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Mark Mobius Echoes Carl Icahn: "There Is Definitely Going To Be Another Financial Crisis"

Tyler Durden's picture


In an almost verbatim repeat of Carl Icahn's words of caution which we noted yesterday, Templeton's legendary chairman Mark Mobius said that "another financial crisis is inevitable because the causes of the
previous one haven’t been resolved" during a luncheon (menu included herb crusted chicken breast with cheese and tomato sauce, mashed potato and green vegetables, seasonal salad) at the Foreign Correspondents’ Club of Japan in Tokyo. Bloomberg reports: "There is definitely going to be another financial crisis around the corner because we haven’t solved any of the things that caused the previous crisis,” Mobius said at the Foreign Correspondents’ Club of Japan in Tokyo today in response to a question about price swings. “Are the derivatives regulated? No. Are you still getting growth in derivatives? Yes." Unlike Icahn, Mobius stopped short of calling for a return to Glass-Stegall and a repeal of the abominable Gramm-Leach-Bliley which unleashed the era of zero margin derivatives and financial system neutron bombs. On the other hand, it is nice of Messrs Icahn and Mobius to speak up now, two years after the ongoing systemic instability transferred $3.5 trillion in capital from current and future taxpayer generations to the present financial elite. We do, however, forgive them because in their better late than never contrition, they join the likes of Zero Hedge who since January of 2009 have warned, over and over, that nothing in the structure of capital markets has changed, and that the market could any day open not only bidless, but broken beyond even Brian Sack-ian band aid repair.

Mobius, as seems to be the conventional wisdom these days, focuses on the $600 trillion or so in OTC derivatives as the next source of systemic jeopardy:

The total value of derivatives in the world exceeds total global gross domestic product by a factor of 10, said Mobius, who oversees more than $50 billion. With that volume of bets in different directions, volatility and equity market crises will occur, he said.

The global financial crisis three years ago was caused in part by the proliferation of derivative products tied to U.S. home loans that ceased performing, triggering hundreds of billions of dollars in writedowns and leading to the collapse of Lehman Brothers Holdings Inc. in September 2008. The MSCI AC World Index of developed and emerging market stocks tumbled 46 percent between Lehman’s downfall and the market bottom on March 9, 2009.

He also blasted the lunacy of Too Big To Fail, where the Fed and the FDIC took an already unstable system, and made it even more brittle, by concentrating more deposits and more assets with a record low number of banks:

The largest U.S. banks have grown larger since the financial crisis, and the number of “too-big-to-fail” banks will increase by 40 percent over the next 15 years, according to data compiled by Bloomberg.

Separately, higher capital requirements and greater supervision should be imposed on institutions deemed “too important to fail” to reduce the chances of large-scale failures, staff at the International Monetary Fund warned in a report on May 27.

“Are the banks bigger than they were before? They’re bigger,” Mobius said. “Too big to fail.”

However, as long as Wall Street muppet Tim Geithner is in charge of the Treasury nothing will change.

Lastly, Mobius had some origianal words of investment advice, something that one could previously find at the Ira Sohn conference, before it became a media-fest free-for-all, book talking exercise in upcoming asset manager obscurity.

The money manager had earlier said at the same event that Africa has an “incredible” investment potential and that he has stakes in Nigerian banks.

“These banks are doing very well and are much better regulated than they were in the past,” Mobius said, without disclosing which lenders he holds.

Banks account for five of the eight stocks in the MSCI Nigeria (MXNI) Index. Guaranty Trust Bank Plc, the country’s No. 2 lender by market value, surged 31 percent in the six months through May 27, according to data compiled by Bloomberg. Shares of Access Bank Nigeria Plc recorded the second-biggest decline on the gauge in the period, the data show.

Is Africa the next bubble? And is it Africa's banks or their gold and other precious metals? Either way, how long before the IMF decides to offer openly dictatorial regimes in Central and Western Africa, only for NATO to decide one day 2-3 years from now that the time for humanitarian intervention has come, and it is the sanctified duty of the enlightened west to rid said countries of their gold, er oil, er diamons, sorry, evil dictators who will have been for many years the happy recipients of World Bank and IMF "infrastructure" capital...


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Mon, 05/30/2011 - 09:58 | 1322281 ISEEIT
ISEEIT's picture

Glad you guys are active today. I appreciate it.

Mon, 05/30/2011 - 09:59 | 1322287 WhOracle
WhOracle's picture

i second that

Mon, 05/30/2011 - 12:26 | 1322633 IdioTsincracY
IdioTsincracY's picture

I third that too!

Mon, 05/30/2011 - 12:56 | 1322706 Spirit Of Truth
Spirit Of Truth's picture

Might be prescient as there's reason to believe we are on the edge of a cliff:

Mon, 05/30/2011 - 14:44 | 1322929 DaveyJones
DaveyJones's picture

nothing like a holiday to lift your spirits. Now where is my spirits?

Mon, 05/30/2011 - 12:10 | 1322586 ToNYC
ToNYC's picture


The movie is in production. The Financial system became dependent and floated on the shadow banking system. The toxic waste is being traded to the entitled ones's future cash-flows. It is as if the Titanic imploded in the black hole of credit contraction and the Atlantic Ocean went dry. Hint: it's a Pacific Rim story.

Mon, 05/30/2011 - 12:38 | 1322664 IdioTsincracY
IdioTsincracY's picture

Big fucking surprise here!!!

Black hole of credit contraction?!?!?  .....

I'd say that it's more of "The collapse of the Pyramids" .....

The Pyramid scheme of casino-style markets

The Pyramid scheme of investment with no ties to the real economy

The Pyramid scheme of 'free' market economics .... where free stands for "let the Oligarchs do whatever the hell they want"

The Pyramid scheme of 'wait for that trickle down, as we pump it up to the top"

The Pyramid scheme of 'we are the few, the proud, the fucking elite and we deserve all of of it, so kiss our asses'

The Pyramid scheme of 'suck the middle class dry, outsource what you can, cheat on you taxes, offshore your wealth, and flip your middle finger'


As we celebrate memorial day and pay our respect to the people who sacrificed for our Country ... let's all shout a big "FUCK YOU!!" to the people who sacrificed our Country (sic!)

Fuck the bankers, the corrupt politicians, and the fucking speculators!

Mon, 05/30/2011 - 13:43 | 1322800 ToNYC
ToNYC's picture


I'd say after you f**k everyone you feel the need to....then maybe you can get busy.

Mon, 05/30/2011 - 12:56 | 1322699 bogey4
bogey4's picture

A crisis will never happen when this many guys call for one.  Where were their calls for crisis in mid-08?  Nowhere to be found.

Crises come out of the blue - not when everyone predicts one.

Mon, 05/30/2011 - 14:51 | 1322942 Michael
Michael's picture

We bloggers called the dot-com bubble to bust and that busted.

We called the housing bubble to be a bigger bust and that busted.

Two out of three so far.

