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There Could Be Weeks When Decades Happen

Tyler Durden's picture





 

Via Mark J. Grant, author of Out of the Box,

There are a variety of ways of making a point. I am not in the Armageddon crowd or the ranting and raving group. I find it to be irresponsible to call for the end of the world and personal aggrandizement is not what I am after in my commentary. What I write here has one distinct intention and that is to keep you out of trouble. After my very long tenure on Wall Street I know how the Great Game works; make money in eighths and quarters and loose it in points and scores of points. Grant’s Rules 1-10, “Preservation of Capital” is always uppermost in my mind and as Europe sinks into a great and wide gaping hole and as even the IMF projects a deepening recession the concerns that I have felt, the concerns that I have warned about so repeatedly are increasing right in step with the inabilities of Europe first to recognize and then to constructively deal with their problems. 
 
There is a song that is reminiscent of Europe and I listen to it many mornings. The tune is “Oh No” by Mike and the Mechanics. I provide the link here to share it with you but make sure you are somewhere where your colleagues will not come running into your cubicle or office all wide eyed before you click on the link. I hope you enjoy my rather novel manner of making a point this morning.
 
 
 
As I listened to the Finance Minister of Germany yesterday saying that Spain does not need a bailout it was quite obvious to me that either the fellow was wandering around in the Rhineland with some very rose colored glasses or that he had become trapped in what I have long feared; that Europe has come to believe their own made-up facts. I have argued, for the past two years, that there are very real consequences to distorting reality. I have pointed out the real debt to GDP ratios for Spain, for Germany, for Greece and a number of other countries. Time and time again I have said that all I did was to add up all of the liabilities of a nation and then divide it by the official GDP that is handed to us. The Press has made some mention of my figures but they have mostly been ignored as I am not the official giver of data. Many have felt that both methodologies were of some value and that it was perfectly fine that the nations in Europe and that the European Union provided figures in their own manner. I am sorry to tell you that this is not the case and was never the case because the non-inclusion of state guaranteed debt, government backed bank bonds, nationally guaranteed regional debt, derivative contracts signed by the nation and corporate debt and securitizations guaranteed by a country and pledged at the ECB may eventually turn from contingent liabilities and into real liabilities that must be paid. What is not counted does not vanish into thin air because it is not counted. I have whacked everyone about the head with this for two years and many of you went on and swallowed the medicine handed out by the EU and went on your merry way. This will prove to be a major mistake!
 
“There are decades where nothing happens; and there are weeks where decades happen.”
 
                -Vladimir Ilyich Lenin
 
 
You see, Europe is in a recession and it is getting worse and it will affect America, make no mistake here, and our earnings season in this quarter and in the next quarter is not going to be pretty. Having made note of that; this is not the point of today’s commentary. Recession drives contingent liabilities into present liabilities quickly and with force and the cattle are now out of control and the stampede has begun. For those of you perhaps wishing for and certainly waiting for some type of “Lehman Moment” to flee; you may find it soon. The danger has always been that Europe will believe its own stuff and then make judgments based upon it and if this turns out to be the case then the decisions will be wrong and the consequences horrific.
 
The firewall concept failed as exemplified by Spain and so what do we find but the new European answer; to build another firewall entitled the ESM. We are given the size of this new contrivance and we are told that it will protect the Continent like some dyke protected the Dutch in that age old children’s tale. Yet, like so many grand schemes handed out by Europe; the plan is NOT funded, the money is NOT there and part of the funding is supposed to come from Greece, Ireland, Portugal and Spain who are the very countries that are in deep trouble and cannot even fund themselves. The paid-in capital of the ESM, when fully funded, will only be 80 billion Euros ($103.6 billion) and the money is to be paid in five tranches over the next two years and so the giant firewall is actually a “promise of a firewall” and any actual funding must go back to every individual nation that may or may not decide to commit new capital. The scheme has been approved by everyone but not the money to fund it. Europe may not like and may not count “contingent liabilities” but they certainly love and always count “contingent assets.”
 
Quietly, ever so quietly, I am informing you this morning we are staring at a ticking time bomb and the hour is late. There has been no decision made about Cyprus, no decision made about Greece and no decision made about Spain while both the hours and the money fritter away in each of these three countries. The quite real possibility of social unrest are mounting and the peaceful demonstrations, so often ignored by many, may erupt as people lose their houses, their incomes and watch their grandparents live in disgrace as a result of “pension adjustments.” You can “hail and congratulate” all that you like but when a father in Spain guaranteed a loan for his daughter to get an apartment and she can no longer afford to pay the mortgage because she is out of a job and when the father cannot make the mortgage payment either and loses not just her apartment but his own house as part of the “hail and congratulate” austerity measures then you are asking for trouble and trouble on a national if not European scale.
 
