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On Shills, Technocrats, Politicians and the Sinking Ship
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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JPM seems to have a policy of protecting their short positions by shorting some more. After a while, the position gets so large there is no way it can be covered without the Fed's help. So the positions keep getting larger still. The perps get bonuses based on the unrealized "profit" and retire when the merde gets too close to the fan. Their only way out is for the market to blow up, not unlike "accidentally" knocking over the chess board just before one's opponent checkmates, and then claim stupidity.
A big part of the problem, I suspect, is the largely hidden, OTC CDS. Perhaps the wrong people are going to win and the sacred cows are going to lose too much if Greece and Spain default and leave the EZ.
Bruce, I know you don't have access to their inner thoughts but what do you think, are they blind or are they lying? It really does make a difference.
I think it is denial. That is a form of lying.
"They are shills. If they did not see problems looming a few months ago, they are either blind, or they were just lying."
I think their sin was mostly their "micro-economic" perspective, or bottom-up slant. That's what's taught and talked about--the prospects for companies, or the economy--that's Taleb's "mediocristan.". The over-extended situation Europe and the world has got itself into doesn't "map" neatly into mediocristan--it's something from extremistan. It could snap next month or two years from now--or more--in their view. They can't quantify it, so they don't want to deal with it.
They sold the lifeboats to the banks who used it to keep the fire burning in their stoves.
We have grown so dependent on international shipping that when the boats don't sail no more we'll grow hungry. Very hungry.
nice analogy...
...did the bankers get priority boarding on the life boats of the Titanic?
No, actually, J.P himself cancelled at the last moment IIRC...
"until in actuality it is gone no one will believe you." that is represented by a usurious interest rate, citizens in the streets, bankrupt governments, all of the above, etc etc. now "back to your regularly scheduled program." and "no you're not allowed to interact with it."
I read somewhere that there has never been a famine in a country with a free press, ever. On the surface this doesn't make a lot of sense, what does the press have to do with food? But if you think about it access to truth helps us to work out problems and come up with ways to get around problems. What's true about food is true about the economy. The MSM shills are lying to us because it gives some advantage to their handlers. If that indirectly leads to the crash of the economy they won't lose sleep over it. As long as they keep feeding the people lies things will not improve.
Famine is a political event. A "free press" keeps the rulers from hogging all the resources by forcing them to release crumbs to the peasants through the power of popular opinion.
A famine occurs when the crumbs stop being released for a multitude of political reasons.
This is not to say that one of the reasons can't be a serious crop failure. But the single biggest reason most of us allow government to exist is to protect us from starvation, privation and murders. When that stops, government generally falls. Governments that lack the resources and/or will to stop a famine are not long for this world.
So famine is the last alert before the fall of a government.
A free press can be used to expose the corrupt and serve society to make a country a better place. The U.S. never had that but now it is a total joke. The masses are controlled by TV and Hollywood. Morons who watch TV enable our serffdom.
The last thing our "free" corporate press will ever do is expose the corruption by which their masters--and ours--flourish.
Beautiful Bill Clinton should be remembered for greasing the skids:
http://en.wikipedia.org/wiki/Telecommunications_Act_of_1996
If someone tells me there is a shortage of food I can prepare the best I can for it. If I find out at the last minute that there is a food shortage I'll have to starve or steal to eat. The governments idea is we won't worry anyone we will just serve them gruel and a little water.
We don't need no water, let the mother fu**er burn!
The roof, the roof, the roof is on fire....
Oh that's OK.
I'm on the next floor down.
(sigh)
Until the FED can 'print' real things like food, raw materials and manufactured goods its just working with myths in order to make sure any understanding of real economics is completely lost.
Its not actually all their fault... the politicians handed the bankers the job because the politicians didn't want the blame for not knowing what they're doing.
Its working great!
But in all honesty... part of the blame is that you won't take the job either.
The Chagora Model: Scaling Speech
Bruce, you're assuming they aren't so poorly educated that they believe almost all the perversions of Keynesian politics. Here's the thing.
Take an ignorant person, in this case the fact is established by the focus of their education, i.e. Journalism or some other BS program. And said person is placed in a position to receive "special access" to the "most intelligent experts" in a field. And for years, decades, the prognostications of said experts bear out - i.e. everything will be okay, the market will come back, EMT, blah, blah, blah. After 20 some odd years, these ignoramuses are never, I say again NEVER, going to believe someone who proclaims contrary to their firmly held, in historical experience, beliefs.
