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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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Sun, 06/03/2012 - 14:40 | 2489475 Eireann go Brach
Eireann go Brach's picture

You stupid fucking mongrel!! Fuck off with your daily post about Obama ads! You see the ads because that is what you read all the time!

Sun, 06/03/2012 - 13:12 | 2489319 11b40
11b40's picture

...and what kind of scum are you, Freddie?  Troll scum?

Sun, 06/03/2012 - 10:35 | 2488957 ljag
ljag's picture

And ACORN & SEIU thugs are whom, again? The boogie man, you say? Gee, better hide behind your mama's skirt so they don't get you. Pussy! Get a friend who is not afraid to pull the trigger on another human being, make a plan and get on with your life. Simple!

Sun, 06/03/2012 - 09:47 | 2488889 HungrySeagull
HungrySeagull's picture

Use Mozilla Firefox. Then use add ons such as no script, ABP and various other available resources. It blocks the ads well enough.

Sometimes I log in from Library and the ads would be something to see... whew... baby!

As far as Greece is concerned, give it 300 billion, make it debt free and the same with each nation in the rest of Europe and be done with this.

Carry on.

As far as the 3 issue, I am stacking. I smell good things when this stuff blows up the paper crap.

As far as the market is concern, let it all fall to 00001.00 and everything will be upgrade from there.

Sun, 06/03/2012 - 07:05 | 2488771 Roger Knights
Roger Knights's picture

@ Freddie. The Obama ads aren't placed here by the site owner, but by ad placement agencies like Google.

Sun, 06/03/2012 - 20:51 | 2490406 philipat
philipat's picture

Whose brilliant algo have determined that ZH is populated by O supporters?

Mon, 06/04/2012 - 04:52 | 2490980 Dr. Sandi
Dr. Sandi's picture

You have to advertise the HELL out of a product people don't actually want.

 

Sat, 06/02/2012 - 21:33 | 2488131 philipat
philipat's picture

Freddie@17:46

Simple solution. Tracking Protection in IE9 works very well. In Chrome and Firefox use AdBlock plus. Either way, no more ads at all!!

Sun, 06/03/2012 - 00:27 | 2488469 etresoi
etresoi's picture

I never knew there were ads on ZH.  Adblock must be working!

Sat, 06/02/2012 - 21:21 | 2488112 Freddie
Freddie's picture

Come on MF'ers - you can do better than that. 

This directed to the 2008 Hope & Change voters.   When the reboot comes - good luck with your shit because you are gonna need it.   When his hordes of ACRON/SEIU hoodies come for your few gold coins.  All the best.  Just remember as they take you out with you last breath - that you voted for it.   You F'ed yourself and your family.

I will be eating popcorn.

Sat, 06/02/2012 - 21:56 | 2488181 Dr. Sandi
Dr. Sandi's picture

I don't expect most of the goons you're describing could find their asses with both hands, a treasure map AND a GPS.

But they could probably order an air strike on the place just to make sure NOBODY has anything of value afterwards. And that's the only FAIR way to do it.

Sat, 06/02/2012 - 20:28 | 2488030 Winston Smith 2009
Winston Smith 2009's picture

"At least the GOP has Rand and Ron"

Ron is only GOP by virtue of the fact that it's a major party that could get him elected. He is a Libertarian. The vast majority of other Repuglicans are sold out slugs and I include the new so-called Tea Party freshmen:

The Tea Party F*ed You. Fire Them

http://market-ticker.org/akcs-www?post=206520

and this video:

http://current.com/shows/the-young-turks/videos/tea-party-banks-sell-out-joe-walsh

Anyone who is still partisan with respect to the two "major" parties or any claimed to be "offshoot" from them is a propagandized idiot.  NEITHER party represents anyone other than the deep pockets that OWN them.

Sat, 06/02/2012 - 21:11 | 2488094 Freddie
Freddie's picture

Loads or supposed Tea Party supporters think RINO open-borders Rubio is a conservative.  They will try to get RINO Connie Mack in Florida. FL is filled with RINO Bush bots.  Texas is not much better either.

Any idiot who watches TV or Hollywoods crap supports this nightmare.

Sat, 06/02/2012 - 21:01 | 2488082 Moe Howard
Moe Howard's picture

Your first "link" claims to have started the Tea Party, and also claims to be a Libertarian but voted for Obama. Zero cred here bozo.

That market ticker dude is a wack job.

Sun, 06/03/2012 - 04:24 | 2488672 philipat
philipat's picture

I still believe that Ron Paul could leverage his position within the GOP by threatening to run as an Independent, unless he gets a position of influence for either himself or Rand. If he were to run as an Independent, it would hand the election to Obama so the GOP PTB would have to listen vaey carefully. It seems obvious to me but last time I suggested this horse trade it wasn't very well recieved by ZHers.

