Guest Post: The Greatest Trick The Devil Ever Pulled

Tyler Durden's picture

Submitted by Tim Price, Director of Investment at PFP Wealth Management, via Sovereign Man

The Greatest Trick The Devil Ever Pulled

Never try to teach a pig to sing, advised Robert Heinlein. It wastes your time and it annoys the pig. Similarly, never try to convince a central banker that his policies are destructive.

After five years of enduring crisis, market prices are no longer determined by the considered assessment of independent investors acting rationally (if indeed they ever were), but simply by expectations of further monetary stimulus. So far, those expectations have not been disappointed.

The Fed, the ECB and lately even the BoJ have gone “all- in” in their fight to ensure that after a grotesque explosion in credit, insolvent governments  and private sector banks will be defended to the very last taxpayer.

Conventional wisdom is that such moves are justified during this period of economic slowdown, as everyone agrees that the market is ’deleveraging’.  But as the consistently excellent Doug Noland points out, this idea of deleveraging (i.e. reduction of available credit) in the US is a myth. In the second  quarter of this year:

- Consumer credit in the US grew by 6.2%, the highest pace in nearly five years;
- US non-financial credit market debt grew by 5%, the highest pace in nearly four years;
- Total household debt increased 1.2%, the highest pace in over four years;
- US Treasury debt has increased 110% in four years;
- After contracting by 1.2% in the first quarter, state and local borrowing is now up 0.8%

The numbers don’t lie. Genuine deleveraging would imply a reduction in debt, especially non-productive debt. Genuine deleveraging would see market prices determined by fundamental forces of supply and demand, not by government intervention, manipulation and inflationism.

Instead, we get a profound form of ‘mission creep’ by central banks, whose policies are now destroying the very same economies they are nominally tasked with protecting.

In the words of veteran analyst Jim Grant, the Fed has evolved well beyond its origins as a lender of last resort and not much else, and now is fully engaged in the business “of steering, guiding, directing, manipulating the economy, financial markets, the yield curve…”

It is a wholly specious argument to suggest that the creation of trillions of dollars / pounds / euros / yen out of thin air will not ultimately be inflationary; it is like saying that storing an infinite amount of tinder next to an open flame does not constitute a fire hazard.

Admittedly, the explicit inflationary impact of historic monetary stimulus will not be fully visible until those trillions are circulating in the economy in private exchanges between buyers and sellers– rather than squatting ineffectively in insolvent banks’ reserves. But financial markets are nothing if not capable of anticipating future trends.

Investors, traders, speculators– call them what you will– are already weighing up the probability of a reduction in future purchasing power; the prices of alternative money such as gold and silver, as denominated in unbacked fiat currency, are already responding.

Financial repression, of course, is all about wealth transfer. Inflationism is the textbook response to a crisis of too much debt (even if you were the over-borrowed entity that triggered the crisis in the first place).

Anticipating an inflationary tsunami is not a precise science because market confidence in intangible paper currency does not persist linearly. It lasts until it doesn’t last any more, and then it runs the risk of shattering instantaneously, along with faith in most G7 government debt. Like Hemingway’s idea of bankruptcy, we go broke slowly, and then all at once.

But one of the most grotesque ironies of our time is that western government debt– the asset class which is objectively the least attractive (as well as the proximate cause of the world’s financial problems)– is also the most expensive.

But just because sheep-like bond fund managers are providing a real time lesson in the perils of agency risk does not mean we have to follow them down the primrose path.

Cash, most forms of bonds, and fixed annuities all look like poor prospects for the years ahead. Productive real estate, defensive equities of businesses with pricing power, gold and silver all look like better alternatives.

The last Fed chairman with the guts to do the right thing for the economy rather than just its banks, Paul Volcker, has rightly observed that “monetary policy is about as easy as it can get”. Another round of QE “will fail to fix the problem”. That is in part because the Fed, along with its international peer group, is now the problem… masquerading as the solution.

