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China Can't Save Anything... Neither Can the Fed
The similarities between 2008 and today are getting scarier by the day. We’ve already seen the Hank Paulson mega-bazooka-bailout from the Emergency Fund in Europe. We’ve also seen short-selling bans, verbal interventions, the Warren Buffett bailout (recently BAC, though it was GS in 2008) and of course the “China saves the day” purchases (Morgan Stanley in 2008 and Europe today).
Now we have Societe General’s CEO doing his best Dick “we’re well capitalized” Fuld impersonation on CNBC, as well as yet another “China saves the day” rumor forcing the markets up nearly 2% in just one hour.
Does anyone remember how China’s 2008 “save the day” purchases turned out? How about Wall Street’s claims of being “well-capitalized” (including CEOs of Merrill Lynch, Lehman Brothers, even Goldman Sachs)? Have people really forgotten how that whole mess turned out in 2008?
Most importantly, does anyone REALLY think this situation will turn out differently this time around? Who exactly would want to buy the market based on rumors of China buying European bonds? How did China’s support of the Euro work out earlier this year?
Let’s be honest here. Neither China, nor the ECB, nor the Federal Reserve can stave off the collapse that’s coming. Indeed, the Fed spent $900 billion and nearly one year to prop the markets up… and we’ve wiped out ALL of those gains in just one month.
On top of this, the credit markets indicate that we are now heading rapidly into a full-scale Depression and market Crash that will make 2008 look like a picnic. Do you remember a time when stocks held up on rumors while the credit markets forecast a collapse?
That’s right… the last time stocks held up while Bonds and the Credit markets forecast disaster was right on the even of the 2008 Crash. They’re flashing the SAME warning signals this time too. Only this time the powers that be won’t be able to do anything about it.
Indeed, by the time the smoke clears on this thing we're going to see civil unrest, bank holidays (no to mention hundreds of bank failures) systemic collapses, and even food shortages.
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Things are moving in the direction of “the French revolution II".
INFLATE OR DIE. That is the dilemma facing the Fed and EU. No one, incl. China, has the cash to cover the losses ALREADY on the books, and God only knows what losses are awaiting downstream. INFLATION=the big boys win, as they have all the assets. The unwashed masses, of course, lose as they cannot possibly keep up. DEFLATION=everyone loses, incl. the big boys (except for a very select few). That is why we have ALWAYS had, HAVE now, and ALWAYS WILL HAVE inflation. There is no alternative. Imagine if we let deflation happen in 2008. You would have seen brokers and banksters jumping out of windows....what a heavenly sight that would have been!!!!!
checkmate. china, india, russia win. reset the board.
IMHO china is eyeing on the highways of this country. Sooner in return of green back they will ask for the ownership of these arteries. We will be paying to use these roads. Chinese are planning to kill us by sucking our blood. We will be NWO slaves.
Global Jubilee and bankster / political arrests and prosecutions would do the job...
Thre are a couple differences from 2008 ...
First that collapse caught a lot of people off guard, and led to a panic and rapid drops in markets. This time everyone knows it can happen, and that we dodged a bullet in 2008. Because people are more aware of the dangers, they will respond much more quickly to threats. This have the effect of slowing the decline phase. Therefore there won't massive quick collapse, but an inexorable, excruciating decline into oblivion.
Second, everything is much more vulnerable. The Fed's bazooka has shot its wad, but they still have a few nukes in the basement. The economy has very little in reserve to counter negative forces. So the tools to stop a decline are simply not there, even the tools that are totally wrong for job, but might avert a decline for a month or two.
This leads to the one BIG QUESTION, which has been floating in the collective unconsicous since 2008: will the Fed drop the nukes? If the global economy goes into the crapper, will they (aided by all other central banks) simply flood the world with liquidity on a scale here-to-fore unimaginable? Think 100's of trillions of dollars, not the puny ten trillion that we've done to date. This would doubtless lead to hyperinflation, but TPTB would have abaondoned the idea of recovery, and gone into damage mitigation mode. Social chaos will be the big fear, financial collapse will be a fait acompli. And they would likely consider hyperinflation less destructive to social order than unconstrained global depression.
So us little investors left to ponder how to prepare for the coming fork in the road: deflatioanry collapse, or hyperinflationary explosion.
