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Here There Be Big Nymbers (Sic)

Tyler Durden's picture


The earlier discussion of CDS, Einhorn, and the US UST-CDS basis trade, sparked a flurry of queries on the topic of "really big numbers." Therefore, even as ZH staff awaits the most recent data out of the BIS, we present for your numeric (in)comprehension pleasure lots and lots of zeroes. The chart below summarizes the biggest relevant numbers currently out there, appearing as pixels occasionally on every single computer in the financial world. And what does it say? That the total notional value of all OTC derivative contracts as of the most recent count (sucks to be on the recount committee), was $592,000,000,000,000.00 at the end of 2008. Fear not: this number is actually a reduction from the most recent previous read of $683,700,000,000,000.00 in June of 2008. Well wait, that thing we said about fear not, ignore that: because the net notional, or the market value of all OTC contracts, i.e. what someone (cough taxpayer cough) would be on the hook for when the Fed's plans go astray, increased by 66.5% over the same period, to $33,900,000,000,000.00. Like we said, big numbers - and this is just OTC. The real number includes regulated exchanges, and to estimate that, double the numbers above. In totality, the "sidebets" on everything from interest rates, to F/X to corporate default risk, amount to about $1.3-$1.4 quadrillion (that's 15 zeroes before the decimal comma) in terms of uncollateralized liquidity (think inflation buffer): take all those zeroes away and the value of the dollar would go down by 1E10-15: you listening yet American middle class? And the actual exposure, or "money at risk" is roughly $60 trillion: a number which is about the same as the world GDP if one were to remove all the various stimulus programs. Take away Goldman, JP Morgan, and all the other wannabe BSD's, and this is what you end up with: the heart and soul of the Too Big To Fail monster itself. And there is no way on earth to stop that mangled, mutated heartbeat without destroying the very fabric of both our capital markets and societal system. Please give the Federal Reserve a golf clap for this truly amazing accomplishment.

So with everyone and the kitchen sink focused on CDS and the neutron bomb that they undoubtedly must be if even such anointed shamans of CDSology as David Einhorn (one wonders, will David donate the billions of dollars he has made while trading CDS to charity?) say they are evil incarnate, here is the truth about CDS courtesy of the Fed's Fed- the Bank of International Settlements.

The volume of outstanding CDS contracts fell 27.0% to $41.9 trillion against a background of severely strained credit markets and increased multilateral netting of offsetting positions by market participants. This was a continuation of the developments seen in the first half of 2008. Single-name contracts declined by 22.8% to $25.7 trillion while multi-name contracts, a category that includes CDS indices and CDS index tranches, saw a more pronounced decrease of 32.7%, to $16.1 trillion.

Despite the lower outstanding volumes, the gross market value for CDS contracts increased by 78.2% to $5.7 trillion as a result of the credit market turmoil. Gross market values grew 95.6% to $3.7 trillion for single-name contracts and 52.5% to $2.0 trillion for multi-name contracts. [As noted previously, the $5.7 trillion number has since collapsed to under $3 trillion as per most recent DTCC data].

Greater use of multilateral netting during the second half of 2008 also resulted in a change in composition across contract types (Graph 3, left-hand panel). Amounts outstanding of multinamecontracts fell 32.7% to $16.1 trillion, while the 22.8% decline in single-name contracts to $25.7 trillion was somewhat smaller.

The composition across counterparties also changed during the second half of 2008 (Graph 3, centre panel). Although the amount of CDS contracts between reporting dealers declined 24.4%, this was smaller than the 29.8% decrease in outstanding contracts between dealers and other financial institutions and the 47.7% drop in contract volumes between dealers and non-financial institutions.

Developments in gross market values across counterparties reflected the uneven declines in the outstanding volumes for the different market segments (Graph 3, right-hand panel). The market value of contracts between reporting dealers grew by 89.3% to $3.2 trillion, representing 56.2% of the total market value of outstanding CDS contracts. The market value of contracts between reporting dealers and other financial institutions increased by 66.3%, while the market value of contracts between dealers and non-financial institutions was 51.0% higher.


Less than $3 trillion? I mean, how is that even worthy of an FT op-ed? Most people won't even bend over to pick up a $3 trillion bill on the street: sorry - if it doesn't have a quint-, or at least a quadr- in front of the -illion, people frankly don't give a shit, thank you Tim Geithner. Trillion is just so..... pre-Obama.

Yet where it gets moderately interesting is when analyzing Interest Rate derivatives (swaps, options and forwards), not only because the numbers suddenly really perk up, but because of the $420 trillion in notional OTC total, about $200 trillion is held by none other than the usual zombie stooges: Goldman, JPM, BofA, C and WFC. Do you see now why the Fed will kinda, sorta always and forever be forced to bail out this unholy pentagram? The shitstorm as a result of the collapse of one or more of the five major spokes of at least $420 trillion (and as much as $840 trillion) in IR derivs would basically wipe out anyone and everything in its path. No exceptions.

BIS on Interest rate derivatives:

In the second half of 2008 the market for OTC interest rate derivatives declined for the first time, after recording an above average rate of growth in the first half of the year. Notional amounts of these instruments fell to $418.7 trillion at the end of December 2008, 8.6% lower than six months before (Graph 2 and Table 3). Despite the decrease in notional amounts outstanding, declining interest rates resulted in a notable 98.9% increase in the gross market value of interest rate derivatives, to $18.4 trillion. [yes, that is a lot]

The amount outstanding of interest rate swaps decreased 8.0% to $328.1 trillion. Outstanding volumes of US dollar- and yen-denominated interest rate swaps remained virtually unchanged relative to the previous quarter. In contrast, interest rate swap markets denominated in euros (–10.6%), sterling (–24.2%), Australian dollars (–27.8%), Canadian dollars (–16.7%), Swedish kronor (–21.2%) and Swiss francs (–6.9%) all saw declines in the amounts outstanding.

The gross market value for interest rate swaps – the largest market by far – grew 105.7%, from $8.1 trillion to $16.6 trillion. The most significant increase took place in the US dollar swap market, where the gross market value surged 201.2% to $9.3 trillion. [gee, whose favorite Federal Reserve was singlehandedly responsible for this dollar swap love explosion?]

Outstanding volumes of options contracts declined 17.5% to $51.3 trillion. The gross market value of options grew by 51.3% to $1.7 trillion. The amounts outstanding of forward rate agreements (FRAs), the smallest of the interest rate derivative segments, remained stable at $39.3 trillion, while the gross market value of outstanding FRAs grew 74.4% to $153 billion.

Thus net notional exposure in IR land is nearly $20 trillion or almost double the US GDP (or triple if one excludes the impact of Obama funny-money). So why are we reading again how CDS is anti-social? By that logic IR swaps, sloshed around by the JPM-Goldman-BofA trio of Mutually Assured Destructors, is the pinnacle of delusional, schizophrenic, psychotic behavior. Which is not to say that the CDS' destructive impact should be underestimated. On the contrary: CDS, when handled by the current group of greedy, risk seeking idiots, will undoubtedly destroy the world. It is just a matter of time. However, to keep things in perspective, how about we also consider Interest Rate swaps, whose numerical danger is more than 5x that of CDS (again, really big n(y)mbers here). And we haven't even touched on FX, commodity, and equity derivatives.

Which brings us to our point: thank you Mr. Einhorn for finally starting to focus people's attention on one of the many facets of the Fed's uncontrollable liquidity Frankenstein. CDS, while destructive, is merely the appetizer. What will truly annihilate financial markets are all those instruments that are in place only to perpetuate the myth that a 5% interest rate in 30 year Treasurys is somehow exorbitant (based on a quick back of the envelope calc, should prevailing interest rates move higher by 1%, the net IR exposure will rise by $3 trillion... in the wrong direction... at an exponential pace). Yet what better way to keep rates where they are than than to tell China: "Hey guys, you bust one auction, and this spring loaded balloon full of $420 trillion pieces of worthless Washington feces will blow up right in your face (and take us all down with you)." In essence this is an amusing revision of that old fable: the Fed owes the world a few billion here and there: well, Ben, you are out of luck, "You're Fired"; the Fed owes the world $1.4 quadrillion in naked and worthless pieces of paper (whose nudity will become apparent the second someone calls Bernanke's bluff) and the Fed owns the world.

It is, Mr. Einhorn, unfortunately as simple as that. Which is why may we suggest after you are done with your philosphical anti-CDS crusade, that you take a long hard look at this BIS report and consider just who your friends in the business are: something tells us that of the JPM/GS/BofA trio you Prime with at least two of them. If you really want to make a stand against those who are abusing weapons of financial annihilation, maybe you can demonstrate your seriousness by cutting all prime brokerage relationships with Goldman and JP Morgan. Then, and only then, will we, and everyone else, know you are willing to put your money where you mouth is (and where your CDS P&L used to be).


