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Yes, the Next Crisis is Coming… And It WILL Be Worse Than 2008
While the
mainstream media has numerous stories for why 2008 occurred, the real one is
largely ignored because admitting it would mean admitting that the entire
financial system is filled with crap and that none of these problems have gone
away.
The truth is
that the cause of the 2008 crisis was the black hole of finance: the
derivatives market. A market that is so enormous (20 TIMES the entire world
stock market), so unregulated (Wall Street can literally price these things at
whatever levels it wants) and so complicated that virtually no one wants to
write about it.
Bernanke,
Paulson, all of those guys lied when they acted like 2008 was a surprise. What
was a surprise was that the system managed to last as long as it did. As far
back as 1999, Greenspan admitted in private conversation that any attempt to
rein in the derivatives market would “implode” the market.
Why is this?
Because derivatives are crap, pure and simple. While intensely complicated on
paper (the prospectus for a typical CDO was north of 60 pages) the derivatives
market can ultimately be described in three words: Wall Street BS. It’s
basically the creation of “assets” by dressing up bad ideas and financial
nonsense in complicated terminology.
Consider the
mere notion that lumping a bunch of crap mortgages, student loans, and auto
loans into a single package and then claiming somehow a portion of this is
prime quality asset and you’ll get an idea of what I’m talking about (hint:
they’re all still “crap” loans made to folks who won’t be paying them back).
The reason
Wall Street went so crazy with these things is simple: they can price them at whatever
prices they like and shill them to whoever (Greece, Jefferson County, Alabama,
etc) while charging fees at every stage of the process.
Imagine the
profitability you could create if you literally could claim your own excrement was
a financial instrument and then sell it to investors while loading the deal up
with transaction fees, processing fees, fees if they ever realize it’s just
crap and don’t want it anymore, and the like.
As you can
imagine, this situation lends itself to getting a little too carried away.
Small surprise then that the derivatives market is over $600 trillion in size.
That’s right, the largest market in the world is based on imaginary crap
designed to make money for Wall Street and no one else.
So 2008
comes along. We all find out that this bunch of crap nearly destroyed the financial
system. And we did… nothing. Bernanke funneled trillions to the big banks (all
of whom are the primary producers of this crap) and that’s about it.
It’s almost
as if the conversation went like this.
Bernanke: You did what!?!?
Wall Street: We have rendered the
entire financial system insolvent with crap. We need trillions.
Bernanke: Hmmm… will you stop making
this crap?
Wall Street: No.
Bernanke: Will you consider admitting
it’s crap?
Wall Street: No
Bernanke: Ok, here’s a blank check.
So here we
are today. And rather than fixing any of these problems, we’ve transferred a
couple trillion dollars’ worth of this crap to the public’s balance sheet.
Put another
way, the crap that nearly took down the banks has been allowed to spread to the
US and other country’s balance sheets.
What happens
when a problem is not only ignored but allowed to spread even further? Well, we’re
going to find out.
Indeed, the
next Crisis is coming. And it will make 2008 look like a picnic. Why? Because
this time around the Crisis will involve entire countries, rather than just
banks (see Greece today). It’s going to be really REALLY bad. And I would argue
that 99% of people are completely ignorant of it.
Don’t be one
of them. Don’t believe for one moment that the issues that created 2008 are
fixed or that somehow we’ve made it through the worst. The worst is only just
beginning. It may take a while to hit (just as 2008 did) but when it does it’s
going to be really, really, REALLY bad.
On that note
if you’ve not taken steps to prepare for the coming Crisis, you NEED To
download my FREE report devoted to showing in painstaking detail how to protect
yourself and your portfolio from the coming ROUND TWO of the Financial Crisis
(round one wiped out $11 TRILLION in wealth).
I call it The
Financial Crisis “Round Two” Survival Kit. And its 17 pages contain a wealth
of information about portfolio protection, which investments to own, which to
avoid, and how to take out Catastrophe Insurance on the stock market (this
“insurance” paid out triple digit gains in the Autumn of 2008).
Again, this
is all 100% FREE. To pick up your copy today, go to http://www.gainspainscapital.com
and click on FREE REPORTS.
Good
Investing!
Graham
Summers
PS. We also
offer a FREE Special Report on the inflation situation in the US. This other
FREE Special Report, The Inflationary
Disaster explains not only why inflation is here now, why the Fed is
powerless to stop it, and three investments that absolutely EXPLODE as a result
of this.
All in all
its 14 pages contain a literal treasure trove of information on how to take
steps to prepare AND profit from what’s to come. And it’s all 100% FREE.
To pick up
your copy today, go to http://www.gainspainscapital.com
and click on FREE REPORTS.
- advertisements -
Listen, there are so many fat people in the US, the zombies will have more than enough to eat for years.
In 2009, after dissecting a mortgage-backed
security and investigating the CDS market as
best I could with the available data at the time,
I tried to describe them to a business associate
and long-time friend. I found the term "crap" to
be the only appropriate term to do so. I empathize
with the author of this article for I too could find
no less vulgar term to capture the essence of
these financial entities.
Hey Zorba, get the vaseline ready.
In 2009, after dissecting a mortgage-backed
security and investigating the CDS market as
best I could with the available data at the time,
I tried to describe them to a business associate
and long-time friend. I found the term "crap" to
be the only appropriate term to do so. I empathize
with the author of this article for I too could find
no less vulgar term to capture the essence of
these financial entities.
