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On Shills, Technocrats, Politicians and the Sinking Ship

Bruce Krasting's picture




 

 Three months ago I made fun of an ABC News report about the stock market. The occasion back then was the rise in the Dow Jones above 13,000. ABC has a panel of thirteen “experts.” All thirteen were in agreement; this time the move in stocks was the real deal. All thirteen experts were convinced that stocks had no where to go but up for the rest of the year. Of course they were all wrong. 

 

These are the faces of ABC’s experts. If you watch TV, you may recognize them. I don’t think these folks are experts. They are shills. If they did not see problems looming a few months ago, they are either blind, or they were just lying.

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These very same experts (and most of the politicians in Europe) are selling a few other stories. I think they are as wrong today as they were back in February.

The big lie today is about Greece. Almost every story I read on this topic is the same. If Greece is forced to leave the Euro very very bad things will happen, including:

1) Serious hardship will befall the Greek economy. Unemployment will rise, the economy will fall.

2) Contagion will spread from Greece. Countries such as Spain and Italy will come under attack. Their ability to float new bonds will be impaired. The cost of debt will hinder their ability to grow; unemployment will rise.

3) If Greece goes into the toilet, there will be capital outflows from Southern Europe to Germany. These capital flows will undermine the banks and capital markets of countries in the EU.

4) If the Euro Zone is unstable, then the global stock markets will fall. As equity markets tank, the global economy will go back into recession (or worse). Therefore there is no option but to save Greece.

This is complete horse shit.

1)  Greece has been in a recession for five years. There is not one chance in a hundred that it is going to get out of recession anytime in the next five years if it stays in the Euro. The kindest thing that the leaders in Europe could do would be to kick Greece out. Greece should never have been in the Euro in the first place. Mistakes were made. Mistakes are always expensive, but the worst mistake is not recognizing that a mistake was made.

2)  Contagion? What is going on today if not contagion? Every country in Europe is already infected. The disease has now spread around the globe.

3)  Capital flight will happen if Greece goes turtle? Over the past two months reported capital outflows from the PIIGS exceeds $200 billion. (I think it is much higher than that.) German and Swiss bond yields have gone negative the past few weeks. There are border guards surrounding Switzerland these days to keep hot money out.

4)  The US stock market has lost a cool $1 trillion since the May 6 Greek election ($357 billion on Friday alone). Global stock markets have fallen another $1T in the same period. The book losses on other asset classes is enormous. If you add up the losses in the past three weeks, it easily exceeds $3T (5% of total world GDP).

The best thing the politicians could do for the voters they represent is to just let Greece go. Yes there would be costs, but the costs of pretending that there is a viable option to keep Greece in the Euro will be ten times the cost. If all of Greece’s debt were wiped out, the cost would be $250 billion. By my calculation, the world has already paid a price 12 times higher than that in just the past three weeks. If the game with Greece continues, the cost will be $10 trillion and a global depression. The pundits and pols are saying that the worst case is a Grexit. I say the worst case is another effort to keep Greece in.

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The blow up in Europe (and damn near every corner of the globe) the past month has led most observers to conclude that another round of Federal Reserve intervention is a just few weeks away. The pundits believe that Ben Bernanke will rise up and push some monetary buttons and all will be well again.

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How can supposedly bright people believe that another four month - Fed induced sugar high can do any good at this point? This is as stupid as the forecast that stocks were going to keep rising a few months ago. The Fed is powerless to change things; the markets have already done more than the Fed could ever do.

What might the Fed do next according to the seers? Promise to keep rates low for a long period of time? Ridiculous. We have been living with ZIRP for four years. It hasn’t worked. It's not going to work.

The Fed could extend Operation Twist, but that would not do anything either. The ten-year is at 1.45%. Who in their right mind would think that pushing the T-bond to 1.2% would make a difference? Only a fool.

Some are pushing for another round of pure QE. The Fed would buy up another $600 billion of Treasury bonds and mortgage paper. It would print the money to pay for the purchases. That thinking is insane. If the Fed were to announce a big QE program, the markets might rally for a week, but when reality sinks in, and the downside of further monetary expansion is realized, the markets would resume their slide.