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LawsofPhysics's picture

Here, you go work hard and deliver a product of real value, I will give you this paper promise in return.  Any questions?


trebuchet's picture

Laws of PHysics, I didnt know you were CEO of BofA???!!!!!   DAmn...  honoured guest

LawsofPhysics's picture

Still amazed BofA is still in business.  But I guess you can stick around when you have a lot of accounts to "rehypothicate" and have shifted all you MBS and derivative holding to FDIC insured accounts - "winning bitchez"

AldousHuxley's picture

still amazed Shittibank is still in business even after saudi prince pulled his money out to invest in Fox News.

trebuchet's picture

Laws of PHysics, I didnt know you were CEO of BofA???!!!!!   DAmn...  honoured guest

LawsofPhysics's picture

Volcker is the hero?  Yeah, go ahead and try to raise rates now, I double dog dare you.  Stupid fucking sheep.

Dr. No's picture

Since the rates are set by the big banks lending to eachother, and considering the banks are not lending, a "raise" of the interest rates by the FED would only be a headline with no real effects on the economy.

Tegrat's picture

Raising rates would only cause what happened in 1980 with gold/silver/commodities.


We would owe more interest for all *new* auctions. bot the existing debt rate would be set in stone.


Ultimate screw to American non-cash savers and all Americans in general.




trebuchet's picture

"it is like saying that storing an infinite amount of tinder next to an open flame does not constitute a fire hazard"


-KABOOM!!!!, Bitchez !!!!!

jeff314's picture

Fuck you Bernanke...

Schmuck Raker's picture

Bernanke should hang for treason.

I'm no lawyer, but it feels right.

falak pema's picture

If you were a lawyer you would defend the contrary with as much passion. 

Kobe Beef's picture

He would defend whatever he was paid to. The invasive, metastatic form of lawyer is politician.

lunaticfringe's picture

The headline should read...

The greatest trick the devil ever pulled was convincing you that he doesn't exist. There, fify.

LMAOLORI's picture



+1 lunaticfringe do we really even know who the devil is? The devil is in the details and our government has kept that hidden. The crash was right before the last election and the politicians have gone to great lengths to convince us he didn't exist.


lunaticfringe's picture

The Fed. Most people think the Fed is on their side. Muhahahaha!

sessinpo's picture

And isn't it interesting that it is generally conservatives or modern day libertarians that think the FED is a problem.

On the converse, it is liberals (not all but generally speaking) that don't see a problem.


I guess that goes with their convention disaster of removing God. Of course if the liberals had any real logic, God doesn't exist and thus doesn't require removal.

imbrbing's picture

Or better yet, convincing you he is God, and will sit in the temple of God, and look just like God

WhiteNight123129's picture

The solution is not to raise rate, not to increase leverage, but the restore the ratio of circulation to Debt or Assets or Equities or derivatives. In this scenario financial assets melt in relation to circulation. As this brillant XIX century economist said, ~it can not to often be repeated , that abundance of money in the hands of capitalist is in itself a cause of cheapness. while abundance of money in the hands of consumers is a cause of dearness.~ So the solution is not raise the short of the curve but the long end and raise inflation expectation to organize the dishoarding...

Deleveraging sucks for capital owners (bonds and stocks). Deveraging is not Leveraging, everything works in reverse, inflation expectations drive the spending from those who have net cash instead of spending driven out of new borrowing from those who don t. Long maturity corporate borrowings affect the long bond yield on Treasuries instead of Treasuries driving corporate borrowing yield downwards. Increasing long bond yied pushes prices up (Check Banking School). There are two modes, clockwise (circulation leveraged into financial assets = deflationary = commodities suck = financial assets rise in proportion to circulation everything works like that until 2000) once you hit 0 bound you have to print a lot money and make the machine works counterclockwise (financial assets melted back into circulation, commodities up, circulation in relation to financial assets up, debt being mollified and molten, owning financial assets suck).

The 2007 episode on commodities was a true over excitement of trade as correctly pointed out by Veneroso, it was also a consumption from China in anticipation of zero bound reversal which would have made the building of infrastructure prohibitive if they had waited for 2017 prices. The market which is out of breadth and breath is the Equity and Bond Market, the Market which is following normal course is commodities.



dracos_ghost's picture

 ....but the restore the ratio of circulation to Debt or Assets or Equities or derivatives.

Except that is anathema to the whole NWO "securitization gambit". The goal is 100% Debt/GDP ration for everyone -- the entire output of nations are linked to the banksters balance sheets(aka slavery). No returning to a rational ratio.

