Janet Tavakoli On Why Meltdown Risk Now Is Greater Than It Was In 2007

Tyler Durden's picture

One of the foremost experts on structured finance and derivatives presents a holistic overview of not only the current economic fiasco, and in 10 brief minutes with Max Keiser she provides more succinct, unbiased and relevant information that most pundits are able to convey in years on and off TV, but also highlights the bigger problem of how the administration keeps treating the US public as a bunch of stupid infants, throwing paper blankets over raging systematic fires that are anything but doused. And yet, the administration's ploy so far is successful, unfortunately speaking volumes about the intellectual rigor of the average gullible American.

Futhermore, Zero Hedge joins in endorsing Mr. Keiser's glowing recommendation of Janet's book "Dear Mr. Buffett: What An Investor Learns 1,269 Miles From Wall Street" a must read for anyone who wishes to get a deep understanding of the real severity of America's economic debacle (we receive absolutely no compensation for recommending this book).

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BabaJ's picture

People in structured finance and the shadow financial system are among the few to truly realize the magnitude of the problem.

Great piece.


Careless Whisper's picture

Yeah, most of the people I talk to are in denial.

Anonymous's picture

PeeWee Herman Finance 101:
There is no free lunch.

Financial meth labs indeed.

Seems only the independents are willing to speak the pobvious truth.

JT may understand when credit cyclones
implode, they take all inlfated assets with them,
including gold...


Lionhead's picture

Bullish!!  Look for new highs on SPX, 1200 perhaps... Euphoria now will surely displace the loss of jobs and declining wages. Fools with tons of money will supply the fodder to keep rolling over debt in perpetuity.  Hedge funds, get LONG now! ;)

Anonymous's picture

One comment she makes is that the GDP should be adjusted for inflation or deflation, and that since we have deflation this should be deducted from GDP making the drop worse. However for real GDP surely it should be added? Not that any of the figures are exact.

ZerOhead's picture


BTW... If nominal GDP was down 5% and the GDP deflator was -10%... we'd actually have Real GDP growth of 5%.

I think that's the 'green shoots' angle Timmy and Ben are working on.

I love macroeconomics...

Anonymous's picture

Yes. If we have inflation at +10% and nominal GDP at +5% then we have Real GDP of -5%. The converse is if we have deflation of 10% and nominal GDP of -5%, then real GDP is +5%. I think she misspoke.

The point she is trying to make is this: GDP (output) is declining. Aggregate output = aggregate income. Income is declining but the debt remains the same. Deflation is a bitch for debtors.

Anonymous's picture

Same all stupid mistake that so-called economists make and never seem to understand how the real world works - listen to Albert Edwards. As a business person, pay attention to prices (ie nominal), and throw volumes (ie "real" this and "real" that) away. I could not give a hoot how many pieces of widget I sell, so long as I sell enough to pay the expenses. No use selling 3% more widgets this year (vs last year) if this year's prices is 30% lower than last year, do people understand why businesses need to people go now? Fu$# the stupid economists, nominal GDP is at 2002 level, maybe even lower today, so what the fu*& if the GDP for Q3 and Q4 are going to show "growth"?

DaddyWarbucks's picture

"The cash has to be there to make the payments, where's the cash coming from.."

That's a lot of common sense from someone who works in the "high" financial system. Many small business owners ask themselves that question so often that they should be walking around with a set of prayer beads.

An acquaintance who runs( oops I mean ran) a franchise sandwich shop shut down Friday. The in depth analysis was "I can't pay the bills anymore.." The reality of that is 17 employees out of work come monday. I read comments from so many people yakking about inflation/deflation, GDP this, CPI that, blah, blah, blah and I wonder how many have ever had to meet even a small payroll with THEIR OWN MONEY ( this last condition rules out almost all the corporate executives). Anyone reading this who has ever had to do this understands that the difference between OPM and My Own Money is what separates the men from the boys( apologies to Marla and other ladies, it's just a saying).


Anonymous's picture

I closed my debt free, cash basis retail business early this year simply because I found that I couldn't compete on a level playing field with people using other people's money and those willing to mortgage their assets and bankrupt themselves in order to stay in business. My business should have been strong but in this topsy-turvy financial climate, I was going to have to take on debt or wither, so I closed.