In Greece, in Spain, in Portugal the combination of austerity measures, higher taxes and reduced pensions and social services, are subjecting more and more people to a level of poverty that has not been experienced in a generation. While we often discuss politics and social consequences at the lofty levels of academic inquiry I remind you that there are people in the streets and living on the sidewalks now all across Southern Europe.
 
 
“Poverty is the parent of revolution and crime.”  
 

                  -Aristotle

 


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Tue, 10/09/2012 - 13:09 | Link to Comment LawsofPhysics
LawsofPhysics's picture

This just up on my screens;

 

********* NO SELLING ALLOWED by punishment of death**************

 

WTF?!  Oh wait, just a glitch?

Tue, 10/09/2012 - 13:26 | Link to Comment slaughterer
slaughterer's picture

WTI +3.75%  Qu'est-ce-que sait?  LOL.

Trick or treat Obummer.

Tue, 10/09/2012 - 14:20 | Link to Comment Kitler
Kitler's picture

For those of you perhaps wishing for and certainly waiting for some type of “Lehman Moment” to flee; you may find it soon.

If Europe is incapable of acting, then the Federal Reserve, at some point in time, must.

"Never let an opportunity to expand a Ponzi go to waste." - B.S.B.

Tue, 10/09/2012 - 15:02 | Link to Comment Almost Solvent
Almost Solvent's picture

The FED would love to open a window in Spain Italy Greece etc. Cuts out those pesky middlemen aka Eurocrats.

Tue, 10/09/2012 - 13:31 | Link to Comment silverserfer
silverserfer's picture

it wil be a false flag cyber attack or something. No selling will be done because the internet will be down for us sheeple. When it does go back online everything will have been revalued TO NOTHING!

Tue, 10/09/2012 - 13:33 | Link to Comment ACP
ACP's picture

"Don't hit me with them negative waves so early in the morning. Think the bridge will be there and it will be there. It's a mother, beautiful bridge. And it's gonna be there, OK?"

Tue, 10/09/2012 - 13:37 | Link to Comment BidnessMan
BidnessMan's picture

Too bad for Oddball the bridge was not there when he needed it, despite all his positive waves.  The government (the US Army Air Force) took it down. A metaphor for our times.

Tue, 10/09/2012 - 13:57 | Link to Comment PiratePawpaw
PiratePawpaw's picture

+1 for the Oddball quote.

Unfortunately, the CB's may soon find themselves with nothing but paint to use against the Tiger tank of inflation.

Oddball  "Enough with the negative waves Moriarity. Cant you say something righteous and hopefull for a change?"

Moriarity  "Crap!"

Tue, 10/09/2012 - 20:53 | Link to Comment ACP
ACP's picture

...and there ain't gonna be any trees to keep that turret from swinging around, as far as I'm concerned.

Edit: But then again, remember what Crapgame said about the Tiger Commander:

"A DEAL, deal! Maybe the guy's a Republican. 'Business is business,' right?"

Tue, 10/09/2012 - 14:18 | Link to Comment Winston Churchill
Winston Churchill's picture

Sure is,but NYC owns it.

Hope you didn't pay too much.

Tue, 10/09/2012 - 18:38 | Link to Comment barroter
barroter's picture

Kelly's Hero's was excellent!

 

Tue, 10/09/2012 - 19:38 | Link to Comment Dead Canary
Dead Canary's picture

The went for GOLD, not paper!

Tue, 10/09/2012 - 21:45 | Link to Comment goat
goat's picture

This place is crawling with nazzis.

Tue, 10/09/2012 - 13:09 | Link to Comment Squishi
Squishi's picture

Universities are the real anesthesia 

Tue, 10/09/2012 - 13:15 | Link to Comment LawsofPhysics
LawsofPhysics's picture

Bingo. Full of promises and hope.  This to shall pass as many more get hungry after graduation, with no job and massive debt.  I am banking on them all being smart enough to want to eat.  Long sharecropping, just think how much I can save on diesel.

Tue, 10/09/2012 - 13:25 | Link to Comment surf0766
surf0766's picture

Full of social justice and social ethics. Full of "all for the greater good" teaching. Universities are a complete waste of time and money. The communist/ socialist teachers need to be fired.

Tue, 10/09/2012 - 13:31 | Link to Comment falak pema
falak pema's picture

hey back to galapagos. You're the giant tortoise and I'm the human predator! 