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Sun, 11/08/2009 - 03:14 | 123763 Anonymous
Anonymous's picture

Should have just gone with scientific notation.

Sun, 11/08/2009 - 22:33 | 124217 berlinjames02
berlinjames02's picture

Regean said it best: "If you had a stack of thousand-dollar bills in your hand only 4 inches high, you'd be a millionaire. A trillion dollars would be a stack of thousand-dollar bills 67 miles high."

Right now with ~$11 trillion in public and private debt, the stack of thousand dollar bills would run along I-95 from Washington DC to Jacksonville, Florida.

Mon, 11/09/2009 - 00:47 | 124311 LiquidBrick
LiquidBrick's picture

Doesn't seem right. We should call Myth Busters and put this to the test.

Mon, 11/09/2009 - 01:15 | 124336 Anonymous
Anonymous's picture

You are correct. If the bills were $1000's, it would run 1058.6 miles; $100's would get you from the Fed to any point on the Earth; $1's would get you to the moon and back, twice.

For the pedants out there, there are 164 bills per inch; that is the official thickness of banknote paper.

Sun, 11/08/2009 - 03:31 | 123765 Rollerball
Rollerball's picture

Less than $3 trillion? I mean, how is that even worthy of an FT op-ed? Most people won't even bend over to pick up a $3 trillion bill on the street: sorry - if it doesn't have a quint-, or at least a quadr- in front of the -illion, people frankly don't give a shit, thank you Tim Geithner. Trillion is just so..... pre-Obama.


The shitstorm as a result of the collapse of one or more of the five major spokes of at least $420 trillion (and as much as $840 trillion) in IR derivs would basically wipe out anyone and everything in its path. No exceptions.


Definitely a(nother) candidate for a Nobel (noble?) piece Prize.



Sun, 11/08/2009 - 03:38 | 123771 Mazarin
Mazarin's picture

There has to be a way to make the real risk in this mess clear to the average American: what's at stake, and how the bet would unwind unfavorably. ZH/Tyler, your reporting here is exemplary...the next step is to condense and simplify so mere Senators, Reps, and their peeps can understand the bottom line AND commence some serious ass-whooping..  

Sun, 11/08/2009 - 09:15 | 123814 Cognitive Dissonance
Cognitive Dissonance's picture

"There has to be a way to make the real risk in this mess clear to the average American."

At first I thought the average American was simply too frightened to process information about the severity of these problems and to a certain extent I still hold that view.

But the problem sweeps across the education and occupation spectrum and in my view actually gets worse as you move up the ladder. This isn't simply an education or exposure issue. After I began asking more detailed questions, the picture became clearer to me. Mr. & Mrs. average American is worried about their piece of the pie, that they won't get out of the poker game before it's busted.

They bought into the economic system, often working at miserable jobs for years or decades in order to accumulate wealth and pensions. Now, with retirement around the corner, the economic vehicle is coughing and sputtering and might not make it to the end. I've posted before on ZH how Americans are deep captured by the system. In their minds, their ticket is stamped and thus non refundable, they're on the plane at 35,000 feet, it's two thirds of the way to their destination and they're committed regardless of how they feel about the situation.

The higher up the social/economic curve you travel, the more they're dependent upon a functioning system in order to "cash out" and retire. And that's how they see it. Cash out. While they do understand that most of their assets must actually remain in the system in order to be usable, they see a finish line, not a 20-30 year retirement process. They see their money as a pile that once accumulated, can be moved off the table to somewhere "safe" which is the actual word they use.

Reasonable or not their view is mostly fearful optimism. While things are going to hell, they will probably survive the plane crash mostly intact. This is more along the lines of wishful thinking or even head-in-the-sand denial than a thoughtful careful analysis of their own situation. You might be surprised how many doctors, lawyers, engineers and upper management types secretly pray to the God of their choice to just get them to their destination. 

Not everyone feels this way and awareness varies. Those lower down the curve have less accumulated and thus less to lose. We ZH readers must remember that we do not represent "average" people, Americans or otherwise. We are engaged, curious, reasonably informed and for the most part mad as hell. Average Americans are not and I'm becoming convinced that up to a certain point and for the most part, this is a deliberate and conscious decision. 

BTW, here is a link to a .PDF chart showing outstanding derivatives as measured by the BIS. Please don't leave it lying around for little children to pick up and possibly shoot someone with. -> Statistics -> Derivatives

This table is chart 19 but there's other data there that will curl your hair.

Sun, 11/08/2009 - 09:45 | 123822 Anonymous
Anonymous's picture

Fearful optimism, cashing out, and moving money to a safe place off the table. That sounds about right. I now realize that every cent I have set aside in the past 25 years is at risk, no matter where I put it.

Confession: ZH is at the edge of my English major brain's ability to process financial data, but I am doing my best. As an observer of human beings, however, I surmise your average person is far more focused on 1) how wonderful it is that we're going to have "free" healthcare, 2) how nice it is that the government is extending unemployment and helping people pay for their houses when they lose their jobs and 3) praying that they're not the next one to need to use the aforementioned benefits.

Sun, 11/08/2009 - 13:03 | 123924 JohnKing
JohnKing's picture

Average Productive American:

6:00 AM - wake up, get coffee, wake up 2 or 3 kids, take shower

6:30 AM - feed kids, guzzle coffee, say hi to others, get dressed in corporate garb

7:00 AM - load kiddies in vehicle.

7:30 AM - drop off kiddies, head to mind-numbing job.

8:00 AM - 5:00 PM - Arrive at mind-numbing job, put up with moron boss, play politics, do some work, worry about keeping mind-numbing job.

5:30 PM - Pick up kiddies, grab grub from somewhere, head home.

6:00 - 7:00 PM - get home, make dinner, maybe have a drink, talk with spouse (or fight and bicker with spouse). Talk to kids (maybe).

7:00 - 9:00 PM - turn on corporate propaganda device, select propaganda channels of the day. Feed mind with propaganda of choosing. Have another drink or 2 or a xanax.

9:00 PM - 10:00 PM - put kids to bed, talk, bicker, clean up house.

10:00 PM - Go to sleep looking forward to next day.

Repeat as neccesary.

Once a month they open the statements, maybe up, maybe down, maybe call broker, maybe pray, go to bed get up at 6:00 AM..

They don't stand a chance.


Sun, 11/08/2009 - 14:20 | 123958 Anonymous
Anonymous's picture

You forgot homework and
the car broke down
the lawn needs mowing
the dishwasher broke
grandma's sick
mom's got the flu
business trips
the dog needs walking
the cat litter needs changing
the house needs painting
the kids need braces
the PTA meeting
the parent/teacher conference
the bills need paying
the laundry
the food shopping
the sleepovers

and most important....the neighbors are assholes.

Sun, 11/08/2009 - 23:15 | 124242 Anonymous
Anonymous's picture

What the hell are we doing this all for? So our kids can grow up and do the same thing?

Here is a great piece of appropriate Internet forwarding material with a few threads of truth:

Old Indian Chief “Two Eagles” was asked by a white government official, “You have observed the white man for 90 years. You’ve seen his wars and his technological advances. You’ve seen his progress, and the damage he’s done.”

The Chief nodded in agreement. The official continued, “Considering all these events, in your opinion, where did the white man go wrong?”

The Chief stared at the government official for over a minute and then calmly replied.. “When white man find land, Indians running it, no taxes, no debt, plenty buffalo, plenty beaver, clean water. Women did all the work, Medicine Man free. Indian man spend all day hunting and fishing; all night having sex.”

Then the chief leaned back and smiled. “Only white man dumb enough to think he could improve system like that.

Mon, 11/09/2009 - 12:21 | 124680 tip e. canoe
tip e. canoe's picture


Sun, 11/08/2009 - 14:28 | 123965 Problem Is
Problem Is's picture

That is a really accurate/excellent analysis. I think you forgot something though... in the last 10 years the "corporate propaganda device" now comes on at 6:00am along with the coffee maker.

Average Middle Class American:

6:00am- Turn on corporate propaganda device, select propaganda channel and take in propaganda while performing morning chores in zombie bank like fashion:

Sheeple By Groups:

Financially Literate: CNBC.

All American Anti Socialist Militarists: Fox Pinhead Broadcasting.

Socially Responsible America is a Wonderful Place: Today Show starring Matt "the Idiot" Lauer.

7:00am- Have now watched 43 minutes of rehearsed propaganda intermixed with 17 minutes of corporate product propaganda convincing them they have depression, irritable bowl and restless vagina syndrome and are inadequate or left behind if they don't buy this or that...

9:00am- Stand in line at TBTF behmouth bank and watch more "corporate propaganda device" behavior programming while waiting...

