, in that order, with losses of 20% to 50% by the end of October.

I think he's got the order completely backwards.  Like the unwinding leading the the first great depression, bonds went first.  Why wouldn't the bonds be the first to go?

Thu, 05/12/2011 - 16:23 | 1269371 buzzsaw99
buzzsaw99's picture

right. bonds, then stocks, then bonds boucne, then stocks bounce, then bonds crash, then stocks crash. There's a word for that but I can't seem to...

Thu, 05/12/2011 - 16:24 | 1269358 Miss Expectations
Miss Expectations's picture


Thu, 05/12/2011 - 16:25 | 1269366 jkruffin
jkruffin's picture

Why not just call it the MADOFF - Muni Asset Despository Open Facility Funding


Can you imagine how high the market goes up on debt ceiling increase?  WHOA NELLY!  It will be +1000 day

Thu, 05/12/2011 - 16:31 | 1269405 Verstehen
Verstehen's picture

A 14 trillion economy only reached through 52 trillion debt is an achievement. The US has lost 400.000 businesses since NAFTA. Why are the politicians who are responsible for this crime still alive? Since the gold bull started (6 years after NAFTA) the dollar circulation is in decline. How can they reverse this trend if they do not reverse the self inflicted damage? Like i said political decisions have consequences. The US is becoming the laughing stock of the world but a dangerous one. I want to be on the right side of history thats why I am against the American gangster system.

Thu, 05/12/2011 - 16:42 | 1269437 praps
praps's picture

Wait until the red line starts going down. Then there'll be trouble.

Thu, 05/12/2011 - 16:57 | 1269492 Zing
Zing's picture

+1 Delation!

Thu, 05/12/2011 - 16:44 | 1269454 Caviar Emptor
Caviar Emptor's picture

What I like about the "consumer is back" trade: it sends money directly overseas, mostly to China. Data this week showed imports grew faster than exports again this as import costs are rising. Pace of US import inflation is running about 7% annualized. Sustainable model? You bet because Ronnie proved deficits don't matter. 

Thu, 05/12/2011 - 20:25 | 1270195 Snidley Whipsnae
Snidley Whipsnae's picture

But, but, but ... we are exporting ... exporting dollars that purchase less each day ...

Thu, 05/12/2011 - 16:48 | 1269463 MarcusAurelius
MarcusAurelius's picture

A demolished system to say the least. The credit peg of the markets is still alive and well and can still be seen moving as credit ebbs and flows in key markets. If it were a liquidity probelm then this peg would dissapate with the injection of capital as in money printing or quantitative easing. Is it? No. This has always been about debt and this is the key issue. The monetary policy does not address this problem at all which is why it does not go away. The Fed is a lender which is the main point. It lends money to the banks and they in turn pass it on to the borrowers. Except there are no borrowers. Main street is not borrowing. Neither is this avalanche of money reaching the people it needs to. Nothing has been solved because the people who TRULY expand credit are NOT expanding credit the way they were. They can't. They're broke.

Thu, 05/12/2011 - 16:46 | 1269466 Praetorian Guard
Praetorian Guard's picture

In time it really will not matter. Energy is running out, say within 20-25 years as one poster indicated. Lots of people in government and with wealth want POPULATION reduction down to sustainable levels of 500 million. Audry Tomason is one such person. She is the counter intelligence secretary for the US Gov. If that does not scare you, God knows what will. In the end, from a logical perspective, things are not going to be peaches and cream...


Thu, 05/12/2011 - 17:02 | 1269514 PulauHantu29
PulauHantu29's picture

No worries Mon, gold will be $3,000...oil will be $220 and silver $145 by the end of 2011.

Larry Summers said we need to export our way out of the recession and unfortunately, the dollar is not low enough AND the recession will last many years more.

Thu, 05/12/2011 - 17:40 | 1269705 Praetorian Guard
Praetorian Guard's picture

Which means martial law, continuity of government, collapse, riots, cities burning, yea... Mad Max...

Thu, 05/12/2011 - 17:34 | 1269698 jeffgroove102
jeffgroove102's picture

That which cannot be repaid, will not be repaid, bye bye dollar, hello amero.

Thu, 05/12/2011 - 18:06 | 1269769 bid the soldier...
bid the soldiers shoot's picture

"And similarly, it does not mark the end of significant difficulties, but the probable beginning of a very long period of treacherous economic and financial disruption."

I suppose that means the last 3 years was just the "Prologue in Heaven" and the REAL trouble starts now.

Oh -- and this will drive Durden nuts: The Bernanke Uncertainty Principle.

If you know the purpose of QE3, you won't know how much money they're going to print and when they'll use it. . And if you know how much money will be printed, you won't know what they're going to use it for.

Let the markets beware.

Thu, 05/12/2011 - 20:19 | 1270185 Snidley Whipsnae
Snidley Whipsnae's picture

"All paper will burn. Come, sit by me. We shall watch the bonfire together." - paraphrase of Another


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