So Socrates and Aristotle were commies, lol.

So were Darwin and Hippocrates, Newton and Einstein. 

As for Freud, words fail me...

Tue, 10/09/2012 - 14:02 | Link to Comment PiratePawpaw
PiratePawpaw's picture

I find that "nut case" works pretty good for Freud.

He had serious issues. My fav was the one where the girl hates her mother because she thinks the mother stole her penis as an infant out of jealousy. You gotta be messed up to think of this crap.

Tue, 10/09/2012 - 13:32 | Link to Comment silverserfer
silverserfer's picture

all you need is a bible right buba?

Tue, 10/09/2012 - 13:42 | Link to Comment LawsofPhysics
LawsofPhysics's picture

I'd argue we keep the real innovators.  But many of these faculty don't actually teach and they typically start companies out of the University (getting the taxpayer to file and defend your I.P. is a great thing), but these folks will be easy to spot.

Tue, 10/09/2012 - 14:47 | Link to Comment aerojet
aerojet's picture

Yeah, basically, but also full of idiots who have no business setting foot on a campus. 

Tue, 10/09/2012 - 16:41 | Link to Comment nodhannum
nodhannum's picture

Agreed!  I live in a university town and I can testify from the students that I speak to that they are forced to take politically correct neo-marxist courses without which they cannot not graduate.  And one had better regurgatate the "party line" or one may get bad grades.  Dear Leader would be proud.

Tue, 10/09/2012 - 13:10 | Link to Comment Jlmadyson
Jlmadyson's picture

The hour is very late my friend.

Tue, 10/09/2012 - 13:10 | Link to Comment The Shootist
The Shootist's picture

We live in very interesting times.

Tue, 10/09/2012 - 13:26 | Link to Comment JPM Hater001
JPM Hater001's picture

Hang tight.  Shortly we will die in them too.

Tue, 10/09/2012 - 13:14 | Link to Comment max2205
max2205's picture

Where's my WIN Button

Tue, 10/09/2012 - 13:15 | Link to Comment francis_sawyer
francis_sawyer's picture

On that 'Mike & the Mechanics' album cover, there was, um, a picture of a mechanic...

I'd have never thought of that one...

Tue, 10/09/2012 - 13:16 | Link to Comment news printer
Tue, 10/09/2012 - 13:16 | Link to Comment GolfHatesMe
GolfHatesMe's picture

"Its not a lie, if you believe it"  - George Costanza

Tue, 10/09/2012 - 13:19 | Link to Comment LouisDega
LouisDega's picture

Good cd. Bullish for Sony records

Tue, 10/09/2012 - 13:21 | Link to Comment Stud Duck
Stud Duck's picture

When the people running the show appear to believe the dribble they are espousing to the sheep, then your in deep deep sheep dip.

The stories of Europe in flames told by the grandparents will soon be revisited by the grandchildren! It took decades to creat this socialists quagmire, but only weeks for it to finally be recognized for what it is, ponzi at its best.

We have the same situation in the USSA, but it will take longer for the festering mess here to lay down and die!

Tue, 10/09/2012 - 15:48 | Link to Comment Whiner
Whiner's picture

Takes a long time to ruin a super power. Has it been a long time, Pancho? I don' know, Cisco. what do you tink? I think we don' need to book no stinking contingent liabilities! No matter how big day' are? No señor; they are contingent like asleep, comprendo? Oh Cisco! Oh Pancho! Our beloved duo ride off to the gold mines of Guadalahara.

Tue, 10/09/2012 - 13:25 | Link to Comment Dr. Engali
Dr. Engali's picture

         A lie told often enough becomes the truth.

 

                          Lenin

Tue, 10/09/2012 - 15:33 | Link to Comment V in PA
V in PA's picture

"What is Truth?" - Pontius Pilate

Tue, 10/09/2012 - 13:25 | Link to Comment XitSam
XitSam's picture

"What I write here has one distinct intention and that is to keep you out of trouble."

When someone says he has only my best interests at heart, alarms bells start to go off.

Tue, 10/09/2012 - 13:29 | Link to Comment mick68
mick68's picture

 

 He doesn't charge you to visit his site, so if it doesn't provide value, you won't read it.

 

Common sense 101

Tue, 10/09/2012 - 13:38 | Link to Comment XitSam
XitSam's picture

Did I say anything about value provided? I said I immediately became cautious.  Logic 101.

Tue, 10/09/2012 - 14:05 | Link to Comment PiratePawpaw
PiratePawpaw's picture

Common sense isnt common. Is that a misnomer or an oxymoron? or both.