Don’t believe in the pundits out there that make it on TV every day. They are either shills for their employers, blind and stupid or just flat out lying. Don’t believe in the politicians or central bankers who are pushing the case for more monetary gas. Those folks are so pregnant with their past mistakes, they can’t possibly change direction. Rather than admit their mistakes, they will double up and make the same bad choices again.

There is only one option left for policy makers. Get real. Greece has to go, Spain too. Printing money will not work, that has to stop. Yes, that direction is painful. It will cost the Germans a bundle to make things right, but that is cost it must bear. After all, Germany did create this mess, and Germany benefited from it for a dozen years. The rest of the world will suffer as well. But what is the alternative?

The ship is sinking. The captains are embarrassed that they have put the ship on a reef. They don’t want to admit to past sins so they refuse to put the lifeboats in the water for fear that the passengers will lose confidence. What those captains are actually doing is insuring that all the folks on board will drown. I would like to see a few of those captains go down with the ship, but it is unnecessary that all the passengers (seven billion) drown too. We are on the edge of a very hard landing. I don’t think it can be avoided any longer.

The next two weeks are critical. Either the globe goes through yet another round of "extend and pretend" that won’t work, or we let some boats sink. A year after those boats and their captains sink, the world will be a much better place. If the decision is made to keep the sinking ships afloat, we will pay for it with another decade of deflation.

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Mon, 06/04/2012 - 01:29 | 2490874 Elmer Fudd
Elmer Fudd's picture

No more pipe dreams please.  How is it going to go down and when is it going to go down, those are real analysis that folks need. Enough of the candy man can stuff, please.

Mon, 06/04/2012 - 06:45 | 2491046 eclectic syncretist
eclectic syncretist's picture

100% totally agree.  What little credibility the Fed has left as far as it's capacity to juice the markets would just be further impaired, and perhaps lost completely, by further rounds of easing.  Have a look at this SPY chart of the history of Fed market manipulation to get some idea of the rapidly diminishing returns we are seeing from iterative rounds of easing.

http://img502.imageshack.us/img502/2503/bubblesk.png

The first two bubbles were juiced by artificially low interest rates culminating in ZIRP and the Fed relying upon the "plenty of other tools in it's toolbox" to juice a pure debt bubble.

In the end it's all one big decades long credit bubble and it's about time to pay the bills, that is unless the Fed wants to flame out most heinously and be historically villified for eternity.  The question is will it sacrifice it's existence just to keep the game going a little longer, or will it save itself and let a lot of financial institutions go down?

Look for the Fed to increasingly call for a political solution, which won't come, but will allow the Fed wiggle room to say "it was the politician's fault, not ours", when disaster strikes. 

Mon, 06/04/2012 - 03:49 | 2490958 barliman
barliman's picture

 

Short version: Soon, hard and ugly.

We are coming up on Q2 earnings season. Jamie Dimon and JP Morgan have been fighting a moving retreat from positions (include derivatives used to hedge any position) established, misvalued and mis-reported by Bruno Iskil and chums. The notional losses are between $ 2 billion USD and $ 20 billion USD. Trying to unwind positions while you are under live fire from the rest of the market (your loss is someone else's opportunity to gain) is similar to trying to maintain a disciplined retreat of all your forces from an active battlefield - not much has to go wrong to turn it into a full fledged rout.

Meanwhile, if you are a major financial institution with your own proprietary trading positions - your senior executive management is EXTREMELY NERVOUS right now. They have watched Jamie "I'll break your kneecaps" Dimon get publicly humiliated. No one expected to ever see it happen (Black Swan), because Jamie Dimon is reckoned to run a REALLY tight ship and does not consider FAILURE to BE AN OPTION.  So, if it can happen to Jamie and JPM, you are going to be nervous as hell that it has probably already happened to you.

Time to tell your prop trading groups to start unwinding positions the senior executive management feels are too risky - problem is unwinding your risky positions puts you into a moving retreat. And now for the bad news ...