Good questions. If hyperinflation, wave so long Federal Reserve. If depression, wave goodbye Federal Reserve unless they blame the Congress.
We have already been in a second civil war over debt bondage (slavery) for quite a while, but it is much more subliminal than CWI. This time you have proxy armies fighting (unions, anarchists, illegals) and territory has changed substantially because the Internet is now territory. Bitcoins and cybercurrency of one form or another are where we are headed long term, cause no one is going to want to put up with more Fed bullshit when this is all done. There is a video and book here about this that goes into details of what it will look like. http://www.futurnamics.com/civilwar.php
"Bitcoins and cybercurrency of one form or another are where we are headed long term, cause no one is going to want to put up with more Fed bullshit when this is all done."
Yeah, because computers are so much more secure. LOL! Give me something I can trust, something REAL that won't disappear when the power goes out, give me silver and gold.
they will print until they run out of printing presses. timmy is in europe trying to convince the germans that this time is different. if everyone prints in unison there will be no hyperinflation because the exchange rate will be stable. lol.
one mega dose of inflation just might "fix" everything. no matter which way it turns out the major creditor nations(emerging markets) will come out the other side the winners.
And now if the choir will open their hymnals.......
Gresham's law means the "good" currencies will go down with the bad. We just saw this with the Swiss Franc. If you are a country with a strong currency today dollars will pour in to such a huge extent that your exports will wither and die and your economy will be destroyed. The coming hard times will be shared by all.
They can do ANYTHING THEY WANT TO DO when laws are thrown in the dumpster.
"Let’s be honest here." This isn't about saving the day it's about them making a tad more off the market's short sellers before they head south themselves. If lying rumors will make a few extra bucks for them then that's what we'll get.
This is the international financial ponzi that must die. This whole race to the bottom is a side show of ephemeral Oligarchy suicidal play. The whole system will burn. The linch pin is the demise of USD as reserve currency. As it feeds the current mindset and hubris.The world has to move out of this age of irrational exuberance and exorbitant privilege. Pronto. A new financial, international architecture has to emerge with tight regulations, as the global village will survive, albeit it will shrivel in size; local initiatives will be a dime a dozen. "De-energizing" the world economy to a new scarcity paradigm will lead the way to new modes of life. THe finance of the world will be regulated to the point where traders will die, drowning by numbers. Good riddance of a mad, sad hyperinflated, ponzi world. Imagine how the world was in 1979 in terms of financialised markets. That's where we should be heading without the prevalent inflation. But obviously that is only a vision. The world moves forward not backwords...I sincerely hope the likes of ZH will have served a purpose. Even though the mood here is "nothing like financial trading"...the gamut of geopolitical news is awesome. I as reader am thankful for that.
if the world is "hyperinflated" as you say (and I agree), then market forces do the opposite ie DEFLATE as the ponzi gets exposed. Which means that the dollar becomes king till we reach the point of mass default. At that point in time, printing or further liquidation will determine if the dollar is to survive. We are a DEBT based system and by definition that means we are spending money "yet to be earned", hence the DEFLATION. That is why the Fed (one trick pony) is so afraid because a collapse renders the banking system insolvent.
Too much debt means deleveraging is now moot as there is NO real growth, just ponzi growth of paper assets denominated in fiats. The whole QE/Zirp story is to keep the ponzi alive, hoping against hope that mORE deficit spending will kick start the real economy. Unfortunately, not where it is needed, in USA/EU. All money injected immediately gets sent either to Bric investment OR to ponzi play of beggar thy neighbour, which is suicidal and self destructive. WIth EU in melt down the FED cannot hold up the bubble on its own...both pillars of the ponzi are now badly fissurised, it must fall.
There will be debt destruction and asset destruction, haircuts and sovereign defaults/writeoffs. Before the dust settles. Bt what ever happens we can't go back to this mad financialised world. That is for sure! Not for another hundred years, at least, as you can never say never as far as the human race is concerned!
I agree with Mr. Summers. These are dying gasps and the "powers that be" are desperately doing what they can to maintain status quo.
Nobody is bigger than the MARKET and any actions by the Fed are nothing more that "extend and pretend" except that now their interventions and rumours don't have staying power. The withdrawl pains from a three decade debt induced stupor are unavoidable.