Semantics 101

Tue, 10/09/2012 - 13:26 | Link to Comment mick68
mick68's picture

Europeans learning how to have a backbone again after decades of liberal minded, truth denying ignorance.

Tue, 10/09/2012 - 13:36 | Link to Comment ezcearhoc
ezcearhoc's picture

It is possible for ZH readers to use context and discernment to decide which words have meaning without being beaten over the head with bold formatting.

Tue, 10/09/2012 - 15:01 | Link to Comment pitz
pitz's picture

Just join SUKI (tm) already.  Its the MOTHERFUCKING RELIGION.  The New World Religion (tm).

Tue, 10/09/2012 - 13:38 | Link to Comment yrbmegr
yrbmegr's picture

Apocalypse is a matter of perspective.

Tue, 10/09/2012 - 13:38 | Link to Comment Coffin Dodger
Coffin Dodger's picture

Ugly shit everywhere. Zombie movies are a great educational tool for what's coming.

Tue, 10/09/2012 - 13:40 | Link to Comment Inthemix96
Inthemix96's picture

Always tell the big lie, tell it often enough and add that all we be ruined if the lie is not followed through, and then all will be well, people dont believe the little lie, the one that causes doubt.  They only believe the big ones, the ones that cause public outrage.  Hitler had this down to a tee.  Tell something often enough, with enough venom, and with enough hate, and it will be believed.

May we all live in interesting times ZHers.  Which lie has you outraged then?

Tue, 10/09/2012 - 13:51 | Link to Comment Desert Irish
Desert Irish's picture

It took less than 6 months for Eastern Europe to break up despite governments issueing shoot to kill orders on protesters - how long would it take the EU, comprising of democratically (well almost) elected leaders to fragment once the first country jumps ship?  Not long at all.....

 

“(A unified) ‘Europe’ is the result of plans. It is, in fact, a classic utopian project, a monument to the vanity of intellectuals, a programme whose inevitable destiny is failure: only the scale of the final damage done is in doubt.” — Margaret Thatcher

Tue, 10/09/2012 - 14:10 | Link to Comment q99x2
q99x2's picture

uhmmpf!

--q99x2

Tue, 10/09/2012 - 14:16 | Link to Comment The big unzip
The big unzip's picture

Keep pushing that lie.  

Tue, 10/09/2012 - 16:58 | Link to Comment stiler
stiler's picture

It's like a football game and it's the fourth quarter. I told my wife the game would be over in 10 minutes, so she could make dinner, but a time-out has been called; there is a delay of game because a player was injured. We are waiting for the restart of the game...

Tue, 10/09/2012 - 14:54 | Link to Comment AustrianJim
AustrianJim's picture

"make money in eighths and quarters and loose it in points and scores of points"

should be

"make money in eighths and quarters and lose it in points and scores of points"

 

Tue, 10/09/2012 - 14:58 | Link to Comment steve from virginia
steve from virginia's picture

 

 

There is  no appreciation for what is actually taking place in Europe and elsewhere. There will be no way foward until this occurs.

 

The problem is political: the establishment is in the pocket of industrial ownership. The money-economy belongs to tycoons, so does 'management'.

 

At bottom, the issue is destruction of capital, not 'money capital' which is always loans, rather it is physical- capital/resources which can be converted into something useful, not converted into anything or destroyed for shits and giggles (convenience, status, transitory advantage). The West has made the 'destroy choice' for long enough period and now faces the consequence.

 

Yes, Virginia ... there are always consequences.

 

One of these is there will be no recovery at all ... ever! This is because the destroyed capital cannot be reclaimed. All of the monetary, fiscal, programmatic, stimulus, debt-forgiveness, jubilees, restructuring, etc are attempts to reclaim capital and all fail completely. Any partial success is counterproductive b/c it destroys capital faster. The nature of capital destruction is that it always undermines itself.

 

As capital shrinks it is repriced, it is now too expensive to be wasted/destroyed. As capital costs rise they become unaffordable and the capital wasting infrastructure is stranded. This is what is occurring in Europe and around the world right this second right under everyone's noses. All that fucking shit the Euros spent trillion$ on is absolutely worthless.

 

The number-one capital destroying enterprise on Planet Earth is the automobile industry, it is the world's largest single industry, its dependencies include the energy 'production', finance, insurance, real-estate, food production, engineering/construction, ocean shipping, mining and materials, military and government. The automobile is the axle around which the modern world rotates. In order to preserve the automotive status quo, every other thing is being thrown into the fire, including auto industry dependencies. Greece, Spain and the rest are collapsing due to the Pyrrhic 'success' of this industry. Following along are Japan, China, Brazil and soon enough the land that the automobile created, USA.