They just didn't realize that some of the players already overshot the mark. Whoops. How ironic. The more sovereigns go over the 100% Debt/GDP mark, the more the banksters become the slave to debtors. It's the old, "Owe a bank a $1000, you're in trouble. Owe a bank $1T, and the bank is in trouble".

orangegeek's picture

Earnings season coming in a few weeks.


Dow weekly shows primary wave 3 ready to go.

walküre's picture

courtesy of poster "Radical Marijuana" regarding article "Fed's QE 3.9 trillion"

worth reposting a couple times:

However, there may be a bright short-term future in control frauds?

I find this kind of article complicated, and hard to understand, because it seems to me to be like Alice debating the Red Queen ... EXCEPT we are still going down the rabbit hole, and I have no clue how deep that tunnel of deceits goes ...

The established financial system makes money out of nothing, while that money can also disappear to nothing, and so, we all have to watch the banksters keep juggling everything, very carefully, to try to preserve the Goldilocks' just right balance of the creation out of nothing, and the destruction to nothing, so that we get just enough more net money, so that everything works out O.K. ??? (Yet, with that delicate balance biased just so, towards the benefit of those banksters, and their buddies.)

Meanwhile, ordinary accountants are used to the basic arithmetic ideas of the conservation of money. Ordinary accountants never have to deal with the problem of their money simply appearing out of nothing, or disappearing to nothing, UNLESS there is a crime of some kind to investigate.

Ordinary accountants do not have to wrap their heads around them having the power to legally counterfeit, and therefore, how much to do that.  Ordinary accountants do not have to worry about money just disappearing to nothing, unless there was some embezzlement, or whatever!

However, the Central Banksters, and all of those who share in the rights and responsibilities of being able to legally counterfiet the money supply, who also have to worry about the things that make fiat money disappear, have problems that no ordinary accountant ever faces.

I believe I find this kind of article to be difficult to understand, because it is discussing something which IS CRAZY!

Ordinarily, conservation and preservation principles make the world around us appear to be intelligible. Ordinary accountants operate within an apparently sane world, where there are principles of the conservation of money, and preservation of information about where that money came from, and where it went to ...

Central banksters, and those who have the right and responsibilities to create fiat money, out of nothing, as debts, (and therefore, also to worry about that money disappearing to nothing, when things go wrong) do not operate inside of a world that appears to be intelligible ... EXCEPT as a tunnel of deceits and frauds, that keeps on getting deeper and deeper, and more twisted up and paradoxical!

Everything is discussed using a quite surreal language, where the ordinary common sense ideas regarding the conservation of money, and the preservation of the information of where it came from and went, have been divorced from the fundamental basis of the whole system itself.

The whole system looks magical, in the sense that it is based on triumphant runaway frauds, which were made and maintained through organized crime taking control of governments, while perfecting their ability to be professional liars and immaculate hypocrites regarding that entire process!

THERE IS NO REAL MAGIC! However, the system IS based on being able to make money out of nothing, and having that money able to return to nothing, and therefore, having to perform a magical juggling act to try to balance those illusions out, while nevertheless, they still remain connected to the real world, in the sense of using that money to pay for labour, or to earn wages, and so on and so forth, to buy and sell things which actually exist, and which NEVER get made out of nothing, NOR disappear to nothing.

The rules of accounting no longer apply ... ??? except the laws of nature still apply, in the sense that the conservation of energy and momentum, still continues ... since THERE IS NO REAL MAGIC.

The banksters and their buddies are more like show business than any other businesses. What they are doing is more like how politics or religion are also show businesses. Our money system is way more like a religion, than anything else, since we have a totally faith based money.  Fiat money is a crazy cult, that has become our state religion.

The banksters are like carnival barkers, or high priests inside of their banking temples, putting on an elaborate show, to entertain the masses with endless tricks. However, the main difference is that everyone is FORCED to be inside that show. Everyone is FORCED to use that money to pay taxes, and so on and so forth. Thus, that crazy cult of being able to make money out of nothing (and allow it to also be destroyed to nothing) is ENFORCED as our state religion. We are FORCED to accept the puppet shows being put on for us by the politicians, while we may be presented with fake choices to favour one puppet or another, but we can NOT vote for there to be no more of that insane puppet show, that flagrantly violates the basic laws of nature (except to the extent that real violence, still obeying the laws of nature, backs up its triumphant lies, which do not have to) ...