What do you want to bet our call for a complete and total economic collapse will also be an accurate call? 

Mon, 05/30/2011 - 17:09 | 1323169 Anonymouse
Anonymouse's picture

So you're saying we can stop crises by having lots of people predict them.  That's great news! Let's get on it guys!


- Residential housing is going to crash!

- Commercial real estate is going to crash!

- Banks are going to fail!

- Municipal bonds will plummet in value!

- Corporate defaults will be rampant!

- Inflation is going through the roof!

- Gold, Silver, and Oil will reach unheard-of values!

  -- And just to make it interesting (in a Star Trek computer sort-of-way)

     --- Gold, Silver, and Oil will become virtually worthless!

     --- Gold, Silver, and Oil will trade in an extremely tight range at current levels!

- Obama will be re-elected in a landslide!

- Romney will be elected in a land-slide!

- Charlotte Rea (Mrs. Garrett from "The Facts of Life") will join the cast of "The Office" as the new regional manager of the Scranton branch!

- I'm going to gain 50 pounds any day now!

Come on join with me.  Together we can change the world.  Yes we can!

Mon, 05/30/2011 - 13:02 | 1322726 terryfuckwit
terryfuckwit's picture

me certainly no hot shot investor but you guys definitely deserve a contribution. the articles are amazing .. at first you think oh that's a bit over conspiratorial and then a week late MSM or other events confirms what is written on these pages ... well impressed i am


Thu, 06/09/2011 - 04:35 | 1353878 Michael
Michael's picture

Of course. We've been honing our skills at this for over a decade now. We've gotten pretty good at it. Coming up with the final outcome with pretty good timing in a New York minute, and getting the call right 100% of the time and knowing it. 

We are actually pretty proud of ourselves.

Mon, 05/30/2011 - 10:04 | 1322284 hugovanderbubble
hugovanderbubble's picture


Just 200? 2000¿=?


Belgian central bank faces loss of about EUR 200mln on sovereign bonds according to Belgian central bank director


"the ECB needs a massive recap scheme" (Hugo Peterssen) one trust in Public Accounting...(Mafia Tricky Accounting Mode On:)

National Public Accounts 101% corrupted (world-wide)

Mon, 05/30/2011 - 10:17 | 1322311 trav7777
trav7777's picture

you mean capitalizing with debt spun out of thin air isn't a good idea?

All our money is based on debt and those debts are BAD.  People think that defaults lead to  The money got spent; it stays out there.  Then the debts default and the money no longer has any backing

Mon, 05/30/2011 - 10:40 | 1322352 philgramm
philgramm's picture

Hey Trav,

Question. I dont understand fractional reserve banking all that well. I understand that a home mortgage loan creates money via fractional reserve system. My question is what happens when that debt is fully repaid? Does the money leave the system?

Mon, 05/30/2011 - 10:46 | 1322366 Printfaster
Printfaster's picture

Trav, you just pushed a knife through Denninger's eyball, and Shedlock's mouth.

Print on.

Mon, 05/30/2011 - 10:58 | 1322395 shortus cynicus
shortus cynicus's picture

O, thank you the Lord!

Nice to see at least one ZH junkie supporting the theory i also believe.

I wrote practically the same just few minutes ago:

Mon, 05/30/2011 - 11:58 | 1322550 Muir
Muir's picture

from your post:

"But Chinese know, that those houses are worthless anyway, so they must panic and spend it for anything else. Marginal Utility Theory clearly explains that there is no sense to Chinese to own all US houses. They must flee to commodities, causing price increases."


And after the Chinese have bought all these commodities who is going to buy said commodities after a crash?

Mon, 05/30/2011 - 12:12 | 1322604 cosmictrainwreck
cosmictrainwreck's picture

touche!, Muir.... speculating here: we know they're stock-piling everythng, check. and they're buying up resource-producing capacity (directly or by delivery contract) check. but that's all just to keep the furnaces belching & peasants at bay. hmmm....what is it they're gonna do with the rest of the pile of cash? buy Chicago, maybe? nah, I think they'd prefer Minneapolis.... 

Mon, 05/30/2011 - 12:10 | 1322589 Muir
Muir's picture


"you mean capitalizing with debt spun out of thin air isn't a good idea?

All our money is based on debt and those debts are BAD.  People think that defaults lead to  The money got spent; it stays out there.  Then the debts default and the money no longer has any backing"


It's a 2 way street.

As more crap can not be collateralized, (because it is recognized for what it is: crap) then you cannot create further "money" out of thin air.

Mon, 05/30/2011 - 10:05 | 1322294 DK Delta
DK Delta's picture

yup yup

Mon, 05/30/2011 - 10:03 | 1322296 Arch Duke Ferdinand
Arch Duke Ferdinand's picture

OT:Ignore Most Dietary Advice – Follow These Four Steps Instead...

Mon, 05/30/2011 - 13:14 | 1322748 Problem Is
Problem Is's picture

Some Serb anarchist might cap your ass for such comments...

Mon, 05/30/2011 - 10:11 | 1322298 Caviar Emptor
Caviar Emptor's picture

Echo-bust, bitchez!

Mon, 05/30/2011 - 11:32 | 1322477 disabledvet
disabledvet's picture

never underestimate a new twist on an old theme.  "monetize everything but the debt" please.

Mon, 05/30/2011 - 10:08 | 1322299 alangreedspank
alangreedspank's picture


Then again, it's not so much that they deregulated derivatives, it's that they are backstopping the kids messing up things using them. That in itself, it hyper-regulation.


Mon, 05/30/2011 - 15:44 | 1323052 A_MacLaren
A_MacLaren's picture

Derivatives are still the elephant in the room, as Eric Sprott pointed to back in April 2009.


Mon, 05/30/2011 - 10:08 | 1322301 blindfaith
blindfaith's picture

How gracious of them to spew forth with great wisdom.  Never would have guessed this without their help.

Gee...wonder what trades they have in place to profit from their 'observations' and a gentle shove off the cliff for everyone else.

Dear Carl, we in Florida have not forgotten what you did to us.  Have YOU?

Mon, 05/30/2011 - 11:35 | 1322491 cosmictrainwreck
cosmictrainwreck's picture

can you elucidate? inquiring minds want to know.......

Mon, 05/30/2011 - 10:30 | 1322302 cowdiddly
cowdiddly's picture

Never eat the seasonal salad at a luncheon in Tokyo. As the picture confirms, your hair will fall out and it makes you so mentally slow to the point where your predictions are so late they are already reality.

Mon, 05/30/2011 - 10:10 | 1322304 f16hoser
f16hoser's picture

So DONK didn't fix shit! Our politicians are so predictable it's not even funny anymore. Even Dodd knew better than to run again. I wonder how his new job on Wall Street is working out for 'em? Ron Paul better have his name on the next ballot or my "write In" candidate will be Mickey Mouse! At this point, even our idiotic politicians know the debt can't be repaid. All that's left is retirement pensions and 401K's. I can't wait for the super rich to start fucking each other over. And they will once they're done with us.......! Average Americans are to illiterate to understand what's happening to them. Divide and conquer! Americans are divided between the two party system. Dems/Repub will fuck-up the free lunch line too. Just wait and see!