Unwinding the positions is generating unbelieveable amounts of cash. Cash is bad. No one wants to have $ 100 billion USD sitting in their bank accounts ... but they also want something that is very liquid and very low risk.  Hmmmmmmmmmmmmmmmmmm.

Now you have a bunch of people with $ 100 billion USD cash piles that all start to move into goold old UST 10 year (and everything else) bonds. UST's are considered as liquid as cash - maybe even more so. The entire herd bids up the price (down the yield) across the WHOLE UST curve.

Irony is the reason there is sooooooo much money to be invested is because the Federal Reserve has been shoveling the money into the markets via QE, QE lite, QE2, ZIRP and Operation Twist. Now everybody with lots of cash is unwilling to invest in equities.

Tragedy is when you find yourself drowning in your own excess money because the money you dumped on the world has come back home (UST's) and the only bullet you have left in your gun is too flood the world with more money.

While all this high level shit is going down, the people have decided they want their money out of their bank - so they can move it outside of the country where they live. Voila - excess cash is collapsing UST interest rates while nd the same time that fear in the streets means the small to medium size banks can end up with insufficient liquidity due to "bank runs."

How long can that go on? George Soros says 3 more months. I think he is an optimist. I think it all goes up in a flash before the end of July.

barliman

Mon, 06/04/2012 - 06:53 | 2491055 eclectic syncretist
eclectic syncretist's picture

Thank you Barliman.  Great post.

The banks got an extremely unpopular free pass in 2008.  This being an election year it's doubtful the politician's will give them another.

 

Mon, 06/04/2012 - 00:10 | 2490805 Goldtoothchimp09
Goldtoothchimp09's picture

You can think of it as a modern feudal system with Banks as King as they literally own the currency.  The serfs pay tribute (interest) to the King for use of the King's currency in our debt-based money system.  It's trickle down economics on the grandest scale.

In our debt-based system - money is ONLY created as loans from the King (banks).  Therefore, the banks solely determine where new money gets allocated (think largest corporate borrowers).  Is it no wonder we have such poisonous concentrations of wealth in our society. 

Now, say the gov't wants to stimulate a lagging economy.  In our system, the money gets allocated to the banks.  In a non-debt based system, you could send a stimulus check to every household and then the stimulus would actually work and get to Main Street. 

Folks, the problem is with the very core of our financial system -  the Banker as King - Federal Reserve system.

Jamie Dimon is using the newly created money to refresh his banks 'excess reserves' so as to maintain bank "solvency" and perpetuate the Banks as King system status quo.
The people get the bill in the form of a devalued dollar (devalued savings, commodity inflation) -- you see, the newly printed money is free for the King Bank but is a costly tax on the population.

It's all a rather simple exercise -- the parasitic banks steal from We the People. But our country is so complacent and dumbed down -- that MBAs and Economics majors are, ironically, the last people to recognize what's going down because they have been indoctrinized and go on television blathering on about the failures of We the People rather than helping the public understand that they are being stolen from. PATHETIC!

Interestingly, Ron Paul has consistently won the 30 and under vote in the primaries.

The young instinctively know that they have been born into debt servitude.  They may not be able to explain all the details - but they know, instinctively, that Ron Paul is fighting for We the People, rather than the status quo system of Fed Bankers as King.

It used to be that only the man of the household had to work to comfortable support a household.  Federal Reserve theft has gradually devalued the dollar so that now, generally, both spouses have to work.

There is nothing 'American' about the FED.  The Constitution says 'all men created equal'  Folks, the Federal Reserve Act of 1913 created a superior class of citizen - the banker class.  the Act gave ownership of the currency and financial system to a cartel of private bankers.  It is, literally, unconstitutional.

The Federal Reserve system is a poison to Americans’ standard of living to the benefit of the banker class.

Sun, 06/03/2012 - 23:35 | 2490735 neutrinoman
neutrinoman's picture

Oh save us, Obi-Ben Bernanke ....

The paid shills are bad. The unpaid shills are ... ridiculous. At least get paid, man!