Daddy, I totally get what you are saying on a real and experiential level.

Anonymous's picture

The Zionists in charge of the Federal Reserve understand their game is up, and soon Zionists in Israel plan to soon attack Iran in order to implode the entire world system. Imperialism cannot continue to function moving ahead without a new event to collapse the global economy. We might say that their attack on Iran will *probably* fail, but that they have no other option. If they don't take drastic steps, their grip on global power will evaporate, maybe a 5% chance they will hold it for another 20 years. The attack on Iran has perhaps a 30-40% chance of success, giving the Zionist alliance with Big Energy new life, and bringing down the uprising nations in the process through a new global collapse. Do nothing = certain failure in the medium-term; drastic action = very risky but some chance of success. The writing is on the wall.

Anonymous's picture

Translation: "We can save the world by eliminating the Jews". Happens every time...

Anonymous's picture

"Translation: "We can save the world by eliminating the Jews". Happens every time..."

Geez, and I came away with the feeling he wanted to end the Fed.......never did see the word "Jew" until you brought it up....

Anonymous's picture

Since the term "Zionist" apparently didn't register...

n. A Jewish movement that arose in the late 19th century in response to growing anti-Semitism and sought to reestablish a Jewish homeland in Palestine. Modern Zionism is concerned with the support and development of the state of Israel.
Zi'on·ist adj. & n., Zi'on·is'tic adj.

The American Heritage® Dictionary of the English Language, Fourth Edition

dnarby's picture


I'm going to give you a chance to name said Zionists in the Fed.

But if you can't... STFU f-tard.

And war is not a cause of economic instablity, it is a result.

Flagged as junk.

Anonymous's picture

"And war is not a cause of economic instability, it is a result."

That's a joke, yes? Iraq had one of the most modern, western-style economies and societies before we started sanctions on them under Bush1 and Clinton, and then invaded them under pressure from Bush administration Zionists like Douglas Feith, Paul Wolfowicz, Richard Perle and msm Zionists like Wolf Blitzer. You want more names? Go read the PNAC manifesto, and who signed on for a "New Pearl Harbor", bubbula.

There maybe others are too timid to name names, but farang is not.

Yes, how very adult-like of you to use ad hominem attacks: "STFU F-tard", to deflect and refuse to address the charges, and divert the topic. "Happens every time..."

Are you seriously denying Israel is pressuring the world to invade Iran over their legal Nuclear program, while refusing to allow inspection of their own?

No, really, seriously?

I think the topic of eliminating the Fed is the one that needs serious discussion, and if that makes you uncomfortable, good. Greenspan. Bernanke. Shall I go on?? Who owns the Fed? Do you really want to go there?

Thanks for the video, I always enjoy watching Max.

jesusonline's picture

Ben Shalom Bernanke looks like a zionist to me alright

JR's picture

In my opinion, there’s a general understanding in American politics that Zionists, not Jews per se, are Jews who want to use American political, economic and military power to support the interests of the state of Israel.  And they have been accused accurately, IMO, of using U.S. support of Israel even when it jeopardizes the national interests of the United States.

I think the war in Iraq urged on the United States by the Zionist neo-cons in the Bush Administration, using every thin pretext possible including manipulating Intelligence, forced an attack on a sovereign nation that was not a serious threat to the stability of the United States.  The airwaves are now awash with every conceivable danger illuminated concerning Iran’s nuclear program.

Given the fact that the pro-Israel political forces are so strong within the U.S. government--top to bottom in the Obama administration and in the financial sectors (yes, including Zionist influence in the Federal Reserve System)--the American people are now faced with a wake-up call.  Are we to fight another undeclared war where Congress takes no action to be on record without clear evidence as to what American interests are at stake?  It is childish and foolish to call inquiries of this kind as anti-Semitic.  We are talking about the largest economic decision of this new century, let alone the blood and sacrifice for peoples in the Middle East and families in the United States.

Are there no statesmen left who will put the interests of the United States ahead of these dangers?