Other than that "God Bless America!"

Mon, 05/30/2011 - 10:35 | 1322336 Caviar Emptor
Caviar Emptor's picture

At least they had Betty Boop for President way back when. Now we can't come up with a decent update. Sadder yet: if a rapper, porn star, pimp or pedophile wanted to run for President many might take the candidacy seriously and they would have a serious shot. 

Mon, 05/30/2011 - 12:18 | 1322609 i-dog
i-dog's picture

"if a rapper, porn star, pimp or pedophile wanted to run for President"

Only connected insiders get a final crack at the job, the others just "happen" to have a scandal or two pop up during the campaign (if they are getting too popular). That's why, next time, it will be Perry vs. Obomber (just in case Diebold fucks up the rigging). Last time, they were "covered" with either McCain or Obomber (and, funnily enough, neither was born in the country!).

Mon, 05/30/2011 - 15:07 | 1322995 boiltherich
boiltherich's picture

Porn star, let's talk!  I would rather have a guy who made an honest living off of having a huge dick than any of the current crop of crooks.  As long as he can prove he was born on US soil. 

Mon, 05/30/2011 - 10:51 | 1322385 i-dog
i-dog's picture

"Ron Paul better have his name on the next ballot or my "write In" candidate will be Mickey Mouse"

Why the fcuk do you participate in that charade? Do you seriously think they even count the votes?

"God Bless America!"

How do you think that is working out, so far?

Mon, 05/30/2011 - 11:47 | 1322525 nodhannum
nodhannum's picture

Sadly, I have to agree. You can fool some of the people some of the time but you can't fool all of the people all the time...with one CAN fool enough of the people enough of the time.  We are fucked and they won't even kiss us!

Mon, 05/30/2011 - 10:16 | 1322308 rufusbird
rufusbird's picture

Comments here over the past week prompted me to try to articulate this thought. Please bear with me...

A New Division

     The nature of the events and follow up discussions has strengthened my growing belief that there is a developing new division in this country. On the one hand there is the combination of the current powers in control, on the other hand is a growing group of citizens who believe they no longer represent the interests of the public, and in the extreme, believe that are acting in concert to the disadvantage of the public. Now I realize that is a broad swath, but intentionally so, because the second group is becoming a larger and larger group.    

     The media and the news has historically presented a view of ourselves, as a nation, as a nation of Democrats and Republicans. This is something else. There has been something new growing. For lack of a better word at present, I will say it is like a political party, except that it is not organized. That is the ominous part. If it were organized, it could be watched, influenced, controlled, debated, invalidated or what ever. It is a like a live organism with a life of it's own, a mass of cells without a body, but with a consciousness in the Carl Young “collective conscious” sense. This growing population has a growing mass of literature and communication that is conducted primarily in/on the Internet. I have never yet heard of it referred to collectively with a name. If it had a name, an accurate name would be “The Patriot Party”.

     I think there is a growing division between the The Powers That Be. TPTB for short, and the Patriots. The powers that be include most of the current government administration, the money center banks and the Federal Reserve, heads of Wall Street firms, and major corporations, who collectively control most of the nations media. The other group, the Patriots, is a growing list of people who have become disenfranchised with the direction the nation, it's attitude toward individual freedom, the economy, and financial industry regulation, have taken. A growing number of spokesman has developed, who have a growing population of followers of their comments and videos, and interview clips, some of which are from the main stream media. The list of people is increasingly including journalists, political figures, ex political figures, and ex-military figures, all of whom are speaking out against current Federal Reserve Policy and Banking administration, or lack of, the failure of Regulator bodies to perform their jobs, such as the SEC and the CFTC. A portion of this group believe that a takeover of our government, by the industries that are suppose to be regulated, has already occurred. The reason this group of people and needs to described as new division is because, while they all share a strong conviction that something wrong has, and is happening in the nation, that laws reflect the interests of Major Corporations. Generally, these social critics do not stand out as, or refer to the issue as Democrat vs Republican issue.

     The Powers That Be group includes a large part of the population that is influenced by the media who would probably consider the Patriots to be un, or Anti-American. That is why I call this new development a division. I am speaking as a sociologist, not a politician. I am certain that the administration has social scientists who are aware of, and describe just what I am talking about. I think that there is some conscious effort taking place to keep the general population pacified, and to prevent them from becoming part of the Patriot population. Again, I don't call it a movement because it is not organized. I think there is some fear on the part of government, of what would happen if more of the population became Patriots. That is the motivation behind the growing invasion of privacy, recent extension of The Homeland Security Act, and the development of FEMA camps, and other precautionary measure.

     The weakness in my description above, is in failing to convey how big this new division is. I tend to talk to a select group of a few people who are like minded. Only recently have I had many discussions with other new people that I meet, and have discovered that many people have been going through a process of discovery and disenfranchisement. They express a genuine concern about who is in control of our government processes, and a fear of the future. Invariably, the issue of the power and influence big banks comes up. Rarely does the issue of Democrats, or Republicans come up. These people are all good citizens and concerned Americans and they don't know what to do, but they want to share their concerns. They have become part of the Patriots.



Mon, 05/30/2011 - 10:21 | 1322318 Oh regional Indian
Oh regional Indian's picture

Nice Rufus, I was thinking about this last night and I call them (my-self included) mis-fits.

Plain and simple. In fact, that is the theme of the video (mine) below:


Mon, 05/30/2011 - 10:53 | 1322383 rufusbird
rufusbird's picture

Thank you for the link. I had trouble with the original site, and had to use the YouTube version...

I enjoyed it a lot. Is that you? For what it is worth my three grandchildren were encouraged to use a variety of handdrums around my house as they developed, and they all have a well developed sense of rhythm.

Mon, 05/30/2011 - 11:09 | 1322434 Oh regional Indian
Oh regional Indian's picture

Thanks rufus. Yes, that is me. And that was my blessing too. Instruments around the house that I had free reign on! Good move by the parents.


Mon, 05/30/2011 - 11:42 | 1322501 disabledvet
disabledvet's picture

ever rage into a "death metal" sequence for fun?  "bite the head off a canary" and sheet?

Mon, 05/30/2011 - 12:01 | 1322571 Oh regional Indian
Oh regional Indian's picture

Too funny. You'll have to give the whole DVD a listen then disabledvet, eh?

That was Oz E.

i'm V


Mon, 05/30/2011 - 16:50 | 1323150 Ag1761
Ag1761's picture

Hey ORI, how many Eagles you hiding in those bongo pots in the video?

Mon, 05/30/2011 - 14:04 | 1322834 Pegasus Muse
Pegasus Muse's picture

A most enlightening documentary.  The Banksters have been perfecting their fraud/scam for hundreds of years.  The biggest challege today, in contrast to years past, is so few people understand what really is going on.  This documentary takes care of that problem. 