Sun, 06/03/2012 - 23:05 | 2490689 the grateful un...
the grateful unemployed's picture

i doubt that while the Titanic was halfway in the water from bow to stern that the lights were working. i think it was a cold dark night for those who got off, and colder and darker for the rest.

Mon, 06/04/2012 - 02:56 | 2490929 Bruce Krasting
Bruce Krasting's picture

I just watched a bit on the Titanic. The generators for the ship were shut down just 3 minutes before it sank. This was done to facilitate the evacuation and also to provide power for sending radio SOS signals.

It might have looked very close to this picture.

b

Sun, 06/03/2012 - 22:18 | 2490603 Curve Watcher
Curve Watcher's picture

Nice job, Bruce. Keep doing God's work, sticking it to the talking heads and technocrats. And I sure as hell hope you're right that Bernanke won't print more. With hot-$$ blocks in Switzerland, it's too late to run.

Sun, 06/03/2012 - 20:53 | 2490413 Jackfish
Jackfish's picture

Bruce,

What if the suspicion that there are substantial energy assets in Greek offshore waters (as argued by John Ward at his blog the Slog, http://hat4uk.wordpress.com/) are true?

Would those interests sufficiently explain why Germany might be willing to throw more money at keeping the Greeks inside rather than allow the US to have the inside track to exploiting the resources?

Thanks for your great work!

Mon, 06/04/2012 - 02:58 | 2490930 Bruce Krasting
Bruce Krasting's picture

They may have gas. This is not proven yet. Isreal found a ton of gas off its shore. Cyprus is very close to a big find.

I doubt that this has anything to do with German thinking toward Greece these days.

Sun, 06/03/2012 - 20:49 | 2490391 jmc8888
jmc8888's picture

Actually Germany was strong armed into the Euro.  Kohl could of said no, but when Mitterand was threatening war if Germany reunified without adopting the euro, backed by Bush and Thatcher, Germany had very little choice (from within that construct of course).  They could of waited, called Mitterand's bluff, so on and so forth, but Kohl agreed.   Lord Dark Helmet in Spaceballs was smarter and wiser than Helmut Kohl.

The price of reunification for Germany was to adopt the Euro under the threat of war. 

Sure they have tried to take control of it, but they weren't the puppet masters.  Of course Britain was.  Of course we (US) were in league.  Germany only thinks it controls the Euro, when the Brits set it up SO it would fail. Getting Germany to be included all but assured they'd be seriously hampered in a best case scenario WHEN it collapsed.  When the construct was setup to fail, who cares if you have a good portion of control by being the leading controller of a doomed project?

It really is that fucking simple.

Glass-Steagall

 

Sun, 06/03/2012 - 11:02 | 2489016 shovelhead
shovelhead's picture

Bruce nails it, simple as that. The Euro dream is over. Kaput. Fini. Sooner admitted the better.

Time to take the global bank failures head on and take the pain that will result with a reset. Nobody wants to watch this unending cartoon that is the banks and Govt.s being Wile E. Coyote chase the Road Runner debt.

We already know how it ends.

But I'm betting Wile E. goes thermonuclear because the bastard just can't do anything else. Habit.

Probably not the incisive analysis that ZH er's deserve but it's still early and I need more coffee.

BTW: Fuck the Queen's Jubilee...I need JPM to hammer silver down so I can buy.

Will the Tuesday smack down happen on Wednesday or will gold pull it higher?

Sun, 06/03/2012 - 09:45 | 2488885 tony bonn
tony bonn's picture

"How can supposedly bright people believe that another four month - Fed induced sugar high can do any good at this point? "

these are all very well educated white people......how dare you impugn their perspicacity....i am sure that they are all wise beyond their years....

on the other hand, fucktard does come to mind in describing all of these "experts'" understandings....they are power hungry marie antoinettes living in their luxury cocoons oblivious to the world around them let alone truth, asking with pilate what it really is....

Sun, 06/03/2012 - 10:04 | 2488919 AnAnonymous
AnAnonymous's picture

You know, made me laugh. That is US citizens and their grand thesis.

How can they believe? Nope, they are sure.

The best is that this US citizen authors writes about shills.