Sun, 06/03/2012 - 09:09 | 2488852 bigkahuna
bigkahuna's picture

You are right. Paul needs to run independant. Romney and Obama will govern to the same effect. All you have to do is look at their records: Obamacare - Romneycare -- need I say more.

Sun, 06/03/2012 - 11:53 | 2489136 Bob
Bob's picture

Could it be that Dr. Paul was just a way to tie libertarian-leaning independents to the Republican Party?  Now just slide them over to Mitt and it's a good day's work. 

Yeah, I know, Ron doesn't seem like that, but it was him who ran as a Republican, not me. 

Question is what are the Paulite's gonna do now . . .

Sun, 06/03/2012 - 20:52 | 2490411 New_Meat
New_Meat's picture

answer is: do things to get Rand on the correct and more generally supportable path.

- Ned

Sat, 06/02/2012 - 21:37 | 2488134 Kiss My Iceland...
Kiss My Icelandic Ass's picture

Not to mention a racist nut case.

 

But in fairness when he sticks to finance he's got some good stuff.

Sat, 06/02/2012 - 21:54 | 2488172 DavidPierre
DavidPierre's picture

Not to mention a total 9/11Moron!

Sat, 06/02/2012 - 20:41 | 2488047 nmewn
nmewn's picture

You employ Current (started by Gore & Hyatt) in the same comment you go after the TP...oh, well done...lol.

Sat, 06/02/2012 - 18:00 | 2487845 Bindar Dundat
Bindar Dundat's picture

I am a Capitalist , a business man and a former politician who is losing faith in our political will to enforce the hard reality of capitalism: failure is needed to maintain healthy economic growth and improvement in our quality of life and standard of living.

The great weakness of our political system is that it can be influenced by agents of big business and banks.  When these consultants and lobbyists  succeed they ensure the deck is stacked against small business.  In fact big banks have never liked small business and now they are starting to dislike small Countries that can’t pay their bills.  Perhaps it’s not planned but the side effect of focusing the bailouts on big companies and BANKS is that it ensures a gradual transfer of wealth from the middle class to the wealthiest 0.1% of our population.  It is time to stop this madness before it destroys our freedoms and our dreams of a better tomorrow.

Let’s get back to real Capitalism that includes small businesses and allows for failure when the big guys make stupid mistakes. So no more big corporation bailouts: OK?   In real capitalism people are allowed to fail and that is a very good thing. Failure can often lead to better things and feather bedding big companies is not real capitalism.   It is tough medicine when you say no company is too big to fail but it is the way it must be if we want  the crony Capitalism to end.   

I learned this truth early in my career when Microsystems International failed in Ottawa in 1973 and 800 jobs were lost. Failure of one company can often lead to grand success.  From the failure of MIL came the creation of Mitel Corporation which was a successful entrepreneurial spark in the City.  The spark ignited a firestorm of success and eventually hundreds of small and medium sized technology companies were started which resulted in creating over 80,000 jobs in the Ottawa Valley.  That is true capitalism where problems are turned into opportunities through the hard work and creativity of individuals.  We face a threat to our capitalist system. But it’s not coming from half-naked anarchists manning the barricades at Occupy Wall Street protests. Rather, it comes from a financial system that glides along without enough of the discipline of failure and that produces soaring inequality, socialist bank bailouts and unaccountable executives.


Sat, 06/02/2012 - 21:32 | 2488130 Kiss My Iceland...
Kiss My Icelandic Ass's picture

"I am a Capitalist , a business man and a former politician who is losing faith in our political will to enforce the hard reality of capitalism"

 

NOW you're losing faith? Where have you been for the last four years ??

Sun, 06/03/2012 - 11:48 | 2489120 Bob
Bob's picture

Unregulated capitalism hasn't worked so good in the "mass media," neither:

 

http://en.wikipedia.org/wiki/Telecommunications_Act_of_1996

Of course, that was a given.  Some things just can't be blamed on "market distortions due to failure to allow 'creative destruction.'"

Increasingly concentrated money at some point necessarily equals too much power.  There's a reason why even the NRA (I hope) wouldn't support personal possession of nuclear weapons. 

It could be that, ideologies notwithstanding, there is indeed such a thing as too much money in too few hands. 

Mon, 06/04/2012 - 02:49 | 2490923 CrockettAlmanac.com
CrockettAlmanac.com's picture

 

Increasingly concentrated money at some point necessarily equals too much power.  There's a reason why even the NRA (I hope) wouldn't support personal possession of nuclear weapons.