The Money Masters - How International Bankers Gained Control of America

 "The powers of financial capitalism had a far-reaching plan, nothing less than to create a world system of financial control in private hands able to dominate the political system of each country and the economy of the world as a whole...Their secret is that they have annexed from governments, monarchies, and republics the power to create the world's money..." THE MONEY MASTERS is a 3 1/2 hour non-fiction, historical documentary that traces the origins of the political power structure that rules our nation and the world today. .... "


Mon, 05/30/2011 - 10:33 | 1322331 sschu
sschu's picture

Yours is not a bad thesis, here is a book written by someone with similar perspective:

I have not read it, but listened to a couple interviews and understand the ideas.  They have some merit.

I am unsure how this all gets reconciled, but it seems some sort of social meltdown is likely.  

As the economy slowly (or rapidly) sinks into the debt induced coma, the only institution left standing and the one that will be portrayed as the savior will be the Federal Government. So we will have a Federal Government and Fed induced fiscal and monetary catastrophe that will be solved by more powerful, bigger and intrusive government.

Everyone will work for the government and ultimate power will be achieved by the progressives (TPTB), because if you want to eat, you will vote for the ones handing out the food.

The pain we need to endure to prevent this will not be borne by the American people it is sad to say. I hope I am wrong.



Mon, 05/30/2011 - 10:32 | 1322338 Imminent Collapse
Imminent Collapse's picture

Nice post, dude.  I agree with the premise and salute ZH for leading the way.  Actually this group of people show common attribute:  discernment and independent thinking.  This is not a group of illiterate witch burners.  My experience is that these are people who have considered the facts and come to the very supportable conclusion that the patterns are dysfunctional.  The big issue now is what to do about it - and how to protect your family and friends from the coming cataclysm.  Hold high the mission!  

Something's happening here, what it is ain't exactly clear - Buffalo Springfield -

Mon, 05/30/2011 - 10:55 | 1322396 AgShaman
AgShaman's picture

"Battle lines being drawn...."

Nice thoughts Rufus.

The problem is with the disconnect fomented in the populace's historical background.

"A Republic, if you can keep it" -BF

It has been lost....and the states have been subjugated by a traitorous entity....empowered by a parasitical syndicate of private bankers.

The division you speak of needs to be encouraged.

States would do well to consider threatening the "federal beast" with secession....and snap more of the asleep, over-fluoridated, and over-medicated complicit zombies into being awake to the original designs of their country. They equate "patriotism" with going out and dropping a couple "C-notes" on a box full of fireworks once a year.

I for ashamed to be an American....henceforth, I will accuse military service members of treason....and for breaking the oaths they took upon entrance into their service.

(all enemies....foreign and domestic)

The American landscape is laden with "domestic enemies"....quite a few departments of the federal govt. have easily qualified to emulate that moniker.

Mon, 05/30/2011 - 11:46 | 1322522 cosmictrainwreck
cosmictrainwreck's picture

Understand your premise; I think if they kept the oath we'd have a damn coup. Unfortunately, the more probable outcome is fascism, since all the fat-ass generals & bureaucrats in the Pentagram are nothin' but pigs at the trough, too.

Mon, 05/30/2011 - 15:13 | 1322999 wretch
wretch's picture

The people always wait until they're pushed to the precipice.  Some fight and others get pushed into the void.  Those who fight and live on live only to face the void another day.  We're not there yet.

Mon, 05/30/2011 - 10:36 | 1322349 Bindar Dundat
Bindar Dundat's picture

Well said and VERY clearly articulated!  We are seeing the same thing here in staid old Canada but to a lesser degree. The fear of the TPTB is well founded in the U.S. since you were born out of rebellion.  What you are really saying is that the system is broken and broken part is in control.  Fixing it will be left to the lovers of freedom and individuality.

 "The Bureaucrats are coming!"  Another ride for Paul Revere coming soon?

Mon, 05/30/2011 - 10:43 | 1322354 Renfield
Renfield's picture

Rufus, good call as far as it goes. I think that elusive element you're reaching for is in the 'shadow' side of our psyches: the anger, the rage, the irrational and chaotic element of a disenfranchised mob that academics and thinkers have a hard time describing because it is frightening.

There is a great deal of that element simmering here, and that element is the spark and power behind a revolution.

Of course, a revolution also entails several factors:

1) The outcome is unpredictable, and can easily be even more evil and destabilising (to a 'civilised' society) than the original corrupt regime; and

2) 'Justice' is not always equally imparted; and

3) 'Society' as we know it will most definitely be overturned, and with it any pretence of 'security', including the high probability of survival in a 'stable' political environment.

When our mask of 'stability' is torn away, things become frighteningly chaotic and outcomes seem random to anyone with less than a god's perspective. Only history can restore rationality to the events taking place, and we are barred from that comfort.

I think that elusive element is not difficult for any thinker to see, but much more difficult to admit to and describe even to oneself because it requires a long thoughtful stare into the human abyss. This requires a coolness that can be achieved only by divestment of any interest in the outcome (including one's own life and the lives of family). It requires denial of our own survival instincts.

I think you will have to wait a generation or two, for the detachment of history, before you get the description you're looking for.

Mon, 05/30/2011 - 14:53 | 1322957 DaveyJones
DaveyJones's picture

Agreed. Sometimes my experience in the criminal justice system skews my perception of the human condition. Sometimes the ugly realities help me face the truth. 

Mon, 05/30/2011 - 11:01 | 1322402 i-dog
i-dog's picture

"the second group [Patriots] is becoming a larger and larger group"

Yep ... it has rocketed up from 0.1% to 0.5%! Take a poll around your family or colleagues and see what the result is?

Mon, 05/30/2011 - 11:17 | 1322448 rufusbird
rufusbird's picture

Thanks to all for your comments. i-dog, I expressed sentiments similar to  your just recently. But as the weather has improved I have started going back out to the local coffee shops. I don't go to Starbucks but a friend of mine does. We had interaction last week that was part of the cayalyst to the thoughts I expressed (in the middle of the night) the following is taken from a larger revision I did in the morning...It addresses your statement...

"To illustrate this, I can use the example of something that happened last week. I sent a friend a link to Helen Caldicott's YouTube video about Fukushima Japan. She was watching it in Starbucks on her laptop where it ended up with the over head canned music volume turned down so the crowd around her could hear the video they were all watching on her laptop. She said the people “were so hungry” for information about Fukushima, and that one woman stated that she needed to get a PC and start using the Internet because she couldn't get any real news anymore. When one asks why the US news media provides only limited amounts of Fukushima coverage, it is logical to consider that GE is the world's biggest nuclear-equipment supplier, and is also the largest media owner in the United States. Indeed, a look at the list of their media assets in Wikipedia required me to scroll down button to view them all. Is it any wonder that coverage of this issue is minimal."