Most of those bright people have all increased their personal welfare by telling their stories.
They do not believe. They know. Already working for them.

Will work even more when they are going to come back to comment on the triggering of the process, the ongoing process, the end of the process, the results of the process.

If you can make money and nicely by telling propaganda, fantasy, why bother spoiling it by telling facts?

Fact is that US citizen economics reward better telling lies than factual reports so what?

Mon, 06/04/2012 - 03:56 | 2490964 Colonial Intent
Colonial Intent's picture

"I imagine you have a dim perception that the universe has played a cruel trick on you, but you obviously lack the intelligence to really comprehend the magnitude of the joke."

It seems you are passionate about your support for Lin Biao and unable to accept col gordons interference in your country was for the greater good.

Therefore i shall ask again Mr 8472, do you or do you not agree that mao was the true leader of communism and Lin Biao was just a very bad pilot.

Mao betrayed lin biao and had him killed, his feet never touched the ground, after he gave his all in the long march mao had him killed, not for power or revenge mao did it for a woman......some feckin nutjob dancer with two left feet and a duckface.

I have some lovely hopium bales just for you, just send me all your silver bitchez!

Boxer, you couldnt punch your way out of a paper bag.......

Mon, 06/04/2012 - 01:24 | 2490869 Bansters-in-my-...
Bansters-in-my- feces's picture

Fuck Off loser.

Sun, 06/03/2012 - 09:44 | 2488884 rsnoble
rsnoble's picture

Don't forget what GS said about stocks just a few short months ago! One confidence builder after another:

http://finance.yahoo.com/blogs/breakout/goldman-sachs-best-time-generati...

Sun, 06/03/2012 - 09:15 | 2488854 LawsofPhysics
LawsofPhysics's picture

Don't sweat it Bruce. Only useless paper pushers have anything to fear now, as it should be.

Sun, 06/03/2012 - 08:10 | 2488819 justsayin2u
justsayin2u's picture

Ya Bruce.  We feel your pain bro.  Politicians and policy makers will only make a tough choice when the choice is made for them by circumstance and there is no other choice to make.  As long as the prez and congress are ready to extend, pretend. stimulate. confiscate, twist, and go to war to create jobs we will just be diggin deeper.  And they will never change.  Elect all repubs and ORomney and things will be just as bad.  But hey - how bout that American Idol show ?  Sniff.

Sun, 06/03/2012 - 07:57 | 2488810 snowman
snowman's picture

I think Bruce's perspective here is more accurate than Peter Tchir.

Greece is not contagionistic, but not easy to ringfence either.

Trade with Greece is already very constricted and companies have already adjusted to this (much lower demand for imports in Greece helps too). Frankly, Greece's role in major multinational supply chains is peanuts.

Export Credit Agencies from various countries have already cut off Greece, and internal bank trade finance credit dried up long ago. Greece has no viable trade economy to build on, they are anyway structured as a negative balance of payments country. Going back to the GRD will only hurt them due to the energy imports against USD, and therefore face a very long climb uphill to create a new export economy - apart from tourists. But that is not a global issue. Ok, so it will

cost a little to re-program the financial systems to accept GRD etc, but I can't see why this would be apocalyptic.

Greece is not interconnected to the rest of the EU in the same way Italy or Spain is. Far from it.

 

Greece's remaining debt will be written off in total, a big but not fatal hit to the French and other banks and ECB. There are ways to re-capitalize the banks (with printed money or accounting gimmicks if needed) if it comes down to it.

Contagion means what happens in Greece somehow "spreads" to other countries. Greece is a small trading partner with other countries, not vital in the supply chain, and fairly isolated. Any contagion is from bondholders who got burned by lying politicians and are wary of the next country that lies. But from a financial and economic point, there is no contagion. Spain is an asset bubble problem, Italy is a debt-money-mulitplier problem (ie., the domestic debt hasn't translated into meaningful growth), and France is similar but not as bad.

I don't think you can draw parallels between Lehman and Greece. Lehman was part of a spaghetti intertwined counterparty trading apparatus on Wall Street with the TBTF banks, while Greece is a small country who borrowed too much money.