Now those who want to claim "but El-Erain" is in the group, surely you are not calling him ignorant. Well. yes I am. In fact he is in the deepest part of the pit; where but once in eons the light can shine down upon his anointed throne. You see El-Erain was not only taught by the highest of the most high priests of that political belief system parading like a naked emperor, pompously holding itself up as science; I speak of that Dismal Science, Economics. No, even more so he was selected for their priest-hood. He is truly a lost soul only God can save. If you want to see a caricature of him, of his future, you need to only look at Greenspan.
So though I do not disagree on the fact of sheer ignorance of those pointed to, I do however do not have a looking glass into their hearts. As such I must hold my judgement on that matter.
In the end, it's not them we need to educate and save from the path. But rather the Sheeple.
Regards,
Centurion
Let me see if I understand correctly. Officials will do nothing as the Dow goes to 5000 and the economy goes to -5% GDP over the next couple of months. No, that's not how it works. They will print and print and print, whether it helps or not until fiat currencies are totally debased. There is no other path. When all you have is a hammer, the economy must be a nail.
O'Lenin cannot have his revolution unless everything tanks.
That's what he's working so hard to do.
From Kenya with Love.
'Fly, my drones, fly my pretties, hellfire the middle class!'
You laugh, but I am already keeping an ear out for BOOMS around the area.
Not that I should expect any anyhow.
Thank you. As I have posted before O'Bummer will pull a Chavez on the US.
May be. But he - and his boss Soros - won't get away with it. This isn't Venezuela. This is USA: 80 million guns, and at least 20 million itchy trigger fingers. "When an ATF agent asked Savage what there was to do in Cornelia, Georgia, she said, 'Blow things up'". @ http://abcnews.go.com/Blotter/georgia-college-girl-arrested-alleged-pipe-bomb-hobby/story?id=16475874#.T8161NXkraSo
I did not elaborate and yes, the good old boys and girs will make him pay, if he attempts.
[klaxon wailing]
All hands, prepare to dive.
Dear Mr. Bernanke, Mr. Obama, Mr. Europe and Mr. Market:
Please re-read Traders Handbook, Rule #1. YOUR FIRST LOSS IS YOUR BEST (LEAST) LOSS.
Reset.
Bruce, you're assuming that their goal is to make things better.
"What those captains are actually doing is insuring that all the folks on board will drown." CDS, Sub-prime bonds, HFT, OTC derivatives, taxpayer bailouts, bank guarantees, bank and financial house bonuses, golden hanshakes for destroying companies, QE ad infinitum, etc, etc. These are all insurance policies against the counterparty, us, the little guy. They have control of our savings, control of our money, and through debt, contol of our assets. They have made huge bets that our savings and assets will burn and they have full intention of collecting.
Amen!
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.
Now the family children have to work.
Hell the Govt tried to tell the farms to leave the kids along... I am glad the children like to work the farm.
They will need that experience after mommy and daddy pass on.
If I wanted to farm, the best I could do is cut grass and make large rolls. Honestly.
Wow, good stuff and well written!
You touch upon something beautifully described by CHM recently:
http://www.oftwominds.com/blogmay12/EU-neocolonial5-12.html
Excerpt:
Forget "austerity"and political theater--the only way to truly comprehend the Eurozone is to understand the Neocolonial-Financialization Model, as that's the key dynamic of the Eurozone.
In the old model of Colonialism, the colonizing power conquered or co-opted the Power Elites of the region, and proceeded to exploit the new colony's resources and labor to enrich the "center," i.e. the home empire.
In Neocolonialism, the forces of financialization (debt and leverage controlled by State-approved banking cartels) are used to indenture the local Elites and populace to the banking center: the peripheral "colonials" borrow money to buy the finished goods sold by the "core," doubly enriching the center with 1) interest and the transactional "skim" of financializing assets such as real estate, and 2) the profits made selling goods to the debtors.
In essence, the "core" nations of the E.U. colonized the "peripheral" nations via the financializing euro, which enabled a massive expansion of debt and consumption in the periphery. The banks and exporters of the "core" countries exacted enormous profits from this expansion of debt and consumption.
Now that the financialization scheme of the euro has run its course, the periphery's neofeudal standing is starkly revealed: the assets and income of the periphery are flowing to the Core as interest on the private and sovereign debts that are owed to the Core countries' commercial and central banks.
This is the perfection of Neofeudalism. The peripheral nations of the E.U. are effectively neocolonial debtors of the Core countries' banks, and the taxpayers of the Core nations are now feudal serfs whose labor is devoted to making good on any bank loans to the periphery that go bad.