 

Nuclear weapons were created by government. No free individual would have or could have made such a gigantic investment in destruction. If nuclear weaponry represents the height of disdain for human life then put the blame where it belongs: on those who use legislation and regulation to circumvent the desires of the billions of little people who do most of the living and working and dying here on planet Earth.

Sun, 06/03/2012 - 01:30 | 2488525 jeff montanye
jeff montanye's picture

gotta go with at least fourteen, minimum: last two years of clinton (repeal of glass steagall, refusal to regulate derivatives) and all of bush 2 (lobbyists writing legislation, too big to fail, lehman brothers, no prosecution of liars' loans ...).

Sat, 06/02/2012 - 21:21 | 2488081 Al Gorerhythm
Al Gorerhythm's picture

Although diverse in their demands, I'd sooner trust a half-naked OWS protester in their pursuit of truth and honesty in markets and politics, rather than a coiffeured and besuited dandy, who saturate our screens and news outlets. They (the suits) are the carnival barkers of our time. When you see a politician selling policies, substitute the Trololololo man's sound track as a voice-over. Watch the vid on Utube and imagine the Obamneys delivering promises or excuses and you will soon lose your enamour with them.

It is refreshing to see you use the word "ensure" in context. Bruce uses "insure" in his post which connotes that the Captains of industry have taken out insurance on the death of passengers (share holders). It may have been a slip (Bruce's) but it fits the situation perfectly. This coming collapse is not a zero sum game as the captains have most assuredly taken out insurance policies against the collective savings and shares of the masses and they intend to collect when this bastard burns down.

I would advise that we all ensure that we have taken steps than insures us against loss. 

Gets you some PMs or if you are into paper, sells you some puts.

Sat, 06/02/2012 - 21:53 | 2488176 Dr. Sandi
Dr. Sandi's picture

The business suit is the uniform of the modern evildoer. The "officers" wear the expensive material; the minions, the cheaper stuff.

I say we divide up into "skins" and "shirts" for the next skirmish.

Sun, 06/03/2012 - 00:40 | 2488481 Al Gorerhythm
Al Gorerhythm's picture

They have already divided us into those catagories, good doctor. They've skinned, gutted and filleted us. They've taken the shirts from our backs and fitted us out for yokes.

Sun, 06/03/2012 - 01:26 | 2488521 jeff montanye
jeff montanye's picture

al, in your comment above, would it be buy some puts (not sell)?

one could also buy the stock of gold miners.  they have bucked the bear recently.

Sun, 06/03/2012 - 05:21 | 2488698 Al Gorerhythm
Al Gorerhythm's picture

Oops! Cheers, Jeff. yes the gold miners have taken a beating and I'd be looking for some stocks in a stable economy such as Canada or Australia in this environment.

Sat, 06/02/2012 - 22:50 | 2488305 illyia
illyia's picture

I wonder whether the hoodie (gang-fears) becoming a new uniform means something symbolic here. The noise over FB Zuck's "not showing proper respect" by wearing a hoodie to Wall Street was shrill and silly. I can almost hear the mavens cackling as FB's IPO went crashing down... regardless of the fact that the hoodie and the screw-up (and the overpriced issue) were not factually connected.

Felt like a "tell". As does the new Mad Men apparel craze... Hoodies v Suits.

OWS Hippies v Responsible Workers - Americans v Militants - Rich v Poor.

There's a slogan in there somewhere.

Sat, 06/02/2012 - 18:48 | 2487904 Crab Cake
Crab Cake's picture

I do not disagree with you. Failure is necessary, and fixing that will help alot; albeit after a good deal of pain that will finish the near complete trashing of my generations prospects. Im early 30s. I do want my son to have a future though and do agree with you.

That said you dont seem to have a firm grasp of the socio political landscape. There are many people younger than me, poorer than me, dont have a wife and son to live for, and dont have extended family that supports in any way they can. These people have nothing to lose, and they are seething with anger in a way I dont think you can fathom. There is a price to be paid for these DC and Wall St crimes, and it hasnt been paid yet. In fact your "solution" and return to honest dealing cant and wont be implemented until it has. The time is coming, sooner rather than later in my estimation, that the American populace is going to snap in a fit of road rage like violence because of the social distortions and cognitive dissonance. Whats worse? TPTB are ready for it, or at least they think they are. Northcom, dhs vipr squads, manuevres in urban areas.... When the snap comes, and it is, what would have been a brief prriod of national insanity will get turned into a seige. Revolution is spreading worldwide and it seems US leaders are inviting it, spitting in the faces of their own citizens regularly, and willing to do anything to protect the forces that have caused the majority of these problems to begin with.

In short. Indeed we do need a return to "real" capitalism, but we also must have a return of justice; because without it this country is on course for civil war and societal collapse and not recovery.