 

The problem is there is no economic return to operating a car, driving does not pay for the car or the fuel. Cars are dead losses ... x 1 billion! Drivers cannot pay for the roads, either. Or the gigantic militaries, or the bloated auto industry-serving governments ... or finance. The users of the junk cannot pay for it ... with it. No wonder the world is broke!

 

Detroit ... coming soon ... to a town near you, if it hasn't already arrived.

 

It's survival Bitchez! Armageddon is here: stoopid humans vs. their metal boxes.

Tue, 10/09/2012 - 15:08 | Link to Comment Almost Solvent
Almost Solvent's picture

50 years from now will look more like 150 years ago. Number of humans as well as technology.

Tue, 10/09/2012 - 15:12 | Link to Comment LawsofPhysics
LawsofPhysics's picture

You could have simply said that the world has been traveling down the road of massive mis-allocation and malinvestment of both capital and resources for too long.  Now supply lines start breaking, enjoy.

Humans are no smarter than yeast apparently.

Tue, 10/09/2012 - 16:08 | Link to Comment Diesel Seven
Diesel Seven's picture

. . . at least yeast will rise consistently. . . .

Tue, 10/09/2012 - 15:34 | Link to Comment imbrbing
imbrbing's picture

Wouldn't it be ironic that we survived the ice age, asteroids, floods, whatever previous life disasters were thrown to us. But this time there is no survival

and it was because of US. There just might not be anyone left to tell our sad story when this is done, just plain lights out. Now where did I put my drink......LOL

Tue, 10/09/2012 - 17:37 | Link to Comment blunderdog
blunderdog's picture

"It looks like it could be a one-shot deal."

Life probably only gets one opportunity to exploit the resources of the homeworld.  Spending them wisely can potentially find a way to create a sustainable society.

Wasting them on construction of dead-ends means you're done for.

If you're concerned about their welfare, don't have kids.

Tue, 10/09/2012 - 16:04 | Link to Comment Diesel Seven
Diesel Seven's picture

Yes, John Mauldin has presented many reads that show the problem for what it is--leveraged economic growth that is not sustainable in a world with finite resources. It can be boiled down to the abstract concept of an "economic unit". If an individual, household, municipality, state, province, or sovereign country continue to consume more "units of economic utility" than they produce, the system will eventually fail. Double entry account was designed to recognize and control for this. Classical economists and liquidation theory be damned, but the fact of the matter is there are too many people living a standard of living greater than what their economic contribution warranted. Ben Bernanke Kaynesian economic on acid views are dogma--he states that the liquidationists of the Great Depression were wrong in most of what they did--he states this as an absolute fact as far as I can tell. But, who is to say if we would have realized that same level of growth after WW2 if we didn't liquidate the jobs and capital during the Great Depression, thus starting from a much lower base. But heck, what do I know.Maybe Greece will be able to privatize the Greek railroad and pay off their debt--I'm sure there are a few suckers left for that IPO.

Tue, 10/09/2012 - 16:46 | Link to Comment pashley1411
pashley1411's picture

I'm just going to call bs on the alleged "dire effects".

Greece, and to a lesser extent Portugal, had resource extraction, olive oil, agriculture, and goat-herder economies up until a generation ago.   As a result of financial gamemanship and currency mirages these countries, and their politicans, were able to live like Germans, for a little time and to no lasting effect.   

 

This latest crisis is simply a reversion to the mean.

Tue, 10/09/2012 - 17:27 | Link to Comment blunderdog
blunderdog's picture

Glad to see Mike's still churning out crappy '80s pop even this far into the 21st century.

Tue, 10/09/2012 - 17:33 | Link to Comment GernB
GernB's picture

While it is difficult to find numbers on tax revenue and expendatures, what little I can find does not show any significant decrease in expendatures for the most troubled European nations. I don't doubt that the people of these nations are being asked to endure severe austerity, but where is their sacrafice showing up in the expendatures of Europoean nations.

Wed, 10/10/2012 - 00:55 | Link to Comment Radical Marijuana
Radical Marijuana's picture

The danger has always been that Europe will believe its own stuff ... and the consequences horrific.

That pretty well summarized why the whole of Neolithic civilization is headed towards psychotic breakdowns. Everything we are forced to act like we believe in was ONLY the biggest bullies' bullshit, and the final consequences of believing in that bullshit stuff will be horrific!

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