Mon, 05/30/2011 - 11:49 | 1322529 disabledvet
disabledvet's picture

on the good side you get Jack "the Ripper" Welch starting Tuesday!  "Not only are you fired" but "we'll throw in your city, state and country in the mix just for fun!"  I've been working on a new book--actually "it's more of a short story"--entitled "Straight Through the Gut"--with "a decapitation" so we can "make it crowd pleaser!"  The fact of the matter is the entire world should be disturbed that "we at Zero Hedge are the news now."  I know i am.  Who knows--maybe governments will actually tell them...tell them...tell, forget it.  "We used to be somebody, once.  Somebody...going somewhere, DOING something.  We...

Mon, 05/30/2011 - 14:59 | 1322980 DaveyJones
DaveyJones's picture

my high school daughter is studying for a presentation on Orwell's 1984. That prompted me to start reading it again. It's one hell of a poetic forecast - the collective psyche and the utter inability of characters to grasp the truth.

Mon, 05/30/2011 - 11:09 | 1322435 centerline
centerline's picture

Watch for the strong man.

Mon, 05/30/2011 - 12:05 | 1322584 pirea
pirea's picture

All the time the strong man is coming from the right.

Mon, 05/30/2011 - 11:31 | 1322480 shortus cynicus
shortus cynicus's picture

I hope, the great change will come when real industry takes charge on financial "industry".

Financial cartel has no real power, they are only supporters of military industry. But they practically destroyed its production capability, the last Rear Earth Metals shortage was an awaking call.

Secular commodities rise is much more than speculation, in long term it's

  • dying of money-masters and other parasites,
  • rebirth of real wealth and hopefully freedom,
  • come back of many jobs back to places where consumers live.

Sick people dying in FEMA camps don't make military and industry stronger. So I hope real industry will wake up and make some moves.

Mon, 05/30/2011 - 12:11 | 1322596 pirea
pirea's picture

Greed does not have logic. The main goal is to get as much money as you can. Does not matter how and what is being destroyed.

Mon, 05/30/2011 - 11:44 | 1322506 mayhem_korner
mayhem_korner's picture

When in the course of human events...

Now we are engaged in a great civil war, testing whether that nation, or any nation so conceived and so dedicated, can long endure.

This is John Connor...

Follow the white rabbit, Neo...

Nice post, rufus.


Mon, 05/30/2011 - 10:20 | 1322315 bania
bania's picture

the press is going to tear a strip off Mobius

Mon, 05/30/2011 - 11:50 | 1322532 disabledvet
disabledvet's picture

"he gives great head."  Sorry, i couldn't help it.

Mon, 05/30/2011 - 13:15 | 1322742 Problem Is
Problem Is's picture

Mobius strip is an inside out mofo anyway you fold him...

Mon, 05/30/2011 - 10:26 | 1322320 williambanzai7
williambanzai7's picture

Zero Hedge and the WilliamBanzai7 Blog ;-)

Mon, 05/30/2011 - 10:27 | 1322327 sgorem
sgorem's picture

(menu included herb crusted chicken breast with cheese and tomato sauce, mashed potato and green vegetables, seasonal salad), a sure sign that even the billionaires are cutting back. Guess high gas $, high food, and devalued dollars, along with higher taxes "on the side" will be hitting US next:)

Mon, 05/30/2011 - 11:07 | 1322423 i-dog
i-dog's picture

That's a gourmet treat for the FCC ... and 'over the top' for foreign correspondents! Unlikely there was even a single millionaire there, let alone any billionaires.

Mon, 05/30/2011 - 10:35 | 1322335 sunny
sunny's picture

I agree completely with the idea of yet another financial crisis.  Any decade now.  There are cans no one has yet named, the road is long, there are those who are lining up as I type for the priviledge to kicking those cans for as long as the electorate will allow them.  Don't hold your breath for anything to happen before 2014 or ....


Mon, 05/30/2011 - 10:33 | 1322341 dbTX
dbTX's picture

Mobis, as seems to be the conventional wisdom these days...


I say these days conventional wisdom is an oxymoron. Nothing conventional about wisdom.

Mon, 05/30/2011 - 10:40 | 1322353 Caviar Emptor
Caviar Emptor's picture

We never really got out of the last financial crisis, so the next one will be a summation crisis. Kick the can down the road enough times and even that has diminishing returns. That's because the marginal propensity to purloin (to coin a term, hold the applause) keeps increasing every time. All those decisions are political, not strictly economic. So there are many hands stretched out, many palms to grease, many rabbit holes to fill. Those only proliferate as the situation gets more desperate. They can smell it. 

Mon, 05/30/2011 - 10:44 | 1322364 bugs_
bugs_'s picture

what if i got a paper cut?

then you'd be doomed

Mon, 05/30/2011 - 10:47 | 1322370 falardea
falardea's picture

Ok, I'm pretty dumb when it comes to financial derivatives.  If there is $600T in the derivatives market, who "owns" that money, the banks.  Is this the play money they use to have instant capital when they need to tweak a market in their favor?  How can there be more money in a market than there is in total world GDP?  I'm a really smart guy and I don't understand how there is more money in a market than there is value in the world.  Agh!

Mon, 05/30/2011 - 11:05 | 1322411 Fancy Bear
Fancy Bear's picture

It's the sum total of the value of the bets. E.g. If you give me $10, I'll promise to give you $1T if the next US president is a citizen of North Korea. But I'd probably just default or get bailed out if I'm TBTF and a bigger institution can fit me on their books.

Mon, 05/30/2011 - 11:03 | 1322412 centerline
centerline's picture

These days... there is a virtually endless list of creative financial mechanisms invented to accomplish just this task.  In fact, without them the ponzi would have collapsed decades ago.  That money isn't liquid though.  It was spent in one way or another... fueling the wealth transfer engine we now see out in the open.

Mon, 05/30/2011 - 11:11 | 1322440 Renfield
Renfield's picture

Falardea, most of us are pretty dumb when it comes to financial derivatives...I wonder if anyone posting or commenting here would claim to understand them.

I'm no financial player but just are you are learning by reading. Let me oversimplify to start the ball rolling in reply to your questions, and the other ZHers can jump with with corrections and all the ways my reply is idiotic and then you can learn from the discussion.

"who 'owns' that money"...

Derivatives were designed specifically so that there is no clear 'owner' and specific end to the money trail - to obscure the 'bagholder'. Risk is bet on, and hedged against, and the success or failure of any given transaction will benefit multiple parties (and often the same ones on both sides) and deal losses to others (those often uninformed about the risk of what they were buying, or even *that* they were buying at all). This is one reason governments choose to step in and make taxpayers the ultimate 'bagholder'.

"instant capital when they need to tweak a market"...

...comes from the government, who 'prints money' via the central bank and backstops all risk of those deemed 'too big to fail'. This 'money' is debt (claims on production) on present and future generations. See above, taxpayers as bagholder. Which is one reason gov/MSM try desperately to prevent ordinary taxpayers from finding out what their government is up to with the central banks, since the taxpayers tend to wind up being pissed off as they find out.