By the end of the day, they believe all of it. This is the vaunted American Middle Class.

Don't bug them with the details. They just want their home prices back, their home as ATM back, their 401k values back, their sleazy easy SUV leases back and their 80" plasma TV sales back...

How that all works, they don't care. They don't like having to work with numbers and anal details... pass the viagra and the paxil. As Jim Kunstler likes to say a "nation of overfed clowns." I like to say a "nation of overfed used mortgage salesmen"... or used insurnance salesmen, or used car salesman, or used mutal fund salesman, or used electronics salesman...

Americans are the most propagandized and reactionary, easily led against their own interests people on the planet. They are wrapped in a cult of personality as they believe their favorite idiot politician from corrupt party A or corrupt party B, depending on which way their pinhead points, left or right, will save the day. They actually believe the idiot political theater on the "corporate propaganda device" is the reality.

JohnKing does an excellent job pointing that out.

Sun, 11/08/2009 - 16:53 | 124038 Cognitive Dissonance
Cognitive Dissonance's picture

"7:00am- Have now watched 43 minutes of rehearsed propaganda intermixed with 17 minutes of corporate product propaganda convincing them they have depression, irritable bowl and restless vagina syndrome and are inadequate or left behind if they don't buy this or that..."


restless vagina syndrome

Sun, 11/08/2009 - 19:04 | 124087 chumbawamba
chumbawamba's picture


I am Chumbawamba.

Wed, 11/11/2009 - 14:03 | 127190 Problem Is
Problem Is's picture

Look it up man...

Big Pharma paid doctors and medical researchers to invent that one to sell women some off label drug for higher profit...

In my day, restless vagina syndrome meant a woman who was lots and lots of fun...

She doesn't need medication, restless vagina syndrome can be worked out with time and extra effort...

Sun, 11/08/2009 - 17:28 | 124054 BIG_Thymer
BIG_Thymer's picture

Not a chance in hell, you're right.

Mon, 11/09/2009 - 00:57 | 124319 LiquidBrick
LiquidBrick's picture

Nothing in that schedule screams "productive".


Mon, 11/09/2009 - 00:58 | 124322 LiquidBrick
LiquidBrick's picture

Nothing in that schedule screams "productive".


Sun, 11/08/2009 - 10:37 | 123843 Anonymous
Anonymous's picture

i submit the congress already know. all this talk about rebuilding the financial system is just if i am not mistaken, this sort of instrument first started appearing in about 1987. so the system cannot be saved. jim willie has been talking about this for two years and nobody would listen. thanks tyler. maybe some of those numbers will start to sink in to the people that come here and read this blog. the time bomb is ticking. all it takes is one small collapse in one weak link in the chain and this nation and the world will never be the same since. also may i suggest, now that we seem to be in corner and have nowhere to go. this was done on purpose to usher in the new world order. the nattering nabobs on the television and in congress cannot change this and never could really. the system cannot be fixed. it is broken. what does the future look like? i don't know for sure. as has been said before. we are in unchartered territory. got gold? got silver coin? got food and water and most guns and ammo. you are going to need it soon enough.

Mon, 11/09/2009 - 09:09 | 124500 Chumly
Chumly's picture

Jim Willie Rules!

He condenses some of the matter here:

Sun, 11/08/2009 - 15:25 | 123894 Voluntary Exchange
Voluntary Exchange's picture

The Gov ain't gonna whop their ass. Banking and and major finance players are allies of “government”. Didn't you notice, often the banks and big finance tell them what to do, not the other way around? This needs to be made simple for those of us who are honest and try to honestly work for a living: you work and slave away, they (connected “business”, gov, GS, JPM, and the other organized crime syndicates) suck your blood till it runs dry then get out of dodge fast before the pitchforks come out. That simple enough?


I just hope the parasites have gone so far this time that there is no way to save it, and the productive will be shocked into digesting what has been done to them by the parasitic class and their mighty tool of plunder the “State”. Maybe then the human race can get back on the path of progress: exclusively voluntary exchanges without aggression or fraud. The reset button must be pressed, complete the process of proving to human awareness that the invention: “State” is incapable of remaining a servant of the people. It always turns into a tool for plunder by the parasites. Monopolies of force (governments) lead to agression and fraud and are a bad idea. Strictly voluntary exchange is the way to go. We were almost there in America in the 18th century but we got hoodwinked by the Federalists.


Sun, 11/08/2009 - 21:42 | 124183 Anonymous
Anonymous's picture

The productive classes tend to have more - and more effective - weapons, and know better how to use them. At least in this country... I don't think it will end well for the parasites. Lot of unused train cars sitting around.

Sun, 11/08/2009 - 13:27 | 123932 Marley
Marley's picture

Dealing with numbers this large just exemplifies how much the masses are just roaches to the oligarchy.  Scurrying about, subsisting on their fecal matter.  Cannibalizing each other to survive, much to their enjoyment.  Complain and out will come the exterminator.

Sun, 11/08/2009 - 14:36 | 123966 Voluntary Exchange
Voluntary Exchange's picture


Fellow human being Marley:


May I suggest that when you see others “cannibalizing each other to survive” that you suggest to them a constructive alternative? There usually are some if you look hard. Just remember that the “elite” are cowards. They prefer to hide in the shadows and get others to do the really dirty work. Extermination is a very dirty business. Most people's attention becomes very focused when they see folks starting to be exterminated. There are many more of the productive than parasite. Many of the henchmen of the parasites would willingly choose a more honorable life if they could. If they see a way out they can easily rebel. So I say, let the “exterminators” just try it. Anyone arrogant enough to view humanity in the way you describe is already halfway to a fall. That is just the way the universe works. In short take heart because so many are beginning to see things so clearly. I see GS and congress critter type ghouls trying to feed as fast and as hugely as they possibly can because they know the game is just about over. Just remember it is the parasite that needs the host, the host does fine without the parasite. When push comes to shove we shall see who the true cockroaches are!


Sun, 11/08/2009 - 19:57 | 124118 msjimmied
msjimmied's picture

Thank you, that's how I see it as well. I wish I could ferry this article across to others, but it's scary, and its in a language that does not translate into anything that  most good people toiling to make a living can understand...this weights heavy, I am myself with yesterdays seven thousand years. We will probably have to let this play out, unless we can take this more main stream. 

Mon, 11/09/2009 - 02:07 | 124373 Marley
Marley's picture

Voluntary Exchange;

Hegel would contend, "The ideality which is in evidence in war, i.e. in an accidental relation of a state to a foreign state, is the same as the ideality in accordance with which the domestic powers of the state are organic moments in a whole. This fact appears in history in various forms, e.g. successful wars have checked domestic unrest and consolidated the power of the state at home." Given the continual state of war we've been in for the last 8 years, implies anticipated unrest, perhaps post Enron.  With regard to honorable henchmen, the only winners in that conflict are those that choose not to participate.  I do appreciate your attempt to cheer me up.  Sorry for the cynicism, I'll get back to my old self.

Mon, 11/09/2009 - 08:13 | 124478 Voluntary Exchange
Voluntary Exchange's picture


Marley and my Fellow Humans:

I quote Hans-Hermann Hoppe:

“A state, in accordance with generally accepted terminology, is defined as a compulsory territorial monopolist of law and order (an ultimate decision maker). “

(“On the impossibility of Limited Government and the Prospects for a Second American Revolution”

In those rare moments in history where a group of people have won their freedom and attempted to preserve their freedom for future times and generations they have resorted to various means to try to preserve it, as history records: monarchy, democracy, oligarchy, and so on up to the 18th century when a minority of Americans tried using a republic with strictly limited powers as granted in a constitution. Any such endeavor that grants a territorial monopoly of law and order must ultimately fail. (Failure in the sense that it must sooner or later cease to be efficacious in preserving life, liberty and property of the people in general and become a tool of plunder by the few against the many).

To be brief: the characteristics inherent in a monopoly of this sort ultimately create the conditions for that failure. The natural laws that govern human action will always lead to this failure, given the starting condition of monopoly that meets the above definition of a State. Its being as such a monopoly, over time, will naturally attract the minority of individuals who consider taking from others through force or fraud a preferred survival strategy. The early stages of their aggressions take on various forms of deception that have become more sophisticated though history, leading of late to central banks, fiat currency, grants of economic and business privileges and so on. In earlier ages religion was often used but that trick is wearing a little thin by now. Eventually as the non-parasitic class becomes aware of the nature of the deceptions and how it has been enslaved, (and eventually it always will happen given the human power of reason, learning and communication: hence the state's perpetual war against reason, learning, and communication), the system enters into its final stage that America is quickly approaching: overt despotism, and open aggression, being unable to exploit by deception any longer.