Yes, the perfection of Neofeudalsim...
Bruce said "We have been living with ZIRP for four years. It hasn’t worked. It's not going to work."
"They" say: "We have been living with ZIRP for four years. We saved everything. It's going to work."
Half empty or half full?
Doesn't matter if it's half empty or half full. Some asshole stole the glass and spirited it away when we weren't paying attention.
Re your second hypothesis (half full), we must consider Japan for the last 20 years, or Rome with its eerie parallels to today taking four centuries to finally collapse (and, arguably, remnants of its empire remain to this day).
Perhaps the half empty/half full dialectic is more some zen both/neither thing?
If the "leaders" get to define failure we will never fail. The reason they prop up large companies is that everyone notices the large companies failing. The "leaders" in Japan surely think they have succeeded in preventing a worse outcome.
well that and the large companies fund the crooked pols' campaigns. i estimate the returns on those campaign contributions are on the order of $1000 for every $1 "given".
Bruce, I increasingly think that Germany will be the element that leaves the EZ. Still dislocative and messy, but actually easier and probably better for most than the slow agonizing Greek departure/default followed by Portugal, Spain, Italy and Ireland in one order or another. If Germany leaves by returning to DeutchMark, the the periphery have the Euro. Can inflate some of the debts away, default on others, reign in wages and benefits on percentage basis via methods unconstrained by Germany (and probably Netherlands, maybe France and Austria, possibly Poland). Yes, hurts German exports to a degree, but not as much as continuing to carry the EZ. ECB, IMF, LTRO, EU all take hits to finances and credibility . . . but that is happening under any scenario.
What do you think? Something other than what the pundits are expecting.
This is the scenario that most troubles me. Who gets kicked out? Is it Greece and Spain? Or is it Germany?
One or the other has to go. The thinking is that it is the weak ones. But you are right, it could go the other way. This is why I am leery of shorting the Euro. I want to be short the Southern Euro, I don't want to be short the the Northern Euro.
Unfortunately the few euro notes I have are with Greek motif...
I hope the split doesn't come along that line.
The Corexit Strategy?
Great name. And I hear there have already been very serious negotiations between the northern Europe economies to defrag and reboot. The Nordic Euro, if you will.
Bruce, I got another option; they'll go through another round of extend and pretend while a whole pissload of boats sink.
Bruce is yet again arguing for a bailout for debtors, whilst killing the savers.
If Greece leaves the Euro, that's what will happen, the new-drachma loses c.50% versus the Euro, living standards plummet AND real hard-earned savers' capital gets wiped out. Typical Yankee socialist nonsense.
Nope, Greece needs to stay in the Euro, and it will. There is no way it could leave now anyway, preparations for a new currency will take at least a year anyway.
All that needs to happen (around the world) is for governments to start living within their means, but that won't happen where they can QE, so they will keep QEing until they kill their currencies (and their savers).
Whatever happens, the world will slide into a depression, because (obviously) we have reached the mathematical debt limit, and people around the world know the game is up and are spending less.
That's great, we can cleanse the whole shitty system, get used to economic reality, and rebuild froma lower base. The world will be a better place, with countries that make and produce real stuff getting wealthy, and those that don't will stay poor.
And in the centre of it all, not the worthless US dollar reserve, but the free-floating physical-only gold wealth reserve, currently being accumulated by central banks en masse. Something real, not something of paper.
It's coming Bruce, no use moaning if asset prices go down, as down they are going.
I am advocating that Greece defaults. When that happens there will be losses. But I don't think there are many "savers" that will lose. It will be the lenders that lose.
If you make a bad loan, you take a loss. Period.
That is the reason they will not let Greece leave...if they leave, no more payments transfered to the creditors under the guise of Greek bailouts. They will continue this charade for as long as possible and extract the maximum amount of wealth from the Greek people as they can. If they let Greece fail, no more $$ for the creditors and they (rightfully) take the loss on their poor investment decision. They will have re-elections until the creditor's govt. is victorious.
Btw. Its 'dead bug' not 'turtle'
Sadly every time I come to ZH anymore it is Oba-2012 banner ads everywhere. ZH is filled with scum who voted for Hope and Change. McCain and the GOP suck but the others are far worse. McCain, Romney and Bush are RINO Bilderbergers. At least the GOP has Rand and Ron.
Idiots with gold fantasies here. Good luck when it collapses because ACORN and SEIU thugs will be collecting your gold as soon as someone finds out you have it and they will.