Anonymous's picture

It's refreshing to listen to people that really do understand what is going on in our financial system (as Janet most certainly does). Working for years on wall street in a senior position, I saw firsthand what was happening and Janet articulates it extremely well. Unfortunately, people refuse to listen to the "negativity" from realists who really know the truth. They would rather listen to the garbage spin and watch reality t.v.. That's why we are headed for economic disaster. Meaningful change won't happen because only crisis motivate people to seek real change and, unfortunately, it will be too late then. I really do feel sad for our future.

Anonymous's picture

It's refreshing to listen to people that really do understand what is going on in our financial system (as Janet most certainly does). Working for years on wall street in a senior position, I saw firsthand what was happening and Janet articulates it extremely well. Unfortunately, people refuse to listen to the "negativity" from realists who really know the truth. They would rather listen to the garbage spin and watch reality t.v.. That's why we are headed for economic disaster. Meaningful change won't happen because only crisis motivate people to seek real change and, unfortunately, it will be too late then. I really do feel sad for our future.

Anonymous's picture

from time to time i have been known to take long walks on the roads and streets around my home. today i walked past a school and lots of gen x people were out there cheering their children on in the game of football. ah yes, football in amerika. they are ignoring what is coming. they simply do not want to know. they want to live in some amerika that they think they always knew which really never existed. so i ask you anon #87754, what does what you have written mean to these people watching their sons play a football game at some middle school in south central texas? what does it really mean to you? what does it mean to american's? what does it mean to me? as i have said before and i will say it again. life as we have known it or thought we knew will never be the same and very soon. the question is what do we intend on doing about it? ignoring it? it will not go away. it will not be covered up. the damage is there. the damage cannot be repaired. the game is rigged. the game is over. so , is it better to remain quiet and in our houses, while our country dies before our very eyes? it is better to stay in our own self imposed confort zones while we yet are not hungry , waiting until the time when we will be forced by hunger or whatever to do what we must? everyday that goes by, they get stronger and we get weaker. as you have so succinctly said, i also feel very sad for our future. but anon #87754, there is hope sir. for you see, in this land, there are those who have not bowed the knee to Baal nor have they kissed his ring or his feet? no sir, there are those that are that lousy 3 percent out here, angry as hell and waiting for the time of the troubles to start. when i hear people like this tell me things i already know, it simply solidifies my desires and my hopes that maybe, by the grace of Almighty God, somehow, some way the american public will one fine day awaken to what has happened to them and revolt!!!!!

Anonymous's picture

god bless you in the name of the father, the
son, and the holy spirit that 7000 may be found
who have not bowed a knee....

Anonymous's picture

I was sitting in my little room in south central texas peeing in my pants over the future of amerika when some boob walks aimlessly by my window. He is ignoring what is coming. . . .

Lndmvr's picture

From time to time I look around the midwest city I moved to and now I don't want to any more! Check this out and look at the dates, then think of the FED, then develop a conspiracy theory, then move forwards to today. We are so screwed.http://www.villiscaiowa.com/  



Anonymous's picture

Not to pick on you, but maybe these people in the Wall Street system who really understand the problem should be ringing alarm bells in D.C. instead of trying to make more money off of it.

Frankly, if such people know we're headed for disaster and they don't do their best to head it off somehow, then they deserve to burn in hell.

Fish Gone Bad's picture

Ouch!  She has written numerous books, and been on Max Keiser.  Got any suggestions?  Now that you apparently know, are you going to do your best to head off the disaster? 

Anonymous's picture

so what is your plan if the future is so grim?

Hephasteus's picture

| Runs around screaming with Zerohead!!!!

Anonymous's picture

Kids and I are going to see "Zombieland" today, a little continuing education in forecasting.

geopol's picture

The inflation folks are right, however we don't have enough juice to fill the derivatives hole, so that protracts the time-line for it's effect on the general CPI. 


On a long enough time-line the survival rate for everyone drops to ZERO. Hmm sounds familiar.



DBLTapViper's picture

Hey Tyler get this lady to be one of your contributors

Anonymous's picture

that would be a treat.
i 2d and 3d that motion.