"how there is more money in a market than there is value in the world"

'Money' does not always measure 'value'. The only difference between a $0.35 reuben sandwich in 1935 and an $8.00 reuben sandwich today is inflation, the 'stealth tax' which again, tends to piss off ordinary taxpayers when they learn about it. (See above, what government is up to with central banks.) The *value* in the system is the same as in yesteryear (adjusted a bit upward for productivity and a bit down for diminished resources). The *money* in the system, which prices that value, has increased exponentially.

I'll quit here and let someone more informed take over. I hope someone's important for us ZH readers to be informed on these basics and god knows answers are hard to come to in all the propaganda and misinformation out there.

ETA: I see 2 people already did while I was still typing. This is one reason I love ZH...

Mon, 05/30/2011 - 11:55 | 1322539 falardea
falardea's picture

Right, I've learned how the Fed works since joining, and should have made the connection between value and money.  I have tried to find a concise definition of a "derivative" (not the calculus kind) and came to conclusion they are essentially bets.


So you're essentially saying the $600T in the derivatives market are all bets on bets on bets, that intertwine such that they have no connection to value in the real world anymore.  Ok...


And we're all f'ed because we are simply the batteries in the Matrix, and there is no Morphius (other than ZH)?

Mon, 05/30/2011 - 12:22 | 1322603 Renfield
Renfield's picture

And we're all f'ed because we are simply the batteries in the Matrix...

Not *all*. Anyone who owns gold, hard money, doesn't have to be a battery. There's a learning curve though. It better be owned as hard money and not a quick leveraged trade on some paperbug chart.

Soft money disciples are fucked, yeah.

PS: There are many Morpheuses (Morphei?) and Trinitys out there. (Trinity rules.) The blogosphere is lit up with the truth and has been for years. We all have a list of bookmarks as long as your arm - just have a look at the left side of the screen, 'Zero Hedge Reads' for starters - ZH is thank God not the only one, although one of the best. The blogosphere truth will get LOUDER and LOUDER as long as people like us crowd into it and keep talking.

Mon, 05/30/2011 - 11:38 | 1322497 Caviar Emptor
Caviar Emptor's picture

Don't you guys get it? They just kept making bets with one another to give the appearance of booming business. That's how they lined their pockets with fees and bonuses aka 'the skim'. 


Mon, 05/30/2011 - 11:52 | 1322540 disabledvet
disabledvet's picture

nobody owns it.  that's the beauty!  it's just "OUT THERE, Man.  Really, really...OUT THERE."

Mon, 05/30/2011 - 10:57 | 1322390 Ricky Bobby
Ricky Bobby's picture

Yeh sure Nigerian Banks WTF

Mon, 05/30/2011 - 10:57 | 1322392 serotonindumptruck
serotonindumptruck's picture

" included herb crusted chicken breast with cheese and tomato sauce, mashed potato and green vegetables, seasonal salad..."

A delectable chicken breast, lightly marinated in cesium 137, along with some wonderfully fresh garden vegetables, mildly seasoned with iodine 131 and trace amounts of strontium 89.

Sounds yummy.

Mon, 05/30/2011 - 11:54 | 1322547 disabledvet
disabledvet's picture

followed by an H W "barf in the lap."  It's hard sitting through those things.  I love that video--describes being a world leader perfectly.

Mon, 05/30/2011 - 10:57 | 1322400 Bahamas
Bahamas's picture

menu included herb crusted chicken breast with cheese and tomato sauce, mashed potato and green vegetables, seasonal salad),

How about a black swan casserole

Mon, 05/30/2011 - 11:08 | 1322426 zen0
zen0's picture

Fukushima sushi

Mon, 05/30/2011 - 11:39 | 1322498 Caviar Emptor
Caviar Emptor's picture


Mon, 05/30/2011 - 11:07 | 1322407 MarketFox
MarketFox's picture

Please allow me to pour some more gas on the fire....



Nothing to the positive can happen economically speaking until true structural reforms are actually implemented.....


Such as....



No corporate-individual be replaced by a sole consumption tax which cannot exceed 15%....cumulative FED and State....


Labor equilibration vs BRIC....

This can only be accomplished by more favorable Dollar vs Yuan terms.....



Must be free and internet based.....

Education is completely out of hand.....



There have to be cost adjustments....and pertinent legal adjustments....No more limits on the number of doctors allowed in the system.....


Legal Largesse has to be all but diminished....

This is killing the US.....Individuals cannot go after the likes of GS....who can afford it....This is how Wall Street knows it can press envelopes....who can afford the time and money to go after them.....


Energy Independence....


The US must retain earnings .....not create and ship them out.....


Minimize the Wal Mart effect....

This happens by BRIC labor equilibration....




And the list just gets longer....


ie Same faces same places in politics is what has caused major damage to the US and is exactly why the US currently has and maintains a FASCIST system....

Total reset....all new names....remove the lobbyist be replaced by State mandates.....





People have lost their trust in the markets.....

There should be normal interest rate curves given asset class.....and equities.....Commodities have to have size limits and speculation restrictions.....


Furthermore the exchange is nothing but software and could be located in any country.....


Perhaps a more neutral domicile ie Switzerland ....along with Wiki style data format per company....would better serve Retail....


The current system simply games what is left of retail.....

Lines need to be Glass Steagall.....



Mon, 05/30/2011 - 11:13 | 1322439 nasa
nasa's picture

Can someone please explain to me why Phil Gramm is not in club Gitmo? 

Mon, 05/30/2011 - 11:41 | 1322508 TheMerryPrankster
TheMerryPrankster's picture

Because he is well connected, having made many rich people much much richer and he is now a vice president of Swiss bank UBS,  his wife is also gainfully employed by the same bank.

Phil Gramm is the kind of tool that stays bought, and gangsters of all stripe appreciate loyalty above all else.

Mon, 05/30/2011 - 12:00 | 1322556 disabledvet
disabledvet's picture

because he's still not afraid of appearing in public.  "that's the difference between being in prison and not."  A prisoner can play basketball "outdoors"--but "not in public."

Mon, 05/30/2011 - 11:18 | 1322451 MrTrader
MrTrader's picture

WHAT SORT OF BULLS1T GENERAL STATEMENT IS THIS:"that the market could any day open not only bidless"? About which "MARKET" are you talking about? At last check - I mean when I was 5 years old - I SOMEHOW learned that there is some sort of correlation or non correlation going on between cash markets, derivatives markets, stock markets, bond markets and some other not named markets. So, basically WTF are you talking about, author????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????ß

Mon, 05/30/2011 - 11:45 | 1322511 Caviar Emptor
Caviar Emptor's picture

There's been only 1 correlation: everything to The Bernank. 

Mon, 05/30/2011 - 19:36 | 1323436 boiltherich
boiltherich's picture

Only a minor correction and I am not sure it is even worth mentioning, some, a good deal of the blame goes to Greenspan who is still alive even if he does not look it, thus still eligible for the courts to examine and then punish appropriately.  and I suspect that Loanspan is an eminence grise behind quite a few people still, including BenB. 