We are a captive audience, within an increasingly insane state religion, based on faith in those who appear to be able to make money out of nothing, to be responsible to make just enough to balance out when some of that fiat money disappears to nothing instead. I believe that any such "REALITY" must be god damn hyper-complicated!!!


But nevertheless, the entire economic system has become an awesome performance art of illusions, stacked on illusions, as we travel through and through the tunnels of infinite deceits, that privatized fiat money inherently creates.

We are obliged to have faith in fiat. In order to live in the real world, we are obliged to use the going legal tender to buy our food, and must obtain that from participating inside of the organized systems of fraud and robbery that are run by the government, as controlled by the banksters.  We are watching their house of cards grow exponentially, and yet, have no choice but to still play their card game. Ordinary people, doing ordinary accounting, can not make their cards out of nothing, and can not make their cards disappear to nothing. HOWEVER, THE BANKSTERS CAN, AND THEY CAN FORCE US TO PLAY THEIR GAME.


MORE AND MORE PEOPLE ARE FIGURING OUT THAT THE WHOLE SYSTEM IS A SHAM!!!! A fraud, a scam and many many lies and manipulations, propaganda and so on. To benefit a few who have INVENTED the PONZI and who are controlling the rules to suit their needs.

It stops when more people refuse to believe and participate than people watching CNBC etc.

Dr. Engali's picture

The greatest trick the devil ever pulled is to convince us we have plenty of time.

falak pema's picture

on a long enough time line all debt evaporates....a pig and his house made of Fiat; you can huff n you can puff...

Supping with the devil; does he have a long enuff spoon?

Darth Mul's picture

This is off thread, but...

good stuff on Building 7 {collapse reported by BBC prior to its collapse}


I hope this poor reporter doesn't get suicided...

Inthemix96's picture

Bernank should be given to a room full of ZHers.

He then has as long as it takes to persuade us that his zionistic intentions are for the betterment of mankind, and then he can explain how creating money from nothing and getting products of real value for said nothingness is good for your average joe.

And after a full and honest hearing, we peel the filthy little cunt alive, bit by bit, lttlie by little, and explain to him why we are peeling him so painfully so he can tell the fucking anti-christ what its like to the average bloke.

The disgusting little fucking parasite.  I have shit more useful things than this twat. PH fucking Dee?  Come join the real world bernank, you are going to have to put some "skin" in the game you cocksucking shit.

walküre's picture

Have Oblama and Mittens by his left and right side. We could give them a minute to plead their cases but I'm not sure if ZHers would be able to listen for more than 10 seconds before punching the crap out of all 3.

sessinpo's picture

Your list is way to short. I'd like to add the majority of congress of both parties to the list. I could go on and on, but just adding most of congress would keep me busy for the rest of my life.

NeoLuddite's picture

The Bernank has already been partially skinned - alive - when he was only 8 days old.

Likely a Brit Periah without any anesthetic.

noses's picture

Heinlein quoted on ZeroHedge? Ok, it's over, the fat lady has sung. What are we going to do with the rest of the week?

Shevva's picture

Actually I'm the devil I have zero invested and zero debt, in other words my line in the accounts book reads zero.

What's that Benny I should buy a house, really?

Urban Redneck's picture

never try to convince a central banker that his policies are destructive

Perhaps because central bankiers have accomplished the heretofore impossible feat of surpassing  Baudelaire's snobbish elitism?

are we there yet's picture

Deleveraging is occuring by deflating the value of fiat and government obligations of all kinds, such as social security.  The net result is power, and all things of true value are flowing from John Doe to Governenment.

Ura Bonehead's picture

it is like saying that storing an infinite amount of tinder next to an open flame does not constitute a fire hazard.

We all just need to remember that THIS is the Governement that invented, nurtured and endlessly defends the institution of TBTF.  It only stands to reason that they would look in the mirror and see themselves as TBTF, regardless of their actions.

Ginsengbull's picture

Barter is a four letter word to bankers and tax collectors.