Anonymous's picture

Her Book "Structured Finance and CDOs , new deveopments in cash & synthetic securitizations" is great

Sqworl's picture

Thank you...just download her book to my KindleDX...+100...love Maxi


Cheeky, relax...x

defender's picture

Sqworl, what happened to your avatar?  Also, is the kindle any good?  I always thought that they sounded like a lot of money for a lot of headache.

Sqworl's picture

My avitar passed....



I love my kindleDX.  It was a gift.  downloading best sellers in 2 seconds for $9.98 is a wonderful thing!  I also can adjust the font size..has built in tools and you never have to touch paper or get ink on your hands...Love it.

exportbank's picture

Bad tax policy encourages bad monetary decisions.

A dollar of earnings should be taxed at the same rate regardless of how it came about. You shouldn't need 80,000 pages to spell out fair and equitable tax rules.

Anonymous's picture

i used to advocate that view and still agree
that an 80k page tax code is an abomination....

however, the fire economy is too powerful and
needs to be rebalance with productive economy
and labor....as such i would endorse a tax
policy increasing rentier income taxes and eliminating
labor and producer taxes....

Anonymous's picture

what a breath of fresh air....this is must listening....

orderly bankruptcy and liquidation....what a novel idea - not...this woman is the anti-roubini.....she needs to be advising someone on how to fix the mess because she gets it and can mellifluously articulate cause and effect, problem and solution....

Anonymous's picture

All paper will burn

ozziindaus's picture

I like Max and have been listening to him for a while now but I just can't confirm whether he believes in the deflation argument yet. Also I'm starting to hear alot of prominant Inflationists put out a case for deflation. I don't care about what's going to happen three, four years from now. My timeframe is immediate to 6 months away at most. Massive asset inflation through dollar devaluation in 5 years means nothing if I don't have my house by the end of the year.

Anonymous's picture


I give you my personal money-backed guarantee that THERE WILL BE NO MAJOR CPI INFLATION WITHIN THE NEXT SIX MONTHS. Any particular subgroup, such as energy or food, could shoot up or down during any given week (especially if someone starts dropping bombs on Iran's beloved facilities), but the current deflationary pull of gravity is so strong that even $15 TRILLION in gov't handouts, loans, and guarantees - based entirely on printing and borrowing - has been insufficient to lift aggregate prices. Beyond six months, as the option-arm resets kick in, the QE and home buying subsidies are either ended or extended (or jacked upward), the CRE defaults explode, companies start hiring again or not, the consumer returns to the store or not, it gets murkier and scarier.

bonddude's picture

I agree with this. 

Anonymous's picture

To which one must reply: Have you seen the equities? More over-priced junk (when QE gets injected to the first available vein what surges?) I have not seen, I surmise that lower EPS price have never been seen on the exchanges. In a financial crisis, in a steep contraction, in a monumental slump of industrial production, we have a ramp like this in equities?

And we're just getting started. Once the drug moves off the mainline and into middle America, inflation as the byproduct of central bank malevolent printing will take hold.

Major retailers that were fire selling in the heat of the crisis have held the line. They are NOT discounting as steeply, they ARE waiting for the policy response to reflate.

The gov't of the USA, superpower that it is, with military, technological, scientific, educational, and financial hegemony will not allow deflation to further steepen the massive debt it has undertaken and will continually add to.

If it is ruination by deflation or by inflation, they choose inflation. That at least they can steer somewhat. And inflation prolongs life expectancy over deflation.

You flatline fast with the D. But can eke out a very long time with I. See Mugabe. He shoudda been dead long time.

sgt_doom's picture

Exactly & spot on, Anon to the Ozz!

We are in the murkiest of territory here...nothing like this scenario has ever existed before.  All predictions are invalid at this point due to insufficient historic data.

My recommendation for the best read on the economic meltdown and necessary reforms to avoid its continuance: Nomi Prins' It Takes a Pillage --- an outstanding text on this subject. Janet Tavakoli, Nomi Prins, Prof. James Galbraith, Prof. Michael Hudson, Prof. Ravi Batra should have been Pres. Obama's appointments in the capacity of economic advisors, not those corrupt clowns he now has.