So, all in favor of bringing back the guillotine hands up, all opposed please go home and be quiet.

Mon, 05/30/2011 - 11:46 | 1322513 TheMerryPrankster
TheMerryPrankster's picture

You are a bold typist, but a bold thinker, not so much. Easy on the punctuation marks, you only get so many per year, and Durden won't let you post once you use them all up.

Mon, 05/30/2011 - 14:36 | 1322909 lizzy36
lizzy36's picture

Time to go back on the meds.

Mon, 05/30/2011 - 11:27 | 1322467 Re-Discovery
Re-Discovery's picture

Moby-us just became slightly less lizardly in my mind.  Only slightly.

He looks like Moby's dad.

Mon, 05/30/2011 - 11:46 | 1322516 Caviar Emptor
Caviar Emptor's picture

Well he did talk his book at the end

Mon, 05/30/2011 - 11:25 | 1322468 FoieGras
FoieGras's picture

Market has been broken since January 2009? Oh please. If this is a broken market then you haven't traded a one-way bull market.

This market is not better or worse than any other market I've seen previously. 1994/1995 soft landing rally, 1998 small cap & tech bear market, 2001/2002 paranoia etc. etc.

This market is *NOTHING SPECIAL* -- markets were changing back then and they're changing today. The author is trying to create some kind of perception as if today was the first time in history markets don't make logical sense or are out of whack. The truth is that this has been the case for the last 100 years, not just today.

Keep blaming the government or the Fed or whoever. If you trade for a living you quickly learn that blaming others is a fool's game.

Mon, 05/30/2011 - 14:38 | 1322907 lizzy36
lizzy36's picture

Oddly i don't remember ZIRP, or the Fed buying trillions in Treasuries or billions in MBS on any of those dates you mentioned.

Nor do I remember Goldman (went public in 1999) and its peers, having quarter after quarter of perfect  "no money losing trading days".

Near as i can tell this article is not blaming "others" for anything. Merely commenting on the likelihood of another major meltdown. Which if anything like the last meltdown, is a true traders wet dream.

Mon, 05/30/2011 - 11:31 | 1322476 PulauHantu29
PulauHantu29's picture

I'll pass on the tomoatoes...but pls pass the mashed potatoes.

Mon, 05/30/2011 - 11:35 | 1322489 ??
??'s picture

Mark Mobius??????????  why not just quote  Elmer

Mon, 05/30/2011 - 12:14 | 1322616 Muir
Mon, 05/30/2011 - 11:44 | 1322507 P-K4
P-K4's picture

I don't get it ! I saw the HBO special " Too Big To Fail" and all of these guys were likeable and should be credited with saving banker pensions and bonuses. They deserve membership in the Bilderberg club (if they don't have it already).


Welcome to the modern day caste system. 

Mon, 05/30/2011 - 11:48 | 1322528 TheMerryPrankster
TheMerryPrankster's picture

 A caste merely relegates all peoples to different classes from which they can never escape, even in death they are still bound by caste, and should they reincarnate as humans, again they stay within class.

What we have here is a return to feudal society, where most people are chattel or property sold with the land. The princes are all powerful for they allow the king to continue to rule or not. The princes decide if the taxes are fair and how much of the crops the peasants can retain.

The princes are now corporations, I'm sure you can plot the remaining relationships.

Mon, 05/30/2011 - 11:48 | 1322520 RobotTrader
RobotTrader's picture

Tough to find a bull anywhere on Wall St. these days.

All the "smart money" seems to be universally bearish.

Mon, 05/30/2011 - 12:02 | 1322564 disabledvet
disabledvet's picture

and if you look below you can see an actual picture of the last remaining bull!

Mon, 05/30/2011 - 12:22 | 1322624 FoieGras
FoieGras's picture

Let the SP500 drop 20% and you'll have 50% of Wall St. and 100% of Joe Average ultra bearish and ultra short. The second we turn above the 200 SMA after a sizable turnturn I'll load the boat with the worst crap stocks.

Rinse and repeat.

Mon, 05/30/2011 - 11:50 | 1322524 bankonzhongguo
bankonzhongguo's picture

These guys are just cheap bastards. 

They can't afford the DOW 36,000 prices, so they are betting the other side of the trade.

Pump and dump.

Nope.  Dump and Doom.

Mon, 05/30/2011 - 12:01 | 1322562 TheMerryPrankster
TheMerryPrankster's picture

I'll see your Dow 36,000 and raise you Dow 36,000,000. All numbers are infinite as is growth itself, why this is only the ground floor. Get in now with the cheap money or you'll be kicking yourself for the lost chance to ride the diamond elevator to the sky.

Any and all sarcasm is intentional, the really infinite factor is man's greed. When we eat more than we need we grow fat, when we grow fat we become lazy and easy pickins for any hungry predator waiting for us to make a mistake.

The Dow is a fake number, in a fake market, it correleates only to greed. It is like counting the molecules in the atmosphere and unlike the atmosphere it does more harm than good.

Were I convinced I needed a fortune, I would make it the old fashioned way selling black market goods and services like so many of the ruling class before me. The Dow is a suckers game.

Mon, 05/30/2011 - 11:53 | 1322531 virgilcaine
virgilcaine's picture

All of the major world markets in this series lost ground over the past week. The DAX has been a consistently poor performer in the three-week comps shown below. But the worst performance by far was the Shanghai Composite's 5.20% plunge. That index is now 21.94% below its interim high on August 4, 2009, which puts it back in bear market territory under the conventional 20% decline benchmark.


Mon, 05/30/2011 - 12:31 | 1322646 boeing747
boeing747's picture

Welcome "Double Dip", several mid-size supermarkets(local chained) out of business in San Jose, California this year.

Mon, 05/30/2011 - 13:13 | 1322738 Problem Is
Problem Is's picture

Icahn's a tool... but the Mobius strip... now that is profound...

Mon, 05/30/2011 - 13:37 | 1322793 Astrolabe
Astrolabe's picture

"except that it is not organized. That is the ominous part. If it were organized, it could be watched, influenced, controlled, debated, invalidated or what ever."

right on. how very perceptive. were it organized it would be co-opted. can you say "tea party"?

Mon, 05/30/2011 - 14:07 | 1322837 Segestan
Segestan's picture

These guys all say nothing has been fixed , that the west is bankrupt , which they contributed to daily, they are investing in other markets, safer markets , growing markets , Africa ?... give me a break,.... but what real efforts have they done to attempt a fix?...Nothing!   They have learned nothing, or at least they as a profession are not united enough the save their own ass.. What makes these fools think Africa can offer more than the west, once the west fails.

Mon, 05/30/2011 - 14:04 | 1322841 Nothing To See Here
Nothing To See Here's picture

"The global financial crisis three years ago was caused in part by the proliferation of derivative products tied to U.S. home loans that ceased performing"


I still cannot figure how it became gospel that the 2008 collapse was because of derivatives and deregulation (Glass-Stegall, Gramm-Leach-Bliley).