The lying politicians who want to keep Greece in the EUR and make arguments that the world will end otherwise, have vested interests to protect their stupid mistakes.

Sun, 06/03/2012 - 07:45 | 2488798 dizzyfingers
dizzyfingers's picture

Nowadays, although more and more of us understand the fact that we live, not in a democratic republic (as we were taught in school), but under a plutocracy, most still suffer from what Richard Grossman and Ward Morehouse call the "colonization of our minds [1], [2]", the corollary of which is the "TINA" (There Is No Alternative) phenomenon. The fact is, there are alternatives to this evermore distintegrative "way of life". But in order to change this society so the seventh generation yet unborn may, once more, have the opportunity to live their lives to the fullest, each one of us must transform our own conditioned thinking from that of programmed consumer into liberated citizen. http://www.ratical.com/corporations/

Sun, 06/03/2012 - 07:06 | 2488772 Negro Primero
Negro Primero's picture

Sorry, maybe this article is slightly off-topic ..but I'm sure Bruce will like it:

"Ex-UBS CEO Oswald Gruebel wrote in his "Sunday" column (see below), it was "only a matter of time and the evolution of the crisis €" that the strategy of the minimum rate should be abandoned. The sooner the SNB do this, the better: "The longer we hold on to it, the higher the price we all pay for it."

In Other Words: 1 EUR = 1 CHF (..or maybe less)

http://translate.googleusercontent.com/translate_c?act=url&hl=en&ie=UTF8...

 

Sun, 06/03/2012 - 08:39 | 2488832 Bruce Krasting
Bruce Krasting's picture

Thanks for this. Last week there were many big sellers of EURCHF. I was told that SNB bought Euro 7B in a single ticket from JPM. Grubel may be right. 1 = 1 is coming.

I wrote the following comment at the link you provided:

 

It's clear that Mr. Grubel is not trying to run for elected office or
make new friends with this article. I can imagine that the folks at the
SNB are steaming at this.

Every direction that I look, I see
the same response. An effort is made to "fix" things for a few months.
The hope is always that everything will be "normal" in short order.
Today, Greece is the worst example of this. In English it is, "Kick the
can down the road".

I agree with Mr. Grubel, the short term measures will not work. In the end they will cost more than the alternative.

Questions:


If the Swiss are offended by the border guards now surrounding the
country, how will they feel in three months when the borders are
functionally closed?

Is it true that the German border guards
around Switzerland are from E. Germany? That this is deliberate so that
those who live in the South feel like they have a "foreign" military in
their backyard?

Sun, 06/03/2012 - 10:57 | 2489002 Negro Primero
Negro Primero's picture

Hi Bruce, regarding those ugly East-German border guards (Angela's relatives, probably)... my  guess is that they are just waiting at the occasion to invade themselves. (Just kidding, yet...)

"Germany Surrounded by Switzerland"

http://bigthink.com/ideas/21305

Sun, 06/03/2012 - 05:27 | 2488708 falak pema
falak pema's picture

For once Bruce, you are coming out into the ring swinging hard; no holds barred.

Good for you! Sock it to them !

Sun, 06/03/2012 - 05:24 | 2488707 Negro Primero
Negro Primero's picture

..some headlines from the British 'press':

"HSBC tests cash machines in Athens for drachmas"

http://www.dailymail.co.uk/money/news/article-2153684/HSBC-tests-cash-machines-Athens-drachmas.html#ixzz1wigvU7ME

"Bloomberg tests Drachma currency in its terminal" http://www.investmenteurope.net/investment-europe/news/2181828/bloomberg...
Sun, 06/03/2012 - 05:15 | 2488693 NuYawkFrankie
NuYawkFrankie's picture

Geeez -you just figured out the media et al. are worthless lying sacks o' shinola?

Say it ain't so Bruce....

 

Sun, 06/03/2012 - 05:52 | 2488720 Bruce Krasting
Bruce Krasting's picture

I figured out that the MSM is a sack of shit years ago. But what we have been getting of late is the worst in my 40 years of watching/reading.