Many American Colonists reasoned that they needed some kind of minimalist state in order to survive in a world populated by other aggressive states, not at that time in history being aware of how a strictly voluntary system of exchanges amongst individuals and groups could arise and long endure to solve the primary needs of individual and group security and justice. As is always the case, along side such individuals were those who viewed aggression and deception as a preferred way of life and saw the forming of a state as their opportunity. The dynamic of these two forces, the subsequent struggles that ensued, in the formation of and subverting of the United States is a fascinating study, or as is often said: “ the rest is history”.

For those who want to understand how to form a viable, strictly voluntary contractual society may I suggest they study Ludwig Von Mises, Murray Rothbard, and Hans-Hermann Hoppe as a good starting point.

We are at a very exciting moment in human civilization. The State and its thus empowered despotism has never been so vulnerable in known human history. The understanding of how to end the “State” and what to replace it with is well developed. Once the appropriate manifestos/declarations ( I suggest “the Manifesto of the free” as a possible title) are properly formulated and globally communicated in a readily digestible form we could see the rapid, total collapse of State-ism similar to the mostly non-violent collapse of Communistic Eastern Europe and the Soviet block. Given an intact internet This could sweep the planet in a matter of weeks or months.

To put it simply, for we who wish to be FREE, the foundation has been staring us in the face since the beginning of civilization:


To all the States of the world and their allies, let the proclamation sound: All those who initiate aggression or use fraud are declared illegitimate. Your system rests upon that which cannot and ought not to endure. You will no longer be obeyed or served. You who have lived by plunder will plunder us no more. Make restitution and go in peace, or face the consequences of open aggression against your moral and just teachers.

Friends, it is high time that we figuratively fight like “warrior poets” and win our freedom! Let those who stand with me against aggression openly declare to each other”



Mon, 11/09/2009 - 12:46 | 124723 tip e. canoe
tip e. canoe's picture

VE, interesting that zizek's latest (linked in today's frontrunning) takes a very similar direction from the other side of the spectrum.

marley:  "With regard to honorable henchmen, the only winners in that conflict are those that choose not to participate."

this is actually not contradictory to VE's point, in fact it is quite complementary.  feel your cynicism, just think you two are much closer to each other than you may realize imo.

Mon, 11/09/2009 - 08:57 | 124498 Apocalypse Now
Apocalypse Now's picture

Buffalo Soldier -

They are just compensating for something small, just like the guy that drives a hummer or has a giant sky scraper built.

The tall buildings and numbers with many zeros after them are designed to impress and intimidate - to make you look at your shoes instead of holding your head high or to make you look away just because the scale is incomprehensible.  You have heard it said if you are faithful in little you will be faithful in much - the opposite is also the case for the faithless and I'm not impressed.

The takeaway should be that they run a debt based deficit system so it is bankrupt to begin with, no matter how many zeros they add.  The scale is imaginary based on computer transactions - if you want to really wonder at scale consider the scale of the universe being at least 13.8 billion light years across, but don't lionize a paper tiger.

Interesting perspective on how we got here:

Lincoln understood who was really pulling the strings and what was at stake for the American people. This is how he explained his rationale. The government should create, issue and circulate all the currency and credit needed to satisfy the spending power of the Government and the buying power of consumers… The privilege of creating and issuing money is not only the supreme prerogative of Government, but it is the government’s greatest creative opportunity…By the adoption of these principles the taxpayers will be saved immense sums of interest. Money will cease to be master and become the servant of humanity.” –Abraham Lincoln

“If that mischievous financial policy, which had its origin in the North American Republic during the late war in that country, should become indurated down to a fixture, then that Government will furnish its own money without cost. It will pay off its debts and be without a debt. It will have all the money necessary to carry on its commerce. It will become prosperous beyond precedent in the history of the civilized governments of the world. The brains and the wealth of all countries will go to North America. That government must be destroyed or it will destroy every monarchy on the globe...claimed that Lincoln was assassinated , not only because international bankers wanted to reestablish a central bank in America, but because they also wanted to base America’s currency on gold. Gold they controlled. In other words, put America on a gold standard. Lincoln had done just the opposite by issuing U.S. notes. Greenbacks, which were based purely on the good faith and the credit of the United States…They were the men interested in the establishment of the gold standard money system and the right of the bankers to manage the currency and credit of every nation in the world. With Lincoln out of the way they were able to proceed with it in the United States. Within eight years after Lincoln’s assassination silver was demonetized and the Gold Standard money system set up in the United States.

3 years later the people elected republican James Garfield president. Garfield understood how the economy was being manipulated. As a congressman, he had been chairman of the Appropriations Committee and was a member of Banking and Currency. After his inauguration he slammed the money changers publicly in 1881.“Whosoever controls the volume of money in any country is absolute master of all industry and commerce… And when you realize that the entire system is very easily controlled, one way or another, by a few powerful men at the top, you will not have to be told how periods of inflation and depression originate. "Unfortunately, within a few weeks of making this statementon July 2nd of 1881, he was assassinated.”

Sun, 11/08/2009 - 15:18 | 123996 sgt_doom
sgt_doom's picture

"..the next step is to condense and simplify so mere Senators, Reps, and their peeps can understand.."

Sorry, Mazarin, but I used to belong to a political action group which attempted to do that very thing, and it was a no go for several reasons.

Firstly, IQ tests aren't required (surely everyone has figured this out by now) for entrance into the hallowed halls of the US Congress.

Secondly, only a few Senators and Reps are truly of upright moral and ethical standing (shoutouts to Peter DeFazio, Oregon, Dennis Kucinich, of course, Ohio, Russ Feingold, Wis. and Bernie Sanders of Vermont --- Cynthia McKinney was run out of congress by those neolibs like Rahm Emanuel, but likewise to her).

Honorable mentions to Dorgan and Massa.....

Sun, 11/08/2009 - 04:24 | 123776 torabora
torabora's picture

Population growth in developed countries is actually declining...leaving the hangover debt to an increasing population of third worlders. And they ain't gonna pay it. That means a greater debt per head on the 1st world with an increasingly needy 3rd out there. Trouble is afoot.

Mon, 11/09/2009 - 09:27 | 124505 Chumly
Chumly's picture

That means a greater debt per head on the 1st world with an increasingly needy 3rd out there. Trouble is afoot.

Especially when the Great Banana Republic, the U.S.A., is joining the ranks of the third worlders.

Sun, 11/08/2009 - 04:47 | 123779 faustian bargain
faustian bargain's picture

Reading the word 'quadrillion' makes me feel a little ill.

Sun, 11/08/2009 - 16:05 | 124017 Careless Whisper
Careless Whisper's picture

I feel poor, like a Million Dollar Bill.


Sun, 11/08/2009 - 04:51 | 123780 Anonymous
Anonymous's picture


They use FORCE to make you do
What the DECIDERS have DECIDED you must do

And now you do what they told ya
And now you're under control
And now you do what they told ya
And now you're under control

Fuck you I won't do what you tell me




Sun, 11/08/2009 - 15:27 | 124000 Mazarin
Mazarin's picture

Shepard Fairey "I don't want my taxes to pay for the new world odor"

(same guy who created the famous obama "hope" poster...

Sun, 11/08/2009 - 04:56 | 123781 Anonymous
Anonymous's picture

Idiots plain and simple. The history of Fiat currency will be honored as epic morons as they righty are "dullards".

Sun, 11/08/2009 - 05:02 | 123782 Stevm30
Stevm30's picture

what is the actual back of the envelope calc please.

Sun, 11/08/2009 - 09:55 | 123828 Cognitive Dissonance
Cognitive Dissonance's picture

"what is the actual back of the envelope calc please."

Short of netting out all the derivatives and bringing the numbers down to near zero, the back of the envelope calculation is as follows.


Sun, 11/08/2009 - 13:50 | 123943 Stevm30
Stevm30's picture

I meant the calculation mentioned...

CDS, while destructive, is merely the appetizer. What will truly annihilate financial markets are all those instruments that are in place only to perpetuate the myth that a 5% interest rate in 30 year Treasurys is somehow exorbitant (based on a quick back of the envelope calc, should prevailing interest rates move higher by 1%, the net IR exposure will rise by $3 trillion... in the wrong direction... at an exponential pace).

Sun, 11/08/2009 - 14:15 | 123957 Cognitive Dissonance
Cognitive Dissonance's picture

I understood.

But I think regardless of the calculation the boom is coming. How much worse can it get beyond catastrophic? We are so desperate to believe there is some way out that we ignore the obvious.

Sun, 11/08/2009 - 14:34 | 123968 Stevm30
Stevm30's picture

It is not obvious to me... that's why I wanted the calculation - so I could better understand the argument put forth in the article...