Got a white paper / document on your analysis by chance?
What a shameless pitch. Screw off.
By any chance, are you affiliated with the University of Phoenix?
Hi Graham.
Thanks for the article. Weak on substance, but your sense of urgency is important. Urgency IS the substance of the article.
I can't believe the Fed/WallStreet/Govt have managed to avoid the inevitable for nearly 27 months.
Yes. This is gonna be big. And nearly no one will be prepared.
IMO, best case scenario, we have a 20+ year global great great depression. Tragically, thousands die.
Worst case scenario, civil authority in the US will collapse under the weight of social unrest; culminating to a second US civil war. Millions die in US and abroad.
Prepare for the "worst," and hope for the "best."
With respect, Founders Keeper, and I liked your brief summary of things However, neither you nor Graham nor 99.99% of people on this planet, people not in the 'loop' has it right about what happened and why it happened. The reason nobody has it right is because of a defense mechanism called 'denial'. A refusal to accept external reality because it is too threatening.
In 2006, when the oil producing nations, did not produce as much crude as they had in 2005, a warning bell told the TPTB that it was probable that global peak oil was here. And if there was a plan for global oil, it was time to implement it.
In 2006 and 2007 the sub-prime real estate bubble was still inflating. As was global GDP. This was an early warning sign. GDP expanding; oil production declining.
A year later in 2008, America and the world were told of the sub-prime mortgage bubble. A month before America was to elect a new president.
What was with that? There is something more serious here than Greenspan and Bernanke screwing up. There is some method in their madness.
But what?
[With respect, Founders Keeper, and I liked your brief summary of things However, neither you nor Graham nor 99.99% of people...]---bid the soldier...
Hi bid. Thanks for your thoughtful reply. I must admit, I have not committed myself to learning Peak Oil as I have economics, finance, banking, money, debt, and history.
Greenspan and Bernanke? There's a lot of blame to go around. These two characters share only some of the blame. Blame for the catastrophe we find ourselves in today can be readily traced through US history going all the way back to our great nation's founding.
Please post more of what you've learned about Peak Oil on ZH. I'm a work in progress. Open-mindedness has served me well.
I don't think there's much to know about 'peak oil'.
'Peak oil' is a lot like same store sales at Walmart or McDonalds except in reverse. As older wells produce less oil than they did the previous year and the addition of the production of the new wells' doesn't equal the output of all wells the previous year, that can be considered 'peak oil'.
Global oil production in 2005 was 73,400,000 bbpd. which was peak production. It has not been higher than that. You would be correct to say that the recession we are in greatly curtailed demand and when the economy returns, demand will return and global production of oil will take out the 2005 number.
However that does not explain 2006 and 2007 when the bubble was expanding to the popping point. Shouldn't the last two years of the bubble have shown the greatest demand for crude oil?
Do you know who Herman Kahn was? Have you seen the film "Dr. Strangelove? Why have we attacked or are threatening to attack oil producing nations like Iraq and Libya, Syria, Iran? And saber rattling at Venezuela?
Let me know what you think of this and if you disagree with what I have said so far. (Yes, there's a tin foil hat may be in the offing)
The rest is the crazy part.
for infos about peak oil check out
http://www.theoildrum.com/
.
What if they manage to avoid the inevitable for 27 years?
How about a little more analysis leading to the conclusion that there will be a collapse vs a correction from the doomsayers?
[What if they manage to avoid the inevitable for 27 years?]---Old Poor Richard
Hi Richard. If "they manage to avoid the inevitabale for 27 years" then you'd be right and I'd be wrong.
I hope you're right.
I hope I'm wrong.
save some for the after-crisis!
Next time try not to sound so despearate in your sales pitch.
Next time try not to sound so despearate in your sales pitch.
This guy is getting on my nerves with his "buy a pallet of my advice and store it in your pre-fab (Walmart) atomic pill box". Mister Summers, do me a favour and stay away. TVM
This is some serious shit. It is going to get ugly soon. Buy all the gold and silver you can.
he's got every right to run a business! did he charge any one of us for the free info? same as online newspapers, if you want all the info, you must subcribe, no?
Not only was it free, but it doesn't hurt to be reminded that the crisis isn't really here yet. It's been postponed and exacerbated by central bank counterfeiting.
I would just add one clarification: The $600 trillion figure for the size of the global derivatives market doesn't represent a shrinkage. The BIS decided to "re-profile" the liabilities away from notional value to make it sound better. The truth is that the notional value of the shadow banking liabilities has actually increased since 2008--from $1.144 quadrillion to $1.2 quadrillion.
Ten trillion here, ten trillion there, pretty soon you're talking real money.
Graham is Zero Hedge's resident lightweight. He never has anything original to say. He just provides a short paragraph or two of doom, and then tries to sell subscriptions to his silly newsletter.
He's a nobody.
Move along.
I thought that honor went to George Washington and his cut-and-paste journalism... at least this author is his own primary source.
I thought that honor went to George Washington and his cut-and-paste journalism... at least this author is his own primary source.
Ah, the "George Washington" (hardly) truthers are out in force today. See here, here, here, here, here, here, here and here.