Sat, 06/02/2012 - 22:28 | 2488264 johnnynaps
johnnynaps's picture

I am with ya brother in age and circumstance. Even though my income is currently half what it use to be, my future is relatively bright because I am of the character that will do anything to survive. Only 8,000 others share my career of choice, and we will have to service 80 million in the next 20 years. I have a daughter that I do worry about though......and her future is in jeopardy if we continue to kick this can further. Justice must be served to promote stability within this system.

Sun, 06/03/2012 - 05:17 | 2488703 Praetor
Praetor's picture

Undertaker?

Seriously out of curiosity what are you employed as?

Sat, 06/02/2012 - 21:59 | 2488187 newworldorder
newworldorder's picture

RE: Crab cake

When the snap comes, and it is, what would have been a brief prriod of national insanity will get turned into a seige."

While I agree with you, this kind of thinking has not been and will not be allowed to permiate American thinking. It is as if, "we willfully expunge this type of thinking" from our nature. It is not American therefore it cannot happen. This willfull denial is what will ultimately unleash the frusrtration and blind anger when the unthinkable happens.

Mon, 06/04/2012 - 00:08 | 2490744 WakeUpPeeeeeople
WakeUpPeeeeeople's picture

This country has the best government that money can buy.

Until such time when all 537 reps along with corporate CEOs and all of their lobbyists are rounded up, frog-marched to the nearest telephone pole and swung by their neckties nothing will change-they have sold this country out. Swingin-em is what it will take to change the system and it won't happen. Americans as a group are fat, lazy and duuuuuuuumb. We will go the way of the Romans and technology will make it happen a lot faster.

Sat, 06/02/2012 - 18:07 | 2487844 Bindar Dundat
Bindar Dundat's picture

 

 

 

Sun, 06/03/2012 - 23:24 | 2490721 sgorem
sgorem's picture

i agree with Bindar totally! And I've been here longer than you have! AND FUCK OBAMA AND THE HORSE HE RODE IN ON!

Sat, 06/02/2012 - 21:50 | 2488166 Dr. Sandi
Dr. Sandi's picture

Succinct, Bindar!

Sun, 06/03/2012 - 06:18 | 2488731 bank guy in Brussels
bank guy in Brussels's picture

Bruce Krasting takes the exact opposite view about the consequences of Greek eurozone exit, from that in the article by ZeroHedge's also thoughtful Peter Tchir, who is quite an expert on the EU bond market.

Krasting and Tchir are two of the best reads on ZeroHedge: Both are sceptical, market-savvy, and with generally excellent perspectives. Their 180-degree disagreement about 'Grexit' makes it difficult for the rest of us.

On this one I am more inclined to go with Tchir. I think Tchir has more worked through the mechanics of the situation, whereas Krasting is a little more instinctual and emotional on this one.

Tchir's ZeroHedge piece on this is here:

http://www.zerohedge.com/news/why-grexit-would-make-lehman-look-childs-play

Sun, 06/03/2012 - 06:38 | 2488748 Bruce Krasting
Bruce Krasting's picture

I read Peter's piece. I don't think we are so far apart. He sees a Greek Exit as being another Lehman. He might be right. But Lehman should have been blown up. It was a carcass when it did blow. Greece is also a carcass. It should be put to bed before the stink kills the rest of Europe.

Grexit is going to be painful, but the alternative of pretending that the status quo can be maintained will be multiples of the cost.

Which would you rather have, a Lehman redo and another 2008 or 1929 - a decade of depression that ends with a global war.

Me? I'd rather have another Lehman than another WWII.

Sun, 06/03/2012 - 10:57 | 2489004 Bob
Bob's picture

A beautifully simple and cogent piece, Bruce!  Unfortunately, what's best for most people or, arguably even "the system" as a whole, is not the guiding principle in all this. 

I think you nailed that point.  But it ain't just the tv shills.  It's the shills who exercise control over the largest sums of money. 

It's hard to think that we're not completely screwed and that the charade will continue to catastrophic implosion.  

Too many freaks have too much to lose otherwise.   

Sun, 06/03/2012 - 07:38 | 2488793 spinone
spinone's picture

I'm worried its a decade of depression then a war either way.

Sun, 06/03/2012 - 20:47 | 2490388 New_Meat
New_Meat's picture

only a decade? light off wars earlier and extend more, imho - Ned

Sat, 06/02/2012 - 20:20 | 2488023 GOSPLAN HERO
GOSPLAN HERO's picture

http://www.youtube.com/watch?v=DZvk2vbGhKo

TOTAL ECONOMIC COLLAPSE -- SEE THIS VIDEO.

Sat, 06/02/2012 - 21:35 | 2488126 Kiss My Iceland...
Kiss My Icelandic Ass's picture

Is he wearing lipstick ? (Not that there's anything wrong with that.)

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