Sun, 06/03/2012 - 07:52 | 2488805 Taint Boil
Taint Boil's picture

 

 

 

MSM lies ................. Turn off the tube. The best thing I ever did.

Sun, 06/03/2012 - 04:14 | 2488665 Bartanist
Bartanist's picture

I like the rant, but think that by concentrating on symptoms and not the root cause, the distraction ensures the root cause is not exposed and never treated.

Unfortunately, in this "age",  it (along with multitudes of falasies and fantasies) has been reinforced to us since birth to ensure that those who endeavor to pursue a solution are not only laleded as foolhardy and antisocial, but also possessing an unstable mind... when nothing could be further from the truth.

When acknowledgement of "truth" is a critical first step to the solution, one must question why is there so little truth available? What does it serve to suppress it? Exposing the lies is one thing, but exposing the critical link for the reason for the lies is more important.

Sun, 06/03/2012 - 04:07 | 2488663 kedi
kedi's picture

The pundits just don't have a clue what is going to happen or why. I don't think anybody really knows what will happen other than it will eventually all fall apart. The economy just has too much imaginary money. Imaginary investments. This all creates imaginary ways for it to go wrong or right. Right being mostly imaginary, wrong being all too real for folks who used to work at real jobs.

How can anyone really predict what will happen in an economy where so much of it has been detached from reality? It amuses me to listen to my local news radio station. Several times a day they have the 3 minute market report. Ha! A different pundit all the time. A different reason every time for the market going up down or sideways. Cell phone sales down? Market is down. EU is collapsing. Market is down the same amount. Pick a reason, any reason. Ten times a day there is a different reason the market is up or down. California sinks into the sea. Market is down. Next day the new IPhone is released, market is up again.

When it is all Alice in Wonderland, any reason is as good as the next. A few big players can make their own reality here and there for a while and profit. By doing it, they make the whole thing more imaginary chaos.

Sun, 06/03/2012 - 02:56 | 2488625 skistroni
skistroni's picture

Bruce, I usually find your rants very interesting reads, but come on... 3 Trillion in lost value because of the stock market decline? 

Was this real money? Was that an actual cost basis to someone, anyone? Did someone have to actually pay this money to anyone? 

This was pure air that simply evaporated and could have done so because of any minor Black Swan event. 

On the other hand, I earned 10K EUR last month and it all went to make my business loan payment (with a hypothecated home as collateral), which I had to take because the government has virtually stopped paying its liabilities to most private-sector contractors. So, this month, no take-home money, no money for rent, no money for cigarettes, no nothing. THIS is real money lost.  And if Greece had done what it should 2 years ago, I could have already hired back some of the employees I had to lay off, and I could have been bringing some money back to my family. 

Excuse me if I don't give a shit about the Trillions "lost" in the stock markets. 

And BTW, I tend to think that many more Trillions will be "lost", whether Greece walks or not. 

With all respect.

Sun, 06/03/2012 - 05:58 | 2488722 Bruce Krasting
Bruce Krasting's picture

Is it real money? Yes, I think it is. The global stock of savings has been reduced.

In the US about 75% of savers are in the stock market. They are all a bit poorer. As a result their spending will decline. This translates to less consumption, slower economic growth and higher unemployment.

You're right that it is just paper. But it does matter.

b

Sun, 06/03/2012 - 06:28 | 2488744 GeneMarchbanks
GeneMarchbanks's picture

Um,

Is it real money? Yes, I think it is. The global stock of savings has been reduced.

You're going to have to get used to the idea of thinking of the concept of 'money' differently just as the Greeks are today.

In the US about 75% of savers are in the stock market.

Again, so what? The rentier model is dying slowly. Get over it. Hyperconsumption is over.

Sun, 06/03/2012 - 09:56 | 2488907 Bruce Krasting
Bruce Krasting's picture

Ending the Age of Hyperconsumption

I love it. It would make a great book title. You should write it.

b

Sun, 06/03/2012 - 10:49 | 2488981 falak pema
falak pema's picture

Its being written in reality right in front of our eyes. In the real world, once the fog clears around the paper world of capital ponzi demise. You should write THAT book as you've been inside that financial world for most of your life! 