Tyler has been arguing over a series of articles about an impending rush for the exits, liquidity crunch scenario, based on dollar short exposure... but I have had trouble measuring what the threat actually is (this article helped)... his calculation would be helpful.


Sun, 11/08/2009 - 16:19 | 124023 Cognitive Dissonance
Cognitive Dissonance's picture


My apologies. I was using the collective "we" and didn't indicate so.


Sun, 11/08/2009 - 05:49 | 123788 ph012
ph012's picture

It's nice that you have a glossary, but try putting the acronyms you use in it!  For instance, BSD (or was it BDS?) and IR (although that's probably just "interest rate").  Thanks.

Sun, 11/08/2009 - 09:54 | 123827 Hansel
Hansel's picture

BSD - Big Swinging Dick

IR - Interest Rate

Sun, 11/08/2009 - 11:52 | 123876 MsCreant
MsCreant's picture

You don't mean bad. You have a nice teddy bear icon. You are just asking questions. It is your right to be new to this without being criticized or harassed for it. So don't take this personally but I want to rip your fucking teddy bear face off and spew the stuffing everywhere then come after you, you trite, triffling, point missing, ARRRRRGH!!! Good fucking thing we are on a board, I would hit you. Get this through your head innocent, well meaning dipshit. THIS IS THE MOST IMPORTANT THING I MAY HAVE EVER READ IN MY FUCKING LIFE. IT IS THE MOST IMPORTANT THING YOU WILL EVER READ, TOO. SO READ IT CAREFULLY AND MAKE SURE YOU GOTS ALL THE WORDS RIGHT.

I probably shouldn't post this and just type it as a catharsis, but you and everyone needs to get this. WE ARE FUCKED.

Sun, 11/08/2009 - 12:28 | 123898 MsCreant
MsCreant's picture

So some lame assed little weasel junked me and did not leave a comment.

Coward. Douche.

Let's all be nice now. Wouldn't want to be rude and offend anyone.

Wouldn't want to get real or anything. Nah, not that.

Sun, 11/08/2009 - 13:59 | 123947 chumbawamba
chumbawamba's picture

Wow.  I'm realizing that some people are only now figuring out what I've known for a good long while, thus bringing explanation to my pithy, sometimes callous, always mocking tone of writing. I remember when I first learned the truth: I freaked out, too.  I maxed out all my credit cards, started stocking up on more ammo and guns, bought dry and canned food, got more serious about my garden, started mappoing out the neighborhood to identify strategic sniper positions and chokepoints that could be blocked off for enhanced security, and bought more gold and silver (and have been on a perpetual hunt for ever more ever since).

Welcome to the team, Ms!

Now that you've arrived, there are a few things you should know.  First, no, you are not crazy, you simply took the red pill.  Second, more people are to come, eventually in droves, so its your job to get fully up to speed with the program and assist the newcomers as they stumble through the door.  You'll recognize their faces.  It's the same one you're currently seeing in the mirror.

Sanity and irreverance will return shortly.  The trick is to not let it cloud your vision.  There is still much work to do.

Your task now is to continue building your store of wealth: Gold and silver, guns and ammo, seed and garden.  Once you put your mind to these important tasks you'll forget all about the big problems in the outside world.  They aren't yours anymore anyway.  You took the red pill.

I am Chumbawamba.

Sun, 11/08/2009 - 14:47 | 123977 Problem Is
Problem Is's picture

Dude... just drink the Kool-Aid and believe in the new Prez with the Nobel "Piece" Prize...

Put the seeds down and go to McDonald's like a good American robot... ur, uh, citizen... seed and garden talk makes Conagra and Monsanto very, very angry.

You can not GROW food... that is an urban legend. You buy food at a corporate retail outlet in a box made by the wonderful people at Kraft, General Mills, Coca-cola and the New Jersey chemical industry...

Drink your Kool-Aid and have a nice Jim Jones day...

Put Chumbawamba on the terrorist watch list, Leon...

Sun, 11/08/2009 - 15:22 | 123998 MsCreant
MsCreant's picture

Stage theory does make allowances for shifting in and out of stages.

Ammo & Arms? X

Training in use of Arms? X

Garden? Needs more attention, will get out today X

Seed saving? Big time X

Dry and canned foods? Need more dried but-> X

Mapping neighborhood? Lots of thought, but honestly, not defendable. Still mapping own house and yard. O

PMs? X

Maxing cards? Can't, they would take my paid for house from me. I have no debt, that is it's own kind of resistance. O

The point of such an inventory? I have been on the team for a while. I knew about CDS and derrivatives. I knew "other types of derrivatives" existed. I did not know the details like this.

I would guess if you have cancer, you go through some of these stages. But it is different to look at the x-rays and see more precisely where the cancer is and how far the metasticizing has gotten. That bitch slaps you to newer depths of understanding, and throws you into revisting the other stages for a while.

Bugs said this on this thread. I "knew" but I didn't know how bad, I didn't know like this.

I'll also look into the planting sites that were posted by tip e and davey.

For the record, I hand out red pills on the job. Been ushering them in for a while.

But I'll say this, thanks for the welcome, and the point is that, unfortunately, as wacky as I am with gold, garden, guns, and grub, I have even more confidence in what I have already been doing, based on this post.

It sucks to be right, that's all.

Sun, 11/08/2009 - 15:50 | 124007 Careless Whisper
Careless Whisper's picture

No debt Ms??? May I suggest a 30 year fixed mortgage --- pay em back with worthless inflated dollars.

Sun, 11/08/2009 - 20:30 | 124139 Conchita Buika
Conchita Buika's picture



There is a vey easy way to solve the zero problem.   Just lopt them off like any other third world banana republic.   It's so easy.  Drop 15 or so zeros off the currency and presto the national debt is only around $5,000.  Oh wait, they that makes your net worth .000000000000000000000045  Just a trade off...


Mon, 11/09/2009 - 06:05 | 124446 Anonymous
Anonymous's picture

Exactly! No problem for those without liquid assets.
How did the worker drones in Germany, Austria, Hungary, etc. survive the hyperinflation at the turn of the
century? If my grandparents survived then the odds are at least 4 to 1 that my kids will too. they may not like
it much but they will survive. So, how did the 'rich'
survive? After all, I return their concern for me
and mine.

Thank you ZH for the great blog. Those grands who
were aware ( or thought fast) survived much better.
I ALWAYS watch the weather forecasts in tornado season!

Mon, 11/09/2009 - 04:29 | 124425 theopco
theopco's picture

 All you really have is your wits and your guts.





Sun, 11/08/2009 - 15:03 | 123989 MsCreant
MsCreant's picture

Looks like I got double douched up there, two junks, no comment about it. Boy do I feel fresh!

Sun, 11/08/2009 - 15:34 | 124003 Cistercian
Cistercian's picture

 Attacked by the illiterate...that is so elementary school!

Sun, 11/08/2009 - 18:21 | 124078 Hansel
Hansel's picture

Your post is junk.  You cut someone's head off for wanting to learn, then claim this is the most important thing you have ever read.  The BIS has been putting reports out like this for years but it took zero hedge posting about it for you to get it, then you play holier than thou.  On account of your adolescent hyperbole, I hope you are never in a position of power.  Your shrill stance doesn't help anything.  Calm the fuck down.

Sun, 11/08/2009 - 19:11 | 124090 MsCreant
MsCreant's picture

Thanks for answering. That is at least productive. Looks like I can't edit if I want to. Not sure I should, even still. Your point, however, is taken. If ZH elides it, I will defer to their better judgement, though I do think censoring our anger has been part of the problem.

Sun, 11/08/2009 - 21:33 | 124178 ZerOhead
ZerOhead's picture

If we nationalize and merge these institutions... domestic primarily but also international unfortunately... we really won't end up with that big of a bill... swaps holdings are very concentrated remember... plus there is no way that the casino winners can get paid out... there just isn't that many trillion lying around these days...

Now we could break them up and sell them and make nice tea cozies out of whats left...

Financial regulatory and Government capture would practically end as a by-product...

Of course that would be socialism and we are all against that... until we have to pay... and then hopefully we aren't.

Try some blue pills for a while... I think you may need them... :-)

BTW... I junked that post above too cuz I thought it was funny... and now I will junk my own... it's very cathartic you know.

Sun, 11/08/2009 - 21:48 | 124186 MsCreant
MsCreant's picture

Yous a cool cat!

Mon, 11/09/2009 - 02:00 | 124366 agrotera
agrotera's picture

Sorry Hansel, i think MsCreant saw that this post wasn't made with an effort  to learn--it was condescending --that didn't look like goodwill suggestions, nor a wish to learn.

Mon, 11/09/2009 - 00:02 | 124275 Virginian
Virginian's picture

Do you think all this stuff is really that bad?  If it is, why does the stock market keep going up?  I think you're over-reacting.  NOTHING could possibly be THAT bad!