Derivatives on home loans proliferated because banks were forced to make bad loans and they wanted to get them out of their books + credit rating agencies gave AAA to these derivatives which were then bought en masse by the Basel-driven computer models of every bitchin institutional investor.


Take the CRA down and you avoid the subprime mess. Avoid the subprime mess and you avoid the tier 1 capital meltdown.

Mon, 05/30/2011 - 14:30 | 1322879 lizzy36
lizzy36's picture

Can you explain to me how "banks were forced to make bad loans"?

Mon, 05/30/2011 - 14:39 | 1322904 ToNYC
ToNYC's picture


NY Fed had a strap-on working big time at 43 & 44's corporate rodeo. Yee-hah.

Mon, 05/30/2011 - 15:01 | 1322983 blunderdog
blunderdog's picture

You didn't read that, you poseur.

Mon, 05/30/2011 - 16:24 | 1323109 cosmictrainwreck
cosmictrainwreck's picture

salut', blunderdog....first time I've ever seen the "-eur" version; I guess everybody likes "poser" cause it sounds like "hoser" ha

Mon, 05/30/2011 - 15:01 | 1322986 Nothing To See Here
Nothing To See Here's picture

Perhaps you will find this more useful though :

"(...) It is the thesis of this chapter that this large increase in defaults had been a potential problem waiting to happen for some time. The reason is that mortgage underwriting standards had been under attack by virtually every branch of the government since the early 1990s. The government had been attempting in increase homeownership in the US, which had been stagnant for several decades. In particular, the government had tried to increase home ownership among poor and minority Americans. Although a seemingly noble goal, the tool chosen to achieve this goal was one that endangered the entire mortgage enterprise: intentional weakening of the traditional mortgage lending standards.

After the government succeeded in weakening underwriting standards, mortgages seemed to require virtually no downpayment, which is the main key to the problem, but also few restrictions on the size of monthly payments relative to income, little examination of credit scores, little examination of employment history, and so forth. This was exactly the government’s goal." (...)

Tue, 05/31/2011 - 00:17 | 1324463 StychoKiller
StychoKiller's picture

It was when the banks and wall street starting selling their loans as derivatives that the problem started." That may be the party line and CNBC talking heads explanation but it's not accurate.   That's just a cause of some stupid regulation (i.e., CRA, AKA "Green-lining") that forced banks to originate loans to people who they knew had no chance of paying them back. That's right, they were forced to make these loans by  regulations passed by the Federal government and threats of fines by the Federal Reserve bank for non-compliance. Hmmm...what's a po' bank to do? I have to loan this money to people who can't pay it back or suffer the wrath of the Feds so I'll have to offset my risk of the defaults I know are coming. The qaunts on wall street figured out that it was legal to package these loans into securities and sell them. What a wonderful idea says the banker. I can make the loan and offset my risk to someone else. It's like insurance! Further, the buyer who took on the risk could bundle the loans with others and sell them to someone else if desired. "Hey this is great! Thanks Government regulators!!, you just created a whole new way for us all to make money while spreading the risk around." "This is easy money, government endorsed, and housing is booming."  said the bankers and wall street titans. Problem was, everyone assumed that the defaults would be handled a little here and a little there. But what happens if the defaults all come at once? We know the answer to that one.


Mon, 05/30/2011 - 15:16 | 1323002 falak pema
falak pema's picture

Its good to see main street america rediscovering what Steinbeck called the "grapes of wrath" and what Thomas Paine called " the american revolution" ...So ZH is now embarked on a "new crusade" for a "superior political system" where power will not corrupt as it will be held in check; the citizen-patriot will triumph. Next stop : a social contract to bring back jobs from "depraved, financialized globalization", and a new energy perception of constrained resources that resolves the insoluble, plutocratic mantra of "all our eggs are in ME! so precious to the "Bush-Cheney-MIC- WS clique" and which re-finds a new key to material progress that doesn't shit on human aspirations by going into the "big brother" spiral.

Good luck!

Mon, 05/30/2011 - 16:09 | 1323098 jmc8888
jmc8888's picture

If the muppets can't learn, how about Sesame Street? (the word game)

Glass-                                    Steagall

 Glass-                              Steagall

     Glass-                Steagall

       Glass-     Steagall


Why do we need it? Well we'll have them listen to Count Von Count

~1.4 quadrillion notional Ha ha ha ha

They're really worth 0.  Ha ha ha ha

Mon, 05/30/2011 - 18:47 | 1323333 Itsalie
Itsalie's picture

Mobius = the same who said in 2010 that we were into a new multiyear bull market. Time to listen carefully not just what is said but who is saying it.

Mon, 05/30/2011 - 19:03 | 1323367 jm
jm's picture

Mobius... the guy that just got his ass handed to him buying Vietnamese stocks.

Mon, 05/30/2011 - 21:40 | 1324044 MarcusAurelius
MarcusAurelius's picture

What I find truely ironic is that the banks are afraid to lend "YOU" money. You need stellar credit to walk into one of these institutions to indebt yourself. I wonder if they ever look in the mirror? They are less than credible on the lowest level yet you need to be of good credit so that they can know you are honorable? These imbeciles wouldn't know what honor is if it bit them on the ass. They engage in the same reckless gambling binges  that destroyed their assets once and they are at it again. That's some lesson they learned. Now they don't even worry or exercise caution and people simply let it happen. Well if you do nothing to stop this insanity you will once again be griping about how thieves were robbing you in broad daylight while you watched.  

Mon, 05/30/2011 - 23:13 | 1324353 Buck Johnson
Buck Johnson's picture

For Mobius to say essentially the same thing as Icahn is alarming, truly alarming.  I think they know that the bubble of US bonds and debt is about to implode and take the dollar with it.  And the reason why he and China and other countries are jumping like crazy to get into Africa is because of their resources of precious everything.  They know that once the dollar goes down, nobody will want any reserve whatever to be one countries currency (especially the US).  So what has been said and hinted about over the 2 years has been a currency that is based on a basket of commodities, not just gold or silver.  Because you couldn't get enough gold out of the ground for the currency but you could get enough commodities if it's based on a bunch of them and at a percentage.  Like 10 percent of gold, 10 percent of silver, 10 percent of Platinum etc. etc..



Wed, 06/08/2011 - 22:44 | 1353452 Boop
Boop's picture

The Next Financial Crisis Will Be Hellish And It’s On Its Way

“Prior to the bursting of the credit bubble, the public was shocked to learn that our biggest investment banks were levered 30-to-1. When asset values fell, those banks were quickly wiped out. But now the Fed is holding many of the same types of assets and is levered 51-to-1! If the value of their portfolio were to fall by just 2%, the Fed itself would be wiped out.”

Hey! Maybe some good news for a change!

Do NOT follow this link or you will be banned from the site!