Sun, 06/03/2012 - 01:41 | 2488541 George Washington
George Washington's picture

Great piece!

Sun, 06/03/2012 - 05:59 | 2488724 Bruce Krasting
Bruce Krasting's picture

Tks, GW.

bk

Sun, 06/03/2012 - 01:41 | 2488538 Monk
Monk's picture

Unfortunately, we're not just looking at many boats, with some sinking and others not, but boats tied to each other, such that if some sink....

 

Mon, 06/04/2012 - 04:00 | 2490967 Colonial Intent
Colonial Intent's picture

Wildfire seems to sink most ships.....

Sat, 06/02/2012 - 22:29 | 2488267 otto skorzeny
otto skorzeny's picture

Why is BaBaBooey an ABC financial expert?

Sun, 06/03/2012 - 03:32 | 2488650 Ineverslice
Ineverslice's picture

Haaaaaaaaaaaaaaaaa!

Diane Sawyer....who in the heck watches you? 

Bababooey! Buy stocks!

Sat, 06/02/2012 - 22:09 | 2488204 Milestones
Milestones's picture

Bruce, looks like ya came out well on you short on the Euro from a post a few weeks ago. Congrats.       Milestones

Sat, 06/02/2012 - 22:04 | 2488193 YHC-FTSE
YHC-FTSE's picture

Nice rant. I only counted 11 fugly faces including Diane Sawyer, but I guess the rest were far too hideous for internet consumption. I don't know about you, but with virtually all the major economies static or in freefall, all we've been getting for the past few years are quarterly "sugar highs" from the central banks that have done nothing to stave off the inevitable collision with destiny, except amplifying that economic implosion more probable with each passing day. So more sugar highs don't really surprise me considering we have been swimming in the waters of the insane for quite awhile. 

In a world where debt is wealth, shadows of a shadow of some vague shadow instrument has value enough to be traded by seemingly sane grown people, fractions of assets and deposits are conjured (hypothcated, rehypothecated and fractionally reserved) out of thin air, where balance sheets and P/L ledgers of institutions that we depend on for our very lives, and those of our children are ridiculously fraudulent (Bankia is typical), where war is peace, the wealthy get welfare, and democracy means being ruled by the same people. In this world there is no room for reason, logic, sanity, or even ethics, for if you dare to point out the obvious, you're a target for ridicule if you're lucky, or a terror suspect if you're not.

I disagree with your optimistic outcome when Greece devolves its currency. It is likely to cause the biggest insurance and banking crisis in history, but I also think in many ways, it is better than the alternative. A crisis is better than a systemic collapse with nothing left to pick up the pieces. Better to let the rotten edifices of insolvent institutions collapse, and start afresh. Until then the only thing one can do is follow the motto of my childhood organization, "Be Prepared". 

Sun, 06/03/2012 - 06:03 | 2488726 Bruce Krasting
Bruce Krasting's picture

I did not want to leave you with the impression that Grexit would be a cheap solution with no concequences.

My point was that if we do not start to deal with things that are not fixable (Greece/Spain) then the costs will be many multiples of just confronting the problems.

Mon, 06/04/2012 - 16:11 | 2493278 YHC-FTSE
YHC-FTSE's picture

+1 Sorry mate, missed your reply. Well considering your usual articles on the matter, it does read unusually optimistic for Grexit, hence the post. But of course the gist of your article is entirely correct - it is INSANE to keep on bailing out Greece or anyone else in order to protect the tbtf insititutions with exposure on their books (Bonds/CDS). That's the whole reason for touting QE, IMF, ECB, and whatever the hell else those political whores are doing on the tbtf corporations' behalf. 

Sat, 06/02/2012 - 21:40 | 2488149 anonnn
anonnn's picture

Insanity is contagious.

Examples abound. Take heed.

Sat, 06/02/2012 - 21:22 | 2488115 Stuck on Zero
Stuck on Zero's picture

Think of the stern of the Titannic as the stock exchange.  At least for the first 98% of the crisis it was going up!

 

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