Mon, 11/09/2009 - 01:50 | 124360 agrotera
agrotera's picture

MsCreant, you have excellent radar!

Sun, 11/08/2009 - 12:39 | 123907 dnarby
dnarby's picture


I'm with ya baby.

This ZH post goes to the head of my blog.


Sun, 11/08/2009 - 16:23 | 124025 Steak
Steak's picture


We are fucked...  We're a country in decline that is overstretched militarily and owes way too much money.  Our economy is based on a giant ponzi scheme whose last gasps are institutionalizing enron style accounting and TBTF.  It will end...badly.

As the big O would say, we as a people can overcome this.  But its gonna hurt.  So the key thing to ask is whether it would be better to choose how we take the pain (by prosecuting, ending TBTF) or continue denying that anything is wrong until it all comes crashing down.

We're better than that, and we should inform ourselves as to the shit we're stuck in.

Sun, 11/08/2009 - 23:38 | 124258 reading
reading's picture

I admit I am confused. Are you responding to the guy who asked about the glossary? Not sure I understand how that elicited such a response, maybe I missed some hidden meaning in his message.

Sun, 11/08/2009 - 05:51 | 123791 Anonymous
Anonymous's picture

Or they could just call the game off. All bets Scratched.
Then they could go back to just being bankers taking a small and honest margin, being respected in the community as a small cog in the wheels of Industry.


They can watch as someone hits the self destruct button and we all follow airline procedure and put or heads between our legs and kiss our ass goodnight

My bet is the latter -In the Race of life always bet on self interest.

Sun, 11/08/2009 - 11:55 | 123879 MsCreant
MsCreant's picture

Now, this here comment, we have a cross between bargaining and acceptance.

Sun, 11/08/2009 - 12:31 | 123901 Cistercian
Cistercian's picture

 Speaking personally, I would hedge with heavy caliber automatic weapons.Massive amounts of ammo on hand is more valuble than gold.


  Oh, and culture as we know it is over.The consume,me first,gotta get it crap is finished.




Sun, 11/08/2009 - 14:04 | 123951 chumbawamba
chumbawamba's picture

Just know that no one knows when the main beam is going to break.  It could take a long time before the real fun starts.  Bide your time; don't blow your wad too soon.

I am Chumbawamba.

Sun, 11/08/2009 - 14:29 | 123964 Cognitive Dissonance
Cognitive Dissonance's picture

I agree. Do not underestimate how long this insanity can last nor how destructive it will become. It's not just the madmen and their henchmen who are trying to keep the machine together. Everyone blissfully unaware, hiding under their bed or in denial are also assisting the madmen by not resisting.

You are either part of the problem or part of the solution. You become part of the solution by accepting what's going on and then making plans and taking action in preparation for the inevitable implosion. And resisting every step of the way.

Sun, 11/08/2009 - 14:48 | 123982 Cistercian
Cistercian's picture

 Oh yes.I have been waiting for years.I suspect not too much longer.I know total collapse is coming for one simple reason:zero prosecution of the worst criminal scum.Let me warn you in advance, do not read the Blankfein interview Tyler posted the link to.Your head will either explode or you may find yourself driving to NYC.It is that bad.



Sun, 11/08/2009 - 21:05 | 124160 skam
skam's picture

I read it and it made me feel as though my mask of sanity was beginning to slip.

Sun, 11/08/2009 - 21:15 | 124168 Cistercian
Cistercian's picture

 I tried to warn you.I am trying to figure out the proper word for the level of villainy evinced by the Dark Lord Blankfein.But no english words seem sufficiently hyperbolic or pejorative.

Sun, 11/08/2009 - 19:54 | 124115 MsCreant
MsCreant's picture

Why junk this? Just fuckin stop with the little power tripping already.

Sun, 11/08/2009 - 21:23 | 124174 Cistercian
Cistercian's picture

 One persons junk is another's treasure.I must say you are in rare form of late, and I totally approve and enjoy it tremendously.The remark you made about not letting our anger show was spot on.Of course, a tiny percentage of the population fears that anger might translate into action....something they fear tremendously.


 I cannot remember a post you have made I didn't enjoy.......

Sun, 11/08/2009 - 23:33 | 124254 MsCreant
MsCreant's picture


Mon, 11/09/2009 - 02:07 | 124371 agrotera
agrotera's picture

Hear-hear Cistercian!

Mon, 11/09/2009 - 11:53 | 124640 Anonymous
Anonymous's picture

I'm new around here (water-wings) and I also agree that MsCreant posts good shtuff.

Sun, 11/08/2009 - 20:05 | 124124 dnarby
dnarby's picture

An army marches on it's stomach.  -N. Bonaparte

Mon, 11/09/2009 - 07:48 | 124472 Anonymous
Anonymous's picture

Or they could just call the game off. All bets Scratched.Its called default dummy

MS you may not realize this but do you really think they don't know these figures. Do you think they wanted to do what they did by printing and paying the dirt bags. NO but the choice was total FUBAR or kick the Can down the road until it healed over and they became worthless. Do you realize just how fragile it is with every bank holding mark to fantasy and GMAC losing Big time on its 2005/ 2006 0% interest rate offer. That Fannie Mae and Mac bleeding Big dollars and the FIDC in a holding pattern because they want to close down C and 6 others but they JUST CANNOT. America has had 5 of the Biggest Bankruptcies in History in one Year, 38 Million American are on Food stamps 28 Million need work. Just ask yourself why the banks are not lending - They need every red cent as a cushion for what is coming toward them. ( alright I will give you a little hint - Its Impossible to MARK it higher than what was LENT. It is a tsunami of epic proportions with CRE not paying even interest on loans and ARMs about to go off from 3% to 8- 10% for catch up. There are no jobs for 28 million people. AND Then you add in the derivatives above. My God Woman- what ever it takes to stem the leaks HAS to be done or you have total and complete anarchy - everywhere.If we get blindsided by some "event" like JAPAN not paying is interest bill then you had better get off the Net and get down low and quite in a darkened room. DO you really think they Don't know about this, they DO and they are doing everything possible to prevent a meltdown. Its not acceptance - its Fear - Live with it because you have to.

Sun, 11/08/2009 - 06:20 | 123794 Anonymous
Anonymous's picture

"Notional Amount" is far less relevant for IRS than it is for CDS...just so you know.

Sun, 11/08/2009 - 06:57 | 123798 digalert
digalert's picture

I always thought a million was alot.

Sun, 11/08/2009 - 10:06 | 123833 RockyRacoon
RockyRacoon's picture

Your avatar demonstrates that two is pretty big... or would that be "are" pretty big?

Sun, 11/08/2009 - 11:33 | 123868 Anonymous
Anonymous's picture

Considering that most of the shit I buy with cash involves $20 bills, yeah, a million is a lot. And if I dare whip out a $100 bill, or even a fifty, the asshole at the counter has to use a special pen to try and ensure that the bill is in fact real. The disconnect here is astounding!

Sun, 11/08/2009 - 16:32 | 124030 JohnKing
JohnKing's picture

I can't stand that pen BS, now when they give me change, I ask for the pen and do them back. They get a bit huffy when I check their paper.

Sun, 11/08/2009 - 18:49 | 124080 deadhead
deadhead's picture

john....that is phucking funny shit!

Sun, 11/08/2009 - 19:55 | 124117 MsCreant
MsCreant's picture

I'm gonna do it at the grocery store next time! Too funny!

Sun, 11/08/2009 - 20:06 | 124126 Cognitive Dissonance
Cognitive Dissonance's picture

Count me in.

Mon, 11/09/2009 - 03:04 | 124402 faustian bargain
faustian bargain's picture can buy your own detection pens at Office Max...just whip it out, surprise 'em.

Mon, 11/09/2009 - 06:09 | 124447 Jendrzejczyk
Jendrzejczyk's picture

I just spit coffee. Thanks John.

Sun, 11/08/2009 - 22:59 | 124229 NumisEX
NumisEX's picture

I remember seeing someone strike matches on bills to see if they were real. I wonder if that trick still works.

Sun, 11/08/2009 - 07:08 | 123799 Anonymous
Anonymous's picture

a must read on how policy trumps evidence

David Nutt, professor of neuropsychopharmacology at Imperial College London, was chairman of the UK government's Advisory Council on the Misuse of Drugs until he was dismissed last week by the UK home secretary

Mon, 11/09/2009 - 09:54 | 124521 Chumly
Chumly's picture

David Nutt, professor of neuropsychopharmacology


That name-profession association is Hillarious!

Neuropsychopharmacology?  And we wonder what is wrong with this world?


Sun, 11/08/2009 - 08:07 | 123803 ED
ED's picture

Lets rationalise these nuymbers a bit, make them easier to wyrk with, since it seems we'll be living with them for a while:

A Minsky = Million

A Bernanke = Billion

A TimmyG = Trillion

A BaraQ = Quadrillion

I've heard 'the first Bernanke is the hardest' to make. On the bright side, looks like it'll be getting a lot easier.

Sun, 11/08/2009 - 10:00 | 123830 KidDynamite
KidDynamite's picture

well done.

in other news, i tried to type a trillion into my HP-12C and suffered an epic fail

Mon, 11/09/2009 - 01:23 | 124342 Anonymous
Anonymous's picture

A Prechter = $200

Sun, 11/08/2009 - 08:19 | 123806 Rogue Economist
Rogue Economist's picture

A pointless exercise in exponential numbers.  The monetary system is rendered worthless and fails here regardless of what the Fed does anymore.  Notional values in the Quadrillions?  By this measure, if you did an even redistribution of the "dollars", even among 7B people on earth if you have 7 QUADRILLION dollars out there, EVERYBODY is a Millionaire!  That includes every last starving child in India.

So quite clearly, all this money is never gonna make it out into the real world, its all going to burn up in the Greatest Bonfire of Paper Wealth in all of Recorded History.  Well, unfortunately we won't get to see the actual fire, since it will occur mostly inside some supercomputers currently pitching around these numbers at the BIS, but nevertheless this money definitely will disappear off the face of the earth.

The entertaining part of this is of course watching just how long and how big the numbers can spin up here before the system fries.  Guesses on how long it takes here?  Anyone?


Sun, 11/08/2009 - 12:40 | 123909 dnarby
dnarby's picture

On or about 2012.


Sun, 11/08/2009 - 19:37 | 124106 Anonymous
Anonymous's picture

Concur. We only have less than three years to prepare for.

Sun, 11/08/2009 - 09:00 | 123810 Anonymous
Anonymous's picture

Well on the premise that attack is the best form of defence, the middle classes could try and starve the government cancers by denying them the blood they crave. Hey, it may be too late, but better to go down fighting!

Sun, 11/08/2009 - 11:43 | 123871 chumbawamba
chumbawamba's picture

Default on all credit cards ==> kill the banks

Don't pay taxes ==> kill the government

Don't use paper money ==> kill the Fed

Resist, god damn it, RESIST!

I am Chumbawamba.

Sun, 11/08/2009 - 12:05 | 123884 MsCreant
MsCreant's picture

You are an adorable, feisty, little ant. The mighty ass of God is getting ready to sit on you.

Go to sleep if you like.

Reisist if you like.

Try to make a killing off it if you like.

Run if you like.

Doesn't matter.

Earth will grind on in her orbit around the sun as the ridiculous monkeys all hop around, some with their dicks in their hands, some with their butts in the air, some stealing what bananas are left.

So really, it just boils down to style points. What are your values? What matters to you?

Resisting may be my style too baby. WTF. I hate this place about now.

For the record, I am obviously doing anger on the Kubler Ross stages of greif typology yada thing. Groping for acceptance though. I'll join your sorry accepting asses, give me time. After all, it doesn't matter.

Sun, 11/08/2009 - 19:07 | 124092 tallystick
tallystick's picture

made my day



Sun, 11/08/2009 - 19:46 | 124111 Narcolepzzzzzz
Mon, 11/09/2009 - 12:53 | 124734 tip e. canoe
tip e. canoe's picture

dance monkeys dance!

Sun, 11/08/2009 - 15:01 | 123988 Problem Is
Problem Is's picture

Thanks to high unemployment, federal tax revenues are already down significantly... way to go middle class...

Unfortunately Bennie Bernak-ster has a trump card for that...

Sun, 11/08/2009 - 09:10 | 123812 Anonymous
Anonymous's picture

Sorry, I have to leave the room for a few minutes...I have a little vomit in my mouth.

Sun, 11/08/2009 - 09:21 | 123815 blindfaith
blindfaith's picture

Is it to late to convert my money into Zimbabwe dollars?

Excuse me, I have to leave the room for a minute...there is bit of vomit in the back of my mouth.


captcha:  what do you mean 21x2 is not 42?  what the hell is it then?

Sun, 11/08/2009 - 09:33 | 123817 aurum
aurum's picture

OFF TOPIC>>>>>>>> TD how in the hell are you selling out to CITI with there FX adverstisement?..... CITI is the biggest bloodsucking zombie bank of them all.....very disappointing.

Sun, 11/08/2009 - 12:09 | 123886 MsCreant
MsCreant's picture

Like he really controls the ads. He is trapped by the system, same as you and me, [erase insult, pointless to insult anyway]. Gotta try to get some $ for this website to keep on doing the work, gotta put up with a little irony and hypocrisy.

Sun, 11/08/2009 - 16:28 | 124027 aurum
aurum's picture

With all due respect, if he doesn't control the ads he has no idea what he is doing-something I seriously doubt. Secondly if we stand for what we believe there is no room for hypocrisy. This time period is more important then the revolutionary era for our country and children. The time for a revolt is here.

Sun, 11/08/2009 - 17:02 | 124042 Cognitive Dissonance
Cognitive Dissonance's picture

Dude, when it comes to advertisement, TD and ZH are like everyone else in that they sell the space to a broker/middleman who fills the space for fees based upon traffic. TD and ZH would make less money doing it any other way. It's the blogs message, not the advertisements, that speaks the loudest.

Sun, 11/08/2009 - 14:51 | 123985 Mazarin
Mazarin's picture

Just click on the ads and transfer a bit of that Citi cash to ZH.

Sun, 11/08/2009 - 15:06 | 123992 Problem Is
Problem Is's picture

Forget Citi...

What happened to the travel ad or whatever it was with the hot blond?

It is the whole reason I started coming to this site in the first place...

Since, like George "All Male Prep School Cheerleader" Bush, I read at the 4th grade level and have obvious learning disabilities... I am "The Child Left Behind."

Sun, 11/08/2009 - 09:38 | 123818 blindfaith
blindfaith's picture

ok, Im back...rum helped a bit.


now what does this mean? "take all those zeroes away and the value of the dollar would go down by 1E10-15: you listening yet American middle class?"  What is 1E10-15, I mean can I put one in my pocket?  Oh, God even my type is getting smaller.

Sun, 11/08/2009 - 10:15 | 123838 Anonymous
Anonymous's picture

If you could peel .001% of the copper off one of the zinc slugs that masquerades as a penny you might be close

Sun, 11/08/2009 - 09:40 | 123820 aurum
aurum's picture

this is precisely why fiat money should not exist...they will learn in due time.

Sun, 11/08/2009 - 14:45 | 123974 Cognitive Dissonance
Cognitive Dissonance's picture

Will everyone please stop giving these mother fuckers the benefit of the doubt by assuming they are stupid idiots who are lost in the woods.

They know exactly what they are doing. EXACTLY!

You're being told otherwise to give you false hope that if we can just get someone in there who knows what they're doing, all will be better. Thus you remain frozen in your tracks and, most importantly from their point of view, not resisting.


Sun, 11/08/2009 - 15:57 | 124012 sgt_doom
sgt_doom's picture

Thank you!

Sun, 11/08/2009 - 19:13 | 124095 DaveyJones
DaveyJones's picture

I'm with cd. But I think like a criminal and come to think of it it allis

Sun, 11/08/2009 - 09:43 | 123821 Anonymous
Anonymous's picture

So we are basically extorting the world to continue to buy our bonds, or else we detonate this $420T financial WMD. How long can this go on, and what exit paths exist? It appears that the IR derivatives mechanism must be gracefully dismantled in order to get off this path. Can the banks and counterparties just somehow "take back" their IR bets? I guess a war would eliminate the mechanism, too.

But otherwise, interest rates will remain near 0, the asset markets will continue to rise, gold will continue to rise, CPI remain subdued, bonds will continue to be bought, until some global event disrupts the process. What are the other corrolaries?

And I had been thinking that our enormous debt was the issue that would bring about our demise. But there is a way to continue funding our deficits indefinitely, and if/when it stops, we will take the whole world with us.

Sun, 11/08/2009 - 09:50 | 123825 Anonymous
Anonymous's picture

My question would be: what measures would you suggest now that we are in this mess? What can be done to unwind it?
Obviously it will unwind one way or another, so what is the least bad way out?
I note that in Europe there seems to be at least a glimmer of recognition of what the banking system has done:
'Bank of England says financiers are fuelling an economic 'doom loop''

Thanks for fine insights, even if much of it is above my head!

Sun, 11/08/2009 - 14:49 | 123983 Cognitive Dissonance
Cognitive Dissonance's picture


It's useless to discuss various ways to unwind this mess when it will never happen. You are assuming they want to fix these "problems". Leave the false hope behind. They have no intention of "fixing" anything. What they have is what they want.

And if you can't understand why then you need to disabuse yourself of some of your fantasies and myths about how the world works and who's in charge.

Bulletin, it ain't Obama or Congress. Most certainly it ain't you and me.

Sun, 11/08/2009 - 15:58 | 124013 sgt_doom
sgt_doom's picture

I repeat, thank you!

Mon, 11/09/2009 - 08:13 | 124479 Anonymous
Anonymous's picture

A bit of an arrogantr reply, no?
Your assumptions on my thoughts and motives are anyway false.
If I wish to criticise the actions taken by actors like the Fed though, I do however think that one needs to have some idea of what alternatives one would suggest in their place, even if there is little possiblity of their being carried out.
You also seem to assume that everyone lives in the US.
Whilst the US is obviously a critical actor in the current drama, it is by no means the only player, and it seems likely to me that the present internationalism will break down, just as in the 30's.

The attitudes to the financial institutions in Europe, for instance, are already considerably different to in the US, and exacerbation of the present crisis seems likely to lead to a very different climate within Europe for them to operate.

Mon, 11/09/2009 - 13:09 | 124748 Cognitive Dissonance
Cognitive Dissonance's picture

You're correct. I (along with everyone else) make assumptions. Should I assume you're the same Anon I responded to earlier? Why should I assume that? How do I know you are the same even if you say you are? Try registering, select a snappy name and avatar and then comment to your hearts desire.

Even then you're still anonymous except you'll have a history that can be reviewed and examined for consistency. Otherwise I have no idea who you are or your agenda. We all have an agenda. Some just don't wish to admit it.

As far as your point is concerned, I no longer chose to pursue false hopes. When someone can explain to me how the path currently followed by the entire world (Europe, while having a different opinion, still enables and even encourages the US in so many different ways) leads to no inflation, no deflation and the resumption of no limit credit without self immolation, I'll be happy to discuss other ways to defuse the bomb.

Sun, 11/08/2009 - 09:52 | 123826 Anonymous
Anonymous's picture

Question - I understand the magnitude of these number, but at the end of the day derivatives are just bets that do not represent real goods. So, if everyone just welches on their bets who loses? I know this is a very novice question, but I'd like to understand what is really at stake.

Sun, 11/08/2009 - 12:58 | 123920 dnarby
dnarby's picture

Everyone who holds paper assets loses.

Sun, 11/08/2009 - 10:02 | 123832 ShankyS
ShankyS's picture

Simply amazing. Once Humpty Dumty falls lets not even try to put him back togehther.

Sun, 11/08/2009 - 10:13 | 123836 bugs_
bugs_'s picture

Pre-Obama!!!! LOL

Time to join "behind the curve pessimists anonymous".

My name is bugs_ and its worse than I thought.

Sun, 11/08/2009 - 12:14 | 123888 MsCreant
MsCreant's picture


Sun, 11/08/2009 - 23:12 | 124240 Miles Kendig
Miles Kendig's picture

That you cotton?

Sun, 11/08/2009 - 10:13 | 123837 Anonymous
Anonymous's picture

Don't worry, none of it is real. Just bits and bites in a computer somewhere, nothing to see here, move along. Why not go out and consume something, it will make you feel better, I promise.

Sun, 11/08/2009 - 10:20 | 123839 Jendrzejczyk
Jendrzejczyk's picture

If a quadrillion non-existent electrons (based on a dollar with air as a foundation) suddenly changed their positive charge to negative, would anyone hear the bloated suits arguing about it over their filet mignon and a bottle of Petrus?

Sun, 11/08/2009 - 10:52 | 123851 SDRII
SDRII's picture

Does anyone know about AIG metals trading complex (recollection serves it was a major player in the PM complex, and prob still is). Any sense of the market share?

Sun, 11/08/2009 - 10:56 | 123852 Lionhead
Lionhead's picture

Excellent TD; the puzzle pieces slowly assemble into a picture that explains the weird market gyrations and anti fundamental movements for forex & interest rates. Keep 'em comin'...

Sun, 11/08/2009 - 11:05 | 123854 SWRichmond
SWRichmond's picture

Don't wory, be happy: according to the IMF, all derivatives globally net out to zero.  This statement appears in their "GlobalFinancial Stability Report"  (page 63, sheet 84 of 251)

Caveats to the Application of Estimated Security Loss Rates to Bank Holdings
Our approach for estimating mark-to-market losses on securities includes only cash instruments, and thus does not account for potential leveraged exposures. As in other iterations, we assumed that derivatives exposures net out to zero for the system as a whole. We did not account for concentrations of counterparty risk.

I guess the fact that most of the derivatives are concentrated in the hands of five major banks doesn't count as a "concentration of counterparty risk".


Sun, 11/08/2009 - 11:38 | 123870 Rainman
Rainman's picture that's a relief. Exposures are assumed to net out to zero. I was concerned there for a minute we might reach the octozillions in exposures.....whcih would put us at the doorstep of WW III.

Now let's move on to this inexpensive health care solution.

Sun, 11/08/2009 - 16:10 | 124020 sgt_doom
sgt_doom's picture

Wow, that really helps me reach that Zen stage...

And to think that's the same IMF which created, through a private firm, 'natch, all those Financial Intelligence Units to track "money laundering" at all those Offshore Finance Centers, which had, oddly enough, been set up for the purposes of money laundering and profit laundering.

I'd say "go figure" but we all know what the anwer is.....

Sun, 11/08/2009 - 17:06 | 124043 skam
skam's picture

"we assumed that derivatives exposures net out to zero for the system as a whole."


One of the first life lessons I was taught was what the word assume does.

Mon, 11/09/2009 - 14:52 | 124893 sgt_doom
sgt_doom's picture

"We assume the profitability of offshoring American jobs."

"The result being that it is highly profitable to offshore American jobs."

From the McKinsey Global Institute's "study" -- authored by Diana Farrell, purported to explain why it is profitable to offshore all American jobs.

In other words, they begin with the "assumption" it is profitable to offshore jobs, and end with the "result" it is profitable to offshore jobs.

Diana Farrell is presently President Obama's deputy director of the National Economics Council.

Mon, 11/09/2009 - 17:45 | 125132 Anonymous
Anonymous's picture

How can anyone assume that OTC-traded derivatives will net out to Zero when there is no control whatsoever?

The reason those derivatives are OTC-traded in the first place is because they are too crooked to pass through a real derivatives exchange - which actually has a "machine god" that DOES net out all open positions to Zero continuously!

Sun, 11/08/2009 - 11:17 | 123862 debtbytes
debtbytes's picture

So we are basically extorting the world to continue buying our bonds, else we detonate the $420T financial WMD.  So interest rates stay at 0, asset prices continue to rise, gold continues to rise, dollar continues to fall, foreigners continue to buy our bonds, until...what?  What can disable the IR mechanism?

Sun, 11/08/2009 - 11:37 | 123869 chumbawamba
chumbawamba's picture

Ok, here's my plan:

There are a lot of out of work veterans, many who are depressed or suicidal.  Meaning could be returned to their lives if someone got together a team of them, armed and financed them, then sent them on a suicide mission to attack GS headquarters at 85 Broad.  First they'd have to take out the guards at the door, which should take all of ten seconds since those guys aren't expecting M16s.  The entire first floor lobby could be secured in no time.  After the doors are barricaded, and the exits secured to prevent any top level executives from fleeing (oh yes, you know where this is headed, don't you?), the team then moves on to the top floor to find the executive offices of one Lloyd Blankfein.  Attrition should be low.  After all, what kind of resistance are a bunch of pencil-necked geeks going to put up?  Letter openers and heavy office implements will be no match for body armor and hollow point rounds.

Just saying.

I am Chumbawamba.

Sun, 11/08/2009 - 11:44 | 123872 Rainman
Rainman's picture

No need for violence. The geeks carry waistband fanny packs with cyanide pills in the event a rogue army finally penetrates the fortress walls.

Sun, 11/08/2009 - 11:45 | 123874 Cognitive Dissonance
Cognitive Dissonance's picture

Chumbawamba always seems to find the simplest and most effective solutions to our problems. Thank you.

When your crew is done with 85 Broad, may I suggest they be redirected to the Federal Reserve in DC?

Just saying.

Sun, 11/08/2009 - 11:54 | 123878 Lionhead
Lionhead's picture

Make sure you have air cap so the GS'ers can't helicopter away before you reach the top floors. Conversely, why not hire Moslem suicide bombers and level the entire building. That would have quite an "impact."

Sun, 11/08/2009 - 12:16 | 123889 chumbawamba
chumbawamba's picture

The idea is not to generate sympathy for GS.

I am